ReAlign Integrated Report 2014-2015 Including the KPMG Accountants N.V. Transparency Report
Contents 01 02
Report of the Board of Management
5
Completing true blue
6
Our results
9
To conclude
12
05
Overview 40 Strong external perception of our reputation
41
Dependable consistent high levels of quality
42
Robust Risk Management 48
Tasks and activities
We demonstrate social responsibility 51
To conclude
04
18 20
06
Innovation and thought leadership
54
Our people are extraordinary
55
Stakeholder Dialogue
23
Stakeholder expectations
24
General 57
Our stakeholders
26
Our partners lead by example
58
Material reporting topics: linking stakeholder expectations with our vision areas
28
Consistent high levels of engagement and performance
58
Diversity in our workforce
60
Remuneration report by the Supervisory Board
61
Our clients see the difference in us
65
Adding value
32
Our purpose: Inspire Confidence. Empower Change.
33
Values in action
34
Our vision areas
35
Value creation
36
Delivering on our promise: performance monitoring
38
07
Overview 56
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08
Operational Excellence
Overview 72 Discussion of trends and results
09 10
71 73
Statement on effectiveness of 74 quality controls and independence Governance & Risk Management 76 Who we are
77
Governance 78
11
12
Risk management
81
Appendices
87
Public Interest Entities (‘organi- saties van openbaar belang’)
88
Summary of our system of quality controls
91
NBA Quality Indicators
99
Financial Statements
101
GRI Disclosure table
158
Overview 66 Top brands want to work with KPMG ‘for life’
67
Leading multidisciplinary solutions 68 to address our clients issues Clients are promoting KPMG, its people and its solutions
2
39
Report from the Supervisory Board 15 Financial statements and discharge 20
03
The public trusts us
69
Glossary 180
2,852 FTES
#2,925 IN 13/14
464,540
# OF PARTNERS #149 IN 13/14
27%
(FTE-BASE)
(FTE-BASE)
FEMALE 34% IN 13/14
11%
FEMALE PARTNERS 9% IN 13/14
Figure 1: Overview of KPMG NL (excluding tax)
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TOTAL INCOME (EUR 1,000) 467,310 IN 13/14
22
# OF INDEPENDANCE INFRINGEMENTS #24 IN 13/14
287
# OF AUDIT REPORTS FOR OOB STATUTORY AUDIT CLIENTS #377 IN 13/14
73% 66% IN 13/14
# OF NATIONAL OFFICES #10 IN 13/14
140
MALE
10
12%
FEMALE DIRECTORS
(FTE-BASE) 11% IN 13/14
120,288 TURNOVER STATUTORY LEGAL AUDITS (EUR 1,000)
2,048
# OF AUDIT REPORTS FOR OTHER STATUTORY AUDIT CLIENTS #2,226 IN 13/14
114,784 IN 13/14
49,955 PROFIT BEFORE TAX (EUR 1,000) 69,956 IN 13/14
10,392
# OF AUDIT REPORTS IN TOTAL #12,713 IN 13/14
Dear reader, The Board of Management in its new composition effective 1 October 2015 would like to present the report of KPMG NL for the financial year 2014/2015. The Board members, both former and present, look back on a remarkable year. A year in which under the stewardship of Jan Hommen stability was brought to the firm and in which the foundation for the future was laid. ‘Never waste a good crisis’ so the saying goes. We felt the need and the ambition to address a very tough situation. Society, clients, employees and other stakeholders have made it abundantly clear that KPMG can and is expected to do better. We implemented improvements and changes in the areas of audit quality, remuneration and rewards, efficiency of processes, and explicit behaviour expected daily from all KPMG employees. The system of audit quality controls has been further strengthened and improved. In terms of governance this has been fundamentally with the appointment of a fully independent Supervisory Board. This was an exceptional year for us and the entire sector in view of the mandatory audit firm rotation. We had to resign from a number of valued audit clients with whom we had longstanding relationships for decades. The silver lining is the new opportunities that emerged for Advisory in developing relationships with these clients. Evidence of our ‘client for life’ concept in practice. We are grateful to our clients for their continued trust. We are very pleased by the trust received from a large number of new clients. We are thankful for this loyalty and support and experience this as a welcome acknowledgement that we are well on the right road to restoring public trust. There is still a lot to be done, but the foundation has been laid and we will all, individually and collectively, make every effort to meet justified expectations of our stakeholders. The conviction that absolute focus on quality is vital will further drive these collective efforts. On behalf of my fellow Board members and all KPMG partners and employees, Albert Röell Chairman of the Board of Management KPMG N.V.
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Report of TotheourBoard of stakehol d ers Management
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Integrated Report 2014-2015 © 2015 KPMG N.V. All rights reserved.
01
Completing true blue
We have extensively listened to our clients, regulators, market observers, and last but not least, to our own staff. It was clear that we had lost much of its public trust and had to act swiftly and deeply. As a result of these root cause analyses, we started last year improving our processes, our quality systems, our governance and, most importantly, the culture and behaviour within the company.
To paraphrase Churchill: today is not the end of the change, neither is it the beginning. We are nearing the end of the beginning. We will continue to improve in 2016 and 2017, aiming to present KPMG at its centennial birthday in 2017 in optimal shape. The true blue programme consisted of 3 waves as depicted in figure 2.
To fulfil our role in society we launched a major change programme at KPMG – true blue. The vision underlying true blue clear and unambiguous – regain our position as the industry standard. WAVE 1 STABILIZE
WAVE 2 STRENGTHEN OUR FOUNDATION
WAVE 3 BUILD & GROW
Figure 2. The true blue programme consisted of 3 waves
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Report of the Board of Management 01
The year under review marks our turning point as we embark on that journey towards 2017. We focussed on strengthening the quality of our services to minimize issues to become a burden for the general public and our clients. In parallel, we devoted necessary time and resources to legacy issues on which we reported in last year’s annual report. Overall, we believe that we made significant progress during the year in solving these legacy challenges. And as we enter the third wave of true blue, we will focus on building and growing our business in a responsible way. For example, our innovative approach to cyber security and big data analytics show that these services truly support our clients in solving the large challenges facing them in this respect.
Strengthen Phase 1 of our true blue programme was completed in FY 13/14. In 2015 we invested to restore our traditional values and culture. We spent significant time on reinforcing our message on our Purpose, Values and Vision as these constitute the core of what we stand for at KPMG. Everything we do is based on 7 core values. We also initiated and implemented a
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fundamental change of the governance of KPMG: bring in the outside world, add external professionalism to the management and externalise supervision. Two external board members were appointed in the position of CFO (Barbara Lamberts) and Chief Human Resources Officer (Bert Ferwerda). Also an external general counsel, Jacqueline Müller, was appointed. Effective 1 October 2015 Egbert Eeftink was appointed Head of Audit in succession to Marc Hogeboom, who rotated to a leading role for one of our key accounts in the financial sector. Rob Kreukniet has been appointed Chief Operating Officer, succeeding Andrew Cranston. Rob Kreukniet will combine this role with the CFO responsibility as from 1 January 2016, following the resignation of Barbara Lamberts on that date. The Supervisory Board comprising solely external members was installed under the chairmanship of Bernard Wientjes in May 2015. The first priority of the new Supervisory Board was the succession of Jan Hommen. Albert Röell was appointed Chairman of the Board of Management and took up his position on 1 November 2015.
Build and grow Our vision is to inspire confidence and empower change. We aspire to support society and our clients by providing trust and by supporting necessary change. We want to be able to guide and advise our clients through the current periods of ever increasing speed of change and uncertainty. This requires high quality processes and the willingness to adapt to the challenging environment we are currently in. We have developed a three year plan around the 4 blocks of our vision (discussed hereafter). We completed this plan last summer including a substantial investment program of EUR 54 million. KPMG International is supportive of the plan, the momentum we have created for further improvements in quality and efficiency, and the focus on innovation and growth. With active investment by KPMG International of EUR 30 million we can accelerate the implementation of the plan.
Report of the Board of Management 01
Our business plan can be summarised in three key themes: 1. Investing in people, processes and 2. Investing in the growth of our business systems to improve quality and efficiency Expansion and renewal of our portfolio of In the next three years, we will make services, in line with the joint, international considerable investments in employee KPMG vision on the expansion of our training and education. We will continue to services to clients. We will focus specifically standardise our processes and systems so on growth in technology-based consultancy we can continue to deliver high quality fields such as Cyber Security and Data & services consistently in the future and will Analytics; integrated solutions such as Big implement robust efficiency improvements. Data, Real Estate Advisory, Integration and We will do this in the audit practice as well as Separation and the growth of our recent in other parts of our organization. acquisitions with expanded and new services.
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3. Adapting the organization to the new market reality Developments in the market and changes to the composition of the portfolio require a close look at the scope and the costs of our organization with a resultants impact in various areas, including reduction of FTEs in Business Support in the coming three years, a decrease in office space leased and increased use of cloud technologies. As we have seen in 2015 the mix of our work force is changing with more focus on risk and quality as well as advisory services. In total we expect a modest growth of our staff in the years ahead of us. Execution of the three year plan has already commenced.
Report of the Board of Management 01
Results We developed 4 key vision areas, expressing where we want to be in order to regain our position as the industry standard: –People – (our people are extraordinary) –Clients – (clients see a difference in us) –Public – Trust (the public trusts us) –Operational – Performance (pass on a stronger and better organisation)
People A key focus point for us has been spending considerable time with our people in dialogue sessions on our Purpose, Vision and Values – which together represent the foundation blocks underlying our essence. We have also increased the number and frequency of town hall meetings with the Board to improve direct interaction. These steps enabled us to increase the level of engagement and open dialogue within the firm. We do see challenges regarding work-life balance – as many firms do – and we are investing on reengineering our core processes around planning and delivery of our services to reduce strain on our teams. We have also started training on improving project and time management skills, and have piloted KPMG Vital, a programme in which we aim to increase employee awareness for exercise, healthy nutrition and sleeping patterns using live user statistics. Another challenge is that of diversity and we are not yet satisfied with the progress achieved. We have set up a task force to review the underlying issues and to present a longer-term plan.
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In Audit and Advisory 350 talents were hired in 2015. Retention levels were in line with the sector average, though above the levels we would like. We appointed 39 new partners and directors per 1 October 2015 to further strengthen our leadership and to have more partners available to manage engagements. This is part of our comprehensive action plan to renew the partnership against our new ambition levels in culture, quality and overall performance. Consequently, certain partners have either been transferred to different roles within the organisation or have left. We remain committed to the continued learning and development of our professionals. We invested approximately EUR 9 million on training and education in the reporting year representing an increase of EUR 1.3 million on last year.
Clients Overall the market place remains very competitive but, at the same time, continues to offer many opportunities. Our clients have been extremely supportive of us through these challenging times and we have been successful in winning new work. Client satisfaction continues to run at high levels, though we always seek continuous improvement.
Report of the Board of Management 01
Reputational issues have however understandably impacted our Net Promoter Score.
Regulatory Compliance, Data & Analytics, Deal Services, Transformation, and Asset Based Consulting.
As the mandatory firm rotation comes to an end, we see a significant change in our client portfolio with the expected reduction in audit revenues. We have however won our fair market share of the opportunities that were available to us. We have also had a number of significant wins of private company audits too, and continue to maintain a high market share across the advisory market.
Finally, we have made changes to our portfolio. We have withdrawn from compilation services and reduced the number of clients at the smaller end of the SME market where we feel we were no longer able to provide the required services at the high standards we aspire to relative to the fees these clients were willing to pay. These reductions include 12 midterm cancellations of audit engagements (FY13/14: 8).
We believe in the relevance of the multi disciplinary firm model to drive audit quality and provide multidisciplinary advisory solutions to our clients, respecting that the combination of audit and advisory services to the same client bears restrictions, which we fully support. We work closely with our colleagues at Meijburg & Co to address the tax elements concerning our audit and advisory clients.
Public Trust
We identify our clients’ issues and adapt our portfolio of solutions accordingly as demonstrated by the decision for acquisitions in the areas of People and Culture and Microsoft Dynamics. We invested significantly in a number of key growth areas including: Cyber Security,
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Our prime focus this year has been – and continues to be – on further improving the quality of our work, particularly where those services are in the public’s interest. We have taken steps to address any potential financial consequences from various legacy issues to ensure that they will have no adverse impact on our strategy and everyday operations. One of these issues is with the Tax Authorities and the public prosecutor regarding the tax treatment of a part of the development costs of the Laan van Langerhuize 1 building in Amstel veen. The particular subsidiary received a
corporate income tax assessment of EUR 15.5 million (including EUR 1.5 million of interest) and value added tax assessment of EUR 3.0 million. These tax assessments are accounted for in the financial statements. (Disciplinary) court cases relating to issues communicated last year are currently in progress. The fully independent Supervisory Board enables us to engage better with our significant groups of stakeholders to really hone our attention for the public interest. The Dutch audit sector is in full transition: its improvements closely monitored by society, media, regulators and politicians. In order to inform our political stakeholders proactively, we developed and implemented a dedicated programme allowing us to communicate on a personal basis with leading financial experts in the national parliament. We have introduced a new remuneration policy where performance and financial rewards are more explicitly linked to quality. Board members receive a fixed remuneration with only a minor variable bonus for Board members who are also equity partner in the firm. In addition, we introduced a claw back scheme
Report of the Board of Management 01
that defers part of the Audit partners income over a time period dependent on their performance in audit quality. Regarding Audit Quality we have invested significantly in our improvement programme, and more generally in quality and risk processes across the whole firm. We are investing in Audit over the next 3 years to further improve our processes, adapt the organisation to our new reality and to enable future growth in audit and audit related areas. Likewise we are investing in Advisory to continue our development of our strategic growth initiatives and further upgrading the high quality of our Advisory services. Our progress in designing for the future has been recognised by AFM. In their recent report on the improvement plans of all 9 OOB audit firms, the AFM rated our programme 4.6 out of a maximum of 5. We feel that the findings are a welcome encouragement. Moreover, they constitute an important sign that we are on target towards achieving our ambition and confirms the difficult choices we made in the past one and a half years. The confidence of our clients in our people and, as such, in our firm has been indispensable.
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Despite all the positive momentum, we fully realise that we are not yet there. While it is a journey that takes time, we will continue to make it our number one priority.
Operational Excellence In terms of financial performance, revenues decreased in the financial year by 1.6% to EUR 442 million. Profit before income tax decreased by 28.6% to EUR 50 million. Revenues decreased 6.0% in Audit and increased in Advisory by 3.8%. Revenues in Audit reduced over the reporting year due to the results of the Mandatory Firm Rotation process on OOBs – as expected. Moreover, we have deliberately exited the compilation market and reduced the number of clients at the lower end of the SME market. The reduction in profits was largely due to the significant investments in quality, including the cost of significant additional resources, and the costs towards resolving our legacy matters. As a result of the mandatory firm rotation we expect a slight decline in Audit revenues in 2016 and stabilisation and growth thereafter. We expect Advisory revenues to increase in the
coming years. We will roll out the investment plan partially financed by increased financing by partners. KPMG International is supportive of the plan, the momentum we have created for further improvements in quality – our highest priority – as well as our focus on innovation and growth in order to continue to attract the best and brightest professionals. We can accelerate the implementation of our plan because KPMG International agreed, recognising this exceptional situation, to provide to us a grant facility (available to be used over the period up to 30 September 2018). Due to the investment programme overall profitability will remain modest during the transition phase, but is expected to grow thereafter.
About this report This annual report comprises not only financial results, but also the reporting on our system of quality controls, our ethics and independence procedures and the description of our legal and organizational management model. This is an integrated report, in which we account for a year in which KPMG went through a major transformation. On behalf of all KPMG partners and staff, we underline we will make every possible effort to consolidate and strengthen the trust our stakeholders have in us.
Report of the Board of Management 01
To conclude
In conclusion, we look back on this year as one in which many important steps were taken on our journey to be the standard in the industry. Overall, we believe we made significant progress and would like to thank all of our partners and staff for their tremendous contribution. Much hard work lies ahead, but we are clear as to where we are heading, and we have the plans in place to achieve the goal”. The Board of Management, Albert Röell Han van Delden Egbert Eeftink Bert Ferwerda Rob Fijneman Rob Kreukniet Barbara Lamberts
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Report of the Board of Management 01
Current Board members Albert Röell (1959, Male, Dutch national) Albert Röell is Chairman of KPMG NL commencing effective 1 November 2015. Albert Röell has more than 30 years of experience in financial and professional services. Following his tenure with McKinsey & Company, he continued his career at ING, where he held various management positions. He was the CEO and Chairman of KAS BANK N.V. from 2005 until 1 November 2015. Han van Delden (1965, Male, Dutch national) Han van Delden is Head of Markets & Clients effective 1 October 2014. Han van Delden serves a broad client base, particularly internationally oriented clients, both listed and non-listed entities. Commencing 2013 Han van Delden was chair of Corporate Clients and as such part of the Audit Leadership Team. He joined KPMG in 1991 and became partner in 2001. From 2006 through 2010, he was seconded to KPMG US in New York to serve the US based units of Dutch and other European clients.
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Egbert Eeftink (1962, Male, Dutch national) Egbert Eeftink is Head of Audit and chairman of the KPMG NL Audit Board effective 1 October 2015. He joined KPMG in 1986 and became partner in 1996. He has extensive experience as external auditor to both listed and non-listed entities, both nationally and internationally. Egbert Eeftink held various professional roles, both within KPMG and outside the Firm. He served as Head of the Department of Professional Practice and is professor of Financial Reporting at VU University in Amsterdam. Egbert Eeftink is also a special counsel at the Enterprise Chamber of the Amsterdam Court of Appeal. Bert Ferwerda (1960, Male, Dutch national) Bert Ferwerda is Chief Human Resource Officer in the Board commencing 1 November 2014. Bert Ferwerda is a seasoned Human Resource professional with extensive experience gained from senior executive positions at ABN Amro, IBM and Rabobank, where he served as Global Head of HR. Prior to his responsibilities in HR, he worked in several sales and sales management and business unit management positions at IBM. Bert Ferwerda holds a master’s degree in Business Management.
Report of the Board of Management 01
Current Board members Rob Fijneman (1964, Male, Dutch national) Rob Fijneman is Head of Advisory and Chairman of the KPMG NL Advisory Board. Rob Fijneman joined KPMG in 1986 and became partner in 1997. During 1999 through 2009 he held various managing positions within IT Advisory and Risk Consulting. His main area of focus is Corporate Clients, both as lead partner and IT sparring partner. He holds post master’s degrees in Accountancy and a PhD in IT auditing. Commencing 2004 Rob Fijneman is professor of IT auditing at Tilburg University and TIAS School for Business and Society.
Barbara Lamberts (1967, Female, Dutch national) Barbara Lamberts is the Chief Financial Officer effective 1 November 2014. Barbara Lamberts was Board member and CFO of Child Care Netherlands (currently Partou). She holds a post master’s degree in controlling (Registered Controller) and has extensive experience in finance and has held leadership positions, including ABN Amro and AEGON.
Rob Kreukniet (1962, Male, Dutch national) Rob Kreukniet is Chief Operating Officer in the Board of KPMG NL. He joined KPMG in 1988 and became partner in 1996. He worked as partner for the Brazil practice of KPMG from 1995 until 1999. Commencing 2000, Rob Kreukniet is external auditor for various publicly listed entities operating in a range of sectors, including agricultural industry, consumer goods and engineering. He is a former member of the KPMG NL Audit Board of KPMG as chairman for Corporate Clients.
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Report of the Board of Management 01
Report Tofrom our the stakehol d ers Supervisory Board 15
Integrated Report 2014-2015 © 2015 KPMG N.V. All rights reserved.
02
Introduction The auditing profession and specifically the position of the Big Four has suffered from various major problems and associated issues that emerged during or shortly after the financial crisis of 20082009. KPMG was particularly affected by the turn of events. The Netherlands changed its perception from “high trust” into ”low trust”. The need surfaced for more supervision by independent regulators and supervisory boards.
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Jan Hommen lead the firm amidst historical most challenging period. As first external Chairman of the Board of Management he changed KPMG’s culture from an inside-out perspective to one of outside-in. The appointment of other external members to the Board of Management were important aspects during the change process in which influence of public interest increased significantly. The composition of the Supervisory Board has been completely renewed during the year under review. Societal development lead to a fully independent Supervisory Board with external members from outside the auditing profession. Next to regular supervision the new Supervisory Board views monitoring integrity and public support for KPMG as its most important task. The entire Supervisory Board therefore acts as the Public Interest Committee.
The Supervisory Board has had conversations with numerous partners and employees and used the input from these conversations not only to get to know KPMG, but also to communicate what the Supervisory Board sees as its role within the firm. In addition, the Supervisory Board equally values its advisory function towards the Board of Management. The reporting year has not been an easy year for the firm. The future outlook is a positive one, following the change programme by Jan Hommen. And there will still be plenty of challenges for the new Board to address. The legacy issues will continue to generate (media) attention to the firm. Nonetheless, the Supervisory Board has much faith in the future and looks forward to contribute to the further success and future of KPMG with passion and zest.
Report from the Supervisory Board 02
Composition KPMG formally installed a Supervisory Board comprising solely external members on 1 May 2015 replacing the former, internal, supervisory board in office. The required areas of expertise and competences of the Supervisory Board members are included in the profile description as published on the KPMG website. Each of the Supervisory Board
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members has been vetted against the requirements and the current composition of the Supervisory Board represents has a high level of compliance with the profile requirements. The Supervisory Board consists of the following members (see table). The new Supervisory Board members have been welcomed with an extensive induction programme in order to prepare themselves for their responsibilities, to become acquainted with senior management and to develop a deeper understanding of the business of KPMG.
All Supervisory Board members qualify as independent in accordance with KPMG’s policy for Supervisory Board members based on the applicable rules and regulations. Independence is monitored by the Ethics & Independence unit within Quality & Risk Management. Members of the Supervisory Board are to notify the Ethics & Independence Director on any material changes in their positions. KPMG maintains an overview of the other relevant positions on its website. In addition, the members of the Supervisory Board are to notify the Chairman of any potential conflict of interest. No such notifications were made in the reporting year.
Date of appointment
End date first term
Agreed date of resignation
Audit & Risk Committee
Remuneration and Appointment Commissie Committee Publiek Belang
Bernard Wientjes, Chairman
01-05-2015
01-05-2019
01-05-2019
Member
Member
Chairman
Laetitia Griffith, Vice Chairman
01-05-2015
01-05-2019
01-05-2020
-
Chairman
Member
Steven van Schilfgaarde
01-05-2015
01-05-2019
01-05-2021
Chairman
-
Member
Jan Maarten Slagter
01-05-2015
01-05-2019
01-05-2023
-
Member
Member
Jolande Sap
19-08-2015
19-08-2019
01-05-2022
Member
-
Member
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Report from the Supervisory Board 02
Tasks and activities The Supervisory Board is responsible for supervising and advising the Board of Management of KPMG and overseeing the general course of affairs and strategy of KPMG. Its roles and responsibilities are laid down in the Articles of Association and in the Rules of Procedure of the Supervisory Board (“Reglement Raad van Commissarissen”). The Supervisory Board operates fully independently, which also is reflected by its mandate that is similar to a Supervisory Board at a large Dutch corporate (“structuur vennootschap”).
Meetings and activities of the Supervisory Board The internal supervisory board held 6 meetings during the financial year through to its replacement in May 2015 by the external Supervisory Board.
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The significant topics for the internal supervisory board meetings included:
The topics tabled at the (new) Supervisory Board meetings included:
–– Selection and appointment of the external executives for the Board of Management positions “HR Director” and “CFO” respectively; –– Succession of Chairman Board of Management; –– Remuneration of Board of Management members; –– Selection and nomination of external candidates for the new Supervisory Board; –– Business, financial and legal updates; –– Partner remuneration, including claw back/ deferred payment; –– Review of the Annual Report 2013/2014 of KPMG N.V.; –– Business Plan and Budget 2014/2015.
–– Succession of Chairman of the Board of Management, Head of Audit and COO; –– Management Board composition and remuneration; –– Business, financial and legal updates; –– Approval of three year plan; –– Regulatory related topics, including the incorporation in the KPMG governance documents of the recommendations made by the AFM to further improve the quality in the accountancy sector; –– Co-investment program by KPMG International and the conditions in relation thereto.
The new Supervisory Board held 5 formal meetings post May 2015 to end of the financial year. In addition, a sounding session was organised in August 2015 to enable the Supervisory Board to supervise and advise on the structure and consequences of the coinvestment program by KPMG International.
The Chairman of the Board of Management attended the meetings, and the other members of the Board of Management and other senior management members were present if the agenda items dictated such participation. In addition, the new Supervisory Board held several closed sessions to independently discuss and review certain matters.
Report from the Supervisory Board 02
Except on one occasion all Supervisory Board members attended all Supervisory Board meetings since May 2015.
Audit & Risk Committee The responsibilities of the Audit & Risk Committee of the Supervisory Board are stipulated in the “Reglement van de audit & risk commissie van de raad van commissa rissen”, published on the KPMG website. the primary responsibilities concern monitoring compliance with independence requirements and internal risk management systems, with relevant laws and regulations and monitoring financing of operations and financial reporting. Since its installation in May 2015, the committee’s deliberations took place during Supervisory Board meetings. During the course of the current financial year, the Audit & Risk Committee will commence holding independent meetings.
Remuneration and Appointment Committee The responsibilities of the Remuneration and Appointment Committee of the Supervisory Board are stipulated by the ”Reglement van de remuneratie- en benoemingscommissie van de
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Integrated Report 2014-2015 © 2015 KPMG N.V. All rights reserved.
raad van commissarissen”, published on the KPMG website. The primary responsibilities concern are advising the Supervisory Board on these matters and submitting proposals on remuneration and (re)appointments. Since its installation in May 2015, the committee’s deliberations took place during Supervisory Board meetings. During the course of the current financial year, the Remuneration and Appointment Committee will commence holding independent meetings. We refer to chapter 6 for this year’s remuneration report.
Just after the start of the current financial year, Barbara Lamberts announced she would be stepping down from her position as CFO with effect from 15 December 2015. Rob Kreukniet will assume her tasks and responsibilities from that date.
The Remuneration and Appointment Committee and the Supervisory Board focussed primarily on the succession of Jan Hommen, who retired effective 1 October 2015. The successor, Albert Röell took up the position as Chairman of the Board of Management effective 1 November 2015. In the one-month intervening period the tasks and responsibilities of the Chairman of the Board of Management were discharged by Andrew Cranston, the former Chief Operational Officer. Two new members of the Board of Management were selected and appointed effective 1 October 2015: Rob Kreukniet as Chief Operational Officer, succeeding Andrew Cranston, and Egbert Eeftink as Head of Audit, succeeding Marc Hogeboom.
Evaluation
Public Interest Committee The Public Interest Committee is fully incorporated in all aspects within the Supervisory Board.
The Supervisory Board will assess its own performance as a board, of the performance of its individual members, as well as of the performance of the Board of Management and its individual members in the current financial year 2015/2016. The Supervisory Board is of the opinion that performing such assessment at an earlier stage would not have resulted in a mature and well considered outcome given the short period of functioning since May 2015.
Report from the Supervisory Board 02
Financial statements and discharge The 2014/2015 Annual Report has been prepared by the Board of Management. The Financial Statements are part of the Integrated Report which comprises the Financial Statements and the Annual Report of the Board of Management. The Financial Statements have been audited by Grant Thornton, the external auditors. Their findings have been discussed with the Supervisory Board in the presence of the Board of Management. The unqualified opinion expressed by the auditors on the Annual Report is included on the last page of this Integrated Report. The Supervisory Board hereby submits the 2014/2015 Annual Report to its shareholders for approval. The Supervisory Board proposes that the AGM, in accordance with Article 20 of the Articles of Association, discharges the members of the Board of Management for their management in the reporting year and the members of the Supervisory Board for its supervision.
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To conclude The Supervisory Board recognises that this was again a challenging year where the focus was fully on improving KPMG’s audit quality and dealings with legacy issues in the face of external and internal forces. The Supervisory Board has been impressed with the commitment of management, partners and staff to continuously improve. The Supervisory Board is specifically indebted to Jan Hommen for his leadership in initiating a comprehensive improvement programme and a culture change with excellent intermediate results. This is underscored by the 4.6 (out of a maximum of 5) rating of KPMG on the AFM Dashboard 2015 on changes and improvement measures. The Supervisory Board would also like to share its deep appreciation for the added value and constructive leadership of Marc Hogeboom as Head of Audit in very hectic and turbulent years. We are extremely grateful to Andrew Cranston (former COO) for his contributions in steadying the ship in the past period. The current financial year shall be focussed on growth and further quality improvement with the full support of the Supervisory Board. Supervisory Board: Bernard Wientjes, Laetitia Griffith, Jolande Sap, Steven van Schilfgaarde, Jan Maarten Slagter
Report from the Supervisory Board 02
Supervisory Board As of 1 May 2015 (A complete overview of current tasks and positions is included on our external website) Bernard Wientjes (1943, Male, Dutch nationality) Bernard Wientjes is chairman of the Supervisory Board. He is an entrepreneur that has been in charge of a family owned business for over three decades. In 2014 he was appointed as professor Business and Leadership at Utrecht University. Prior to that Bernard Wientjes was, among other things, chairman of the employer’s association VNO-NCW and a member of the board at Villeroy & Boch. Laetitia Griffith (1965, Female, Dutch nationality) Laetitia Griffith is vice chair of the Supervisory Board. Laetitia Griffith is Counsellor in the Council of State effective 2012. Prior to that she was, inter alia, a member of the Dutch parliament, a member of the executive board of the municipality of Amsterdam and worked at the Department of Justice. Laetitia Griffith is chairman of the association Vereniging Nederlandse Veiligheidsbranche and board member of VNO-NCW.
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Jolande Sap (1963, Female, Dutch nationality) Jolande Sap is, inter alia, chairman of the Netherlands Public Health Federation NPHF and chairman of Fairfood International since 2013. She is also member of the supervisory board of KPN. Prior to that she was a member of the Dutch parliament (2008-2012) and political leader of the party GroenLinks (2010-2012). She is still closely involved with social topics linked to sustainability, health care, food supply and the clothing industry. Steven van Schilfgaarde (1964, Male, Dutch nationality) Steven van Schilfgaarde was ad interim CFO and executive board member of KPN. Previous position held by Steven van Schilfgaarde included CEO of Getronics. He is a certified controller (Registercontroller). Jan Maarten Slagter (1969, Male, Dutch nationality) Jan Maarten Slagter was appointed programme director of the New Board Program at Nyenrode Business University in 2014. Previously he had chaired the association Vereniging van Effectenbezitters and was a correspondent for the Financieele Dagblad in London. Jan Maarten Slagter is an external expert member of the Capital Markets committee of the AFM.
Report from the Supervisory Board 02
Supervisory Board Supervisory Board until 1 May 2015 Erik Weusten (1963, Male, Dutch nationality) Erik Weusten was the Chairman of the Supervisory Board of KPMG N.V. Mr. Weusten joined KPMG in 1986 and made partner in 1996. He is active as external auditor on some of our largest corporate clients, including AkzoNobel (until 2013), Philips and FrieslandCampina. Dina Aleman (1960, Female, Dutch nationality) Dina Aleman is Advisory partner for the financial services sector. She joined KPMG in 1995 and made partner in 2001. In addition to her roles and responsibilities within KPMG, Mrs. Aleman is also the Chair of Oogfonds, a non-profit organisation aiming to prevent blindness and sight impairment in the Netherlands.
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Onno Sloterdijk (1964, Male, Dutch nationality) Onno Sloterdijk joined KPMG in 1992 and made partner in 2000. He was Head of Private Equity within KPMG Corporate Finance and also a member of the Global Private Equity Steering Committee of KPMG. Mr. Sloterdijk won the award for best M&A advisor for mid markets three consecutive years in 2007-2009 and again in 2012. Roland Smeets (1968, Male, Dutch nationality) Roland Smeets joined KPMG in 1991 and made partner in 2001. He is active as external auditor within KPMG’s National Practice. In addition, Mr. Smeets was also a Board member of the Cooperative KPMG U.A..
Report from the Supervisory Board 02
Stakehol d er Todiaourlogue stakeholders
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03
Stakeholder expectations Stakeholder dialogue is a Board priority and vital to our long-term success. If we want to maintain a passionate focus on our clients and build public trust we need to be able to respond to stakeholder expectations. Our understanding of the stakeholder expectations are listed below and our responses thereto are summarised in this table.
Stakeholder expectation
How it affects KPMG and our response
Conduct high quality independent audits
This is by definition vital to our brand quality. Without high quality audits we would lose a significant part of our value creation. Hence, our rigorous and comprehensive improvement programme Activ8 Your Audit Quality. Independence is a given and the relevant standards were expanded to include a ban on advisory services to PIE/OOB audit clients. We invest in continuous education of our professionals and conduct annual reviews of completed engagements to assess compliance against auditing standards. At the organisational level we conduct Partner Portfolio Reviews to assess the partners’ ability (in terms of time, experience, and resources) to deliver top quality audits.
Help grow and improve
Clients want us to assist in improving and growing their organization(s) to the next level. Our services are by definition dependent on the specific role we play at the clients. From an Audit perspective we assist clients improve by providing independent findings during the course of the audit on their business including identification of business and operational risks that need mitigation, potential (significant) deficiencies in their control environment and business processes. We encourage clients to be transparent in their reporting and disclosures to ensure stakeholders’ interests are sufficiently met. From an Advisory perspective we invest in new services, including Transformations, Cyber Security, Deal Services, and Data & Analytics to help clients in achieving their businesses objectives. Additional investments are made in Asset Based Consulting as well. It is all about relevance.
Table 1. Stakeholder expectations and our response
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Stakeholder dialogue 03
Stakeholder expectation
How it affects KPMG and our response
Stakeholder expectation
How it affects KPMG and our response
Tell us more
We provide shareholders more information on our audit and key audit matters through longform reporting. We also increase our efforts to stand up and be recognised in general meetings of shareholders (AGMs). For Advisory engagements we provide independent views and benchmark data to deepen insights.
Data security and privacy
The increasing use of IT and increasing digitisation impacts us too through enhanced expectations for data security and privacy. Our National IT Security Office and Corporate Security Manager monitor compliance against KPMG International standards for data. A Privacy Officer oversees the recording and processing of personal information in accordance with regulations. Our security system is ISO 27001 certified.
Responsible and sustainable
As one of the thought leaders in the area of sustainability we are very aware of the impact of our business conduct on society, irrespective of the materiality of the actual impact.
Stakeholders and shareholders want us to be more transparent too concerning our own business conduct and results. We aim to be as transparent as we can be. Employer of choice
Our people are the main vehicle for service delivery. Their perceptions (measured through the GPS/Pulse surveys) and their engagement with the organisation are paramount to our success. We benchmark ourselves against our main competitors, other KPMG member firms and similar industries to assess if the HR practices and employment benefits are on par.
We have a Corporate Social Responsibility strategy in place to address our commitment to our communities and our ambitions in terms of our ecological footprint reduction.
Table 1. Stakeholder expectations and our response
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Stakeholder dialogue 03
Our stakeholders Table 2 lists the key stakeholder groups we distinguish based on the impact our service delivery has and our ways of engaging with these stakeholders.
Stakeholder group
Our way of engaging
Clients, including those clients charged with governance
Communication and engagement with our Audit and Advisory clients is as you would expect undertaken in many ways, such as through and during our service delivery, client satisfaction surveys, site visits by Board members and client events (e.g. roundtables). For Audit, we formally report to those charged with governance on the key audit matters and other audit findings, as well as on our independence. In Advisory, we often deliver a client care report or main issues observed during advisory engagements. In more general terms we communicate with supervisory board members through our Board Programme.
Employees and partners We engage with our professionals on a daily (continuous) basis through of KPMG multiple internal communication channels, employee events, on the job training and through our performance management. The results of our regular people survey determine the priorities and the content of our communications. We hold regular meetings to discuss all aspects of our culture and the impact of our work on society. Citizens, government and politicians
We engage through our proactive public affairs programme with government and politicians on a range of relevant business issues, predominantly related to audit quality through comments on exposure drafts of audit standards or audit regulation. As the leading firm in the field of sustainability we maintain regular contact with NGOs, experts in the industry, opinion leaders and media to gain and provide insights and enhance our own initiatives to guide organisations in their journey on sustainable growth.
Table 2. Stakeholder groups and engagement
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Stakeholder dialogue 03
Stakeholder group
Our way of engaging
Stakeholder group
Our way of engaging
Regulators
We are under supervision of the AFM and PCAOB regarding statutory audit engagements and subject to governmental inspection agencies for specific types of audit and assurance engagements.
Professional bodies and academia
We participate in working groups of professional bodies (such as NBA, NOREA, and IIA) to contribute towards developing and maintaining high quality services. We participate in various universities through making professors (full, associate and assistant) available to teach future generations of professionals and to conduct more fundamental research to advance our understanding in the auditing, tax and advisory domain.
We have periodic dialogue with the domestic regulator AFM on quality related issues and our response. Users of financial statements, including professional bodies representing those users and media
Our main interaction with this group of stakeholders is at the annual meeting of shareholders in which we comment on our role as auditors and through the issuance of our (long-form) auditor’s reports. For owner managed businesses our communication is of course directly with owners.
We were actively involved in the Working Group and Steering Group of the NBA’s future initiatives.
We continue to provide education to journalists to assist them in understanding and interpreting financial statements as we have done for the past 25 years now. We interact with media and leading Dutch newspapers about our practices and issues and inform them of our performance and respond as proactively as we can to questions and queries. Table 2. Stakeholder groups and engagement
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Stakeholder dialogue 03
Material reporting topics: linking stakeholder expectations with our vision areas
Materiality assessment According to the GRI G4 reporting guidelines materiality is the scale of importance that warrants that a topic should be reported on. The topics for consideration are identified using both internal and external factors. We have used the expectations expressed by our stakeholders (external) and our vision areas (internal) identify the material topics for reporting purposes. In addition, we have used
the main elements of the GRI reporting framework to ensure we cover all the related aspects identified in that framework. Figure 3 depicts the conclusions drawn from this process. A particular topic is identified as a reportable material issue depending on the impact on stakeholder expectations and business performance. The Board of Management classified the topics into four categories:
Category
Explanation
Integrate
Issues within this category are considered to be of such importance that inclusion is necessary in either the core strategy or Board level focus. These material issues are reported in the main sections of the Report.
Manage
Issues in this category are important for the value creation of KPMG. These issues require functional leadership attention and are reported in either the main body of the Report or in the appendices depending on relations with core issues.
Monitor
Issues in this category might influence business performance, but are not considered as requiring specific Board or leadership attention. These issues are ordinarily only reported in the appendices of the Report.
Accept
This category relates to all other issues that could potentially impact business performance, but that are not considered to be directly applicable to our business or that are deemed immaterial. These issues are not reported on.
Table 3. Impact assessment response.
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Stakeholder dialogue 03
CLIE
NT DIFFERENC
E
ACCEPT
Figure 3. Our materiality assessment.
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I O N A L E XC E L L EN CE ACCEPT
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Client Difference 1. High Quality 2. Independence 3. Help Grow & Improve 4. Open Communication 5. Reputational Issues 6. Thought Leadership 7. Innovation 8. Regulatory Change
Extraordinary People 15. Talent Development 16. Diversity 17. Employment 18. Equality 18. Discrimination 19. Occupational Health & Safety
Public Trust 9. Personal independence 10. Reputational Issues 11. Compliance & Claims 12. Data Security 13. Client Satisfaction 14. CPE
Operational Excellence 20. Remuneration 21. Reputational Issues 22. Sustainable Profit 23. Supply Chain/ Procurement 24. Community 25. Energy/Emissions 26. Water 27. Materials 28. Biodiversity 29. Human Rights
L
M O N I TO R
20
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ACCEPT
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P PEO
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Stakeholder dialogue 03
Topics included in this Report The following table provide the reader with a reference guide for material topics as per the aforementioned materiality matrix and the relevant section in this report.
Nr
Material Topic
Internal alignment
1
High Quality
Public Trust
2
Independence
Public Trust
4
Open Communication
Public Trust
5
Reputational issues
Public Trust
6/7
Innovation, thought leadership and helping grow and improve
Public Trust
10
Compliance & Claims
Public Trust
11
Data Security
Our Clients see the Difference
12
Client satisfaction
Our Clients see the Difference
14
Talent development and retention
Our People Are Extraordinary
15
Diversity
Our People Are Extraordinary
16
Employee Engagement
Our People Are Extraordinary
20
Remuneration
Operational Excellence
21
Sustainable profit
Operational Excellence
Table 4. Material Topics
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Stakeholder dialogue 03
Report boundary General This report covers KPMG N.V. and its subsidiaries. Meijburg & Co is a separate member firm of KPMG and is therefore not included in this report, except where specifically stated. Material topics relate to KPMG N.V. (Audit and Advisory) as a whole unless stated otherwise. Supply Chain We believe that the nature of the industry we are in dictates that we are (part of) our own supply chain (primary supply chain). We need to maintain independence and ensure that our service delivery is not significantly dependent on particular suppliers or subcontractors. This notwithstanding the fact that we directly impact clients and other stakeholders due to the very essence of our services, which is to provide assurance and support change for enhanced decision making. This report therefore only details issues and results that pertain to our Firm and its group companies. We are part of other entities’ supply chains (secondary supply chain) in our capacity as end- users for products and services, such as IT, lease cars and energy. We exercise our
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influence to the extent possible to motivate and move suppliers to deliver products and services that are aligned with our purpose, corporate values and strategy. KPMG International is a member of UN Global Compact and through them we are committed ourselves to the 10 principles. We have implemented a Supplier Code of Conduct. Comparability of Information In a limited number of cases we have made minor adjustments to indicators to ensure comparability. These indicators have been earmarked in the text with footnotes. The adjustments are generally the result of improved availability of information or edits to definitions. External Assurance Last year we started asking for assurance on key indicators, knowing that it is a course that should ultimately result in assurance on all facets of the report. We are almost there. We have asked our auditors Grant Thornton to provide limited assurance on key indicators in each of our 4 vision areas, namely: Quality Performance Reviews; Client Satisfaction and Net Promoter Score Employee Engagement and CO2 emissions.
Stakeholder dialogue 03
Addi n g Tovalourue stakeholders
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04
That requires an understanding of facts and opinions embedded in the interactions between people, processes and systems. Hence, our strong belief in multidisciplinary teams of Audit, Tax and Advisory, where we foster independent views, input and dialogue, because “we” transcends “me”. We believe there is power in deliberate action and that everything we do can positively impact those who succeed us. That is why we will always act with future generations in mind, with clear and complete vision. Helping make the world a better place by empowering positive change.
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IN
CONFIDE
NC
+
+ E
M
PO
E
With passion and purpose, we work shoulderto-shoulder with our stakeholders, integrating innovative approaches and deep expertise to deliver real results.
S
E R I P
E
Our purpose: Inspire Confidence. Empower Change.
Our purpose outlines why we exist. We are here to bring the fluidity, flexibility and sound judgment required to achieve sustainable and insightful change in the world, in our clients, our organisations and in our communities. Whether applied globally or locally, to the world’s biggest challenges or a market’s smallest issues we help enable informed decision-making.
WER CH
G N A
We believe in diversity, individual responsibility, personal growth and dedicated teamwork. We serve the general public and clients with outstanding professionals, alert, sharp observers with a hands-on attitude. We thrive in team collaboration and spirit building on mutual respect and enjoyment. We believe in hard work and in challenging ourselves to become better every day.
Adding value 04
Values in action Our purpose is supported by our values, as documented in our Code of Conduct that is available to every KPMG professional on the desktop of their computers and on our intranet.
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We lead by example at all levels in a way that exemplifies what we expect of each other and our clients. We work together to bring out the best in each other and create strong and successful working relationships. We respect the individual for who they are and for their knowledge, skills and experience as individuals and team members. We seek the facts and provide insight by challenging assumptions and pursuing facts to provide insight as trusted and objective business advisers.
We are open and honest in our communication and share information, insight and advice frequently and constructively and our communication managing tough situations with courage and candour. We are committed to our communities to act as responsible corporate citizens by broadening our skills, experience our communities and perspectives through work in our communities. Integrity is a critical characteristic that stakeholders expect and rely on. Therefore, above all we act with integrity and are constantly striving to uphold the highest professional standards, provide sound advice and rigorously maintain our independence.
Adding value 04
Our vision areas
The Public Trusts Us In our industry, relevance is closely tied to high quality services. And this is also the aspect on which the auditing profession is most under scrutiny by the general public. Public trust must be earned. Society gives us our license to operate. It is not a given. We want to be the trusted standard again in our profession.
Our vision outlines what we want to be Our People are Extraordinary and what we stand for. Our vision is based on 1 single objective: to again be The need for public’s trust is closely followed the industry standard. We live up to our by having extraordinary people. KPMG has legacy and put quality and integrity as our always been at the forefront of employee engagement and development with leading HR #1 priority and in doing so prove our practices. We have to strike a proper balance relevance and contribution to society. between nature and nurture as we do not Our execution is based on four vision areas representing what we want to be. These are underpinned by a culture driven by our values (see figure 1). We place significant focus on ensuring that we deliver the quality of service that society and our clients expect by continually reinforcing the importance of quality and innovation across our firm. We want to ensure that we increase our added value by demonstrating the skills and behaviour our clients and stakeholders expect.
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believe in lifetime employment. What we do believe in is helping employees maximise their capabilities. Our people are what we are. Our cultural heritage is of highest quality service delivered by highly qualified professionals.
Our Clients see the Difference in Us We want to bring our collective Audit and Advisory knowledge to the market and thus contribute to finding solutions to the varied complex problems our clients face. We believe that the combination of Audit and Advisory services benefits clients and stakeholders more than Audit only or Advisory only delivery. Specialist disciplines, such as IT Advisory, Corporate Finance (valuation) or Forensic & Integrity significantly enhance the quality of the audit. Our clients expect us to deliver Advisory services to assist them in resolving their issues and challenges. However we observe strict compliance with independence standards: we do not offer all services to all clients.
Operational Excellence We need to further improve in the efficiency and effectiveness of our processes and procedures as this, together with a focus on quality, maximises our ability for value creation for stakeholders, ensures sustainable growth, and minimises our ecological footprint.
Adding value 04
Value creation The concept of Integrated Reporting revolves around the notion of reporting on how organisations use the capitals at their disposal towards value creation. The IIRC framework for Integrated Reporting identifies 6 core capitals: human, intellectual, manufactured, social, financial and natural capital. We refer to the IIRC framework for further details about these capitals and the framework itself.
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Figure 5 provides an overview of how we employ the aforementioned capitals to address material stakeholder expectations and the value that we create through our unique proposition. Manufactured capital is excluded from our value chain, as our work is intangible in nature: we do not produce physical products. At its core our three most significant capitals are human capital, intellectual capital and our social or relationship capital. We are a people business and without our people there would be no service delivery. They are, together with our collective knowledge encapsulated in our intellectual capital, the means for delivering quality and delivering our vision of being the standard in our sector. The intellectual capital constitutes our methodology and our unique
way of working. Social capital pertains to the shared values we have and the contribution to our communities. Natural capital is the natural resources we consume (i.e. our ecological footprint) during our service delivery. Financial or monetary capital is necessary to attract and retain the other capitals. Our value creation is based on our role in the “supply chain” of trust and informed decision making. Our contribution or value creation lies in our ability to leverage human capital and intellectual capital for the benefit of increasing social capital: by fulfilling our role impeccably as the trusted party in the economic markets and improving societal decision making by our knowledge and insights.
Adding value 04
Capitals
Stakeholder Expectations
Our Unique Proposition
Value Created
Financial
–– Sustainable profit –– Remuneration –– Compliance & Claims
Inspire Confidence. Empower Change.
Human
–– Talent Development & Retention –– Diversity –– Employee Engagement
Vision Areas The Public Trusts Us Our Clients See a Difference in Us Our People are Extraordinary Operational Excellence
Social & Relationship
–– High Quality –– Reputation Issues –– Independence –– Open comunication
Intellectual
–– Data security –– Innovation –– Thought Leadership
Natural
–– Ecological footprint
Attributes
Forward Thinking
Expert
Values –– lead by example –– work together –– respect the individual –– seek the facts
Global Mindset
Value Adding
Passionate
Integrating innovative approaches and deep expertise to deliver real results
–– provide insight –– open and honest –– committed to our communities –– act with integrity
Figure 4. Our value creation cycle: connecting capitals to purpose, vision and action.
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Adding value 04
Delivering on our promise: performance monitoring
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We focus on 11 top level KPI’s to monitor our performance in our vision areas. The top level KPI’s contain a high degree of ambition. We have included these KPIs at the beginning of each of the chapters on our vision areas. This self-assessment is qualitative, based on our judgement against a range of underlying measures, including the ones disclosed in this report. We have graded ourselves both on absolute performance, but also the underlying trend.
In view of the relative early stage in the journey we are understandably still below in absolute terms, our targets on the majority of measures and therefore graded amber in terms of absolute results. Though it is important to recognise that the trend is positive on most measures.
Adding value 04
Publ i c ToTrust our stakeholders
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05
Overview The critical success factors in the area of Public Trust are that: –– We are valued by investors and respected in our profession –– We invest in the communities where we live and work –– We have the courage of our convictions These critical success factors translate into the following performance targets: –– Dependable consistent high levels of quality –– Strong external perception of our reputation –– Robust Risk Management & Independence –– We demonstrate social responsibility
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Performance target
Assessment
Trend
Key Indicators
Strong external perception of our reputation
Media coverage
Dependable consistent high levels of quality
Quality Performance Reviews Regulatory inspections Partner involvement Consultation with specialists
Robust Risk Management & Independence
Audit fees vs Advisory fees Independence compliance General compliance
We demonstrate social responsibility
CSR activities and investments
Public Trust 05
Strong external perception of our reputation
We track external perception of our brand as part of a communication improvement programme commencing this reporting year. Figure 5 charts the first results of the programme where each score represents the
90
number of articles per month (blue bars) and the overall / average sentiment of those articles in % of positive minus negative sentiments (orange line). The year 2015 has been more balanced following the exceptional year 2014.
100%
Media Exposure 2014 - 12015
80
#Articles
%Sentiment
70
50%
60 50 0%
40 30
-50%
20 10 0 October
November
December
January
February
March
April
May
June
July
August
September
-100%
Figure 5. KPMG media attention.
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Public Trust 05
Dependable consistent high levels of quality During the reporting year 61 Audit partners and 64 Advisory partners/directors were subject to internal quality reviews equalling 43% (40% in FY 13/14) and 46% (33% in FY 13/14) of the respective total eligible population of partners/ directors. The results are presented in table 4. A ‘Satisfactory’ or ‘Green’ grading requires both (i) the work performed, the evidence obtained and the documentation produced to comply with our internal policies, applicable (auditing) standards and (legal and regulatory)
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Audit
Advisory
2015/2014
2014/2013
2015/2014
2014/2013
Number of engagements reviewed
62
72
55
76
Number of partners reviewed
57
60
54
74
Satisfactory
47
57
49
38
Performance Improvement Necessary
11
4
14
15
4
1
1
2
Unsatisfactory Table 4. Number of partners reviewed.
requirements, and (ii) key judgements concerning significant matters in the engagement (vis-à-vis the audit opinion) to have been appropriate. A ‘Performance Improvement Necessary’ or ‘Yellow’ grading is attributed where the engagement deliverable is generally supported by the work performed and is appropriate, however improvements are necessary in one or more significant area, including with respect to the documentation of the work performed.
An ‘Unsatisfactory’ or ‘Red’ grading is attributed where the engagement was not performed in accordance with the firm’s policy and professional standards in significant areas, in particular where there are significant deficiencies in the financial statements themselves (Audit), the (audit) work paper documentation or the actual work undertaken.
Public Trust 05
The results show a decrease in satisfactory scores for Audit. This is mainly the result of a decrease in satisfactory scores for non-audit (i.e. other assurance and audit-related) engagements and changes to the quality review process, specifically inclusion of 2013 engagement files in the 2014 quality review and more rigorous reviews. We have identified the initial root causes of these less than satisfactory scores and took action accordingly. We plan to further analyse these root causes to assess if additional remedial actions are necessary. To that extent we have recently installed an Audit Quality Issues Council to assess quality related findings, to monitor the enhanced root cause analysis process and
Jan 2014
June 2014
subsequently track remedial actions. We have also reviewed individual partner portfolios to reassign engagements for a more balanced workload. Average number of findings per engagement increased from 1.6 to 1.8 during the year under review. Advisory results display an improvement as compared to last year, mainly as a result of implemented quality measures following the results of FY 13/14 including increased accreditation requirements for specific types of Advisory services and awareness training. Reasons for the less than satisfactory grades of Advisory engagements mostly relate to untimely completion of engagement
Sep 2014
Jan 2015
acceptance procedures or non-compliance with certain aspects of those acceptance procedures (all non-independence related).
Activ8 Your Audit Quality Our comprehensive audit quality improvement programme commenced last year. The current year marks the beginning of phase 2 and revolves around 3 key themes supported by a clear tone at the top and culture. The key themes are: 1) Consistent Audit Execution, including standardisation, 2) Increased quality controls, 3) Enhance Audit Relevance, including increased usage of Data & Analytics.
Oct 2015
Results AFM/NBA True blue Issues & Incidents –– PPO settlement compliance program –– Oversight by AFM
–– Outside-in view –– Seven workstreams (including Audit Quality) –– Tone at the Top: driven by the board –– Cultural change
–– Critical report AFM Big4 –– KPMG 4th place –– NBA presents reform plan “in the public interest” –– Big4 agree to implement 53 measures
Activ8 your Audit Quality –– Integrated program on all seven drivers of Audit Quality –– Execution of the program driven by Board and Audit Leadership Team
–– Rules of the game per 1 July 2015: teams know what is expected from them –– Lean workflow –– 4.6 score by AFM on design of AFM/ NBA change and improvement measures
Activ8 phase 2 (continuous improvement) –– Further implement AFM/NBA change and improvement measures –– Evaluate input from Audit Quality Issues Council, Root Cause Analysis QPR, Regulators, etcetera
Figure 6. Title??
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Public Trust 05
External reviews (Audit) AFM No engagement file inspections were undertaken by the AFM during the reporting year. We were informed by the AFM in August 2015 that it intended to fine KPMG on the basis of their inspection findings for fiscal year 2012. We have shared our views with the AFM in October and are now awaiting the final decision. Next to engagement specific reviews, the AFM performs theme-based or topic-based reviews. During the reporting year the AFM assessed our change and improvement measures, as mentioned in chapter 1. The AFM finalised its review of our quality controls regarding monitoring and follow up on issues and incidents as well as its review on the follow up of the agreed actions regarding the PPO settlement. Finally, the AFM investigated how Big Four firms address and mitigate the risks of (foreign) corruption as part of their system of quality controls. The AFM intends to organise a round-table with the Big Four to discuss general findings and observations.
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NBA In the summer of 2014, the Netherlands Institute of Chartered Accountants (NBA) launched an initiative to discuss and design the future of audits in response to the chain of events concerning the Dutch profession. KPMG together with other audit firms and the NBA performed a thorough analysis of the issues involved and designed 53 improvement measures that together will lead to better audits. We support the improvement measures proposed by the working group fully and we have substantially implemented the majority of these measures, or are in the process of implementing these as part of our Audit quality agenda or as separate projects. Other ISO audits for ISO 9001 (general quality framework), ISO 27001 (data security) and ISO 14001 (environmental management) all resulted in positive evaluations and continuance of our certification in the designated areas. The Ministery of Education, Culture and Science (OC&W) performed compliance reviews on selected engagement files. All 9 engagement files were rated satisfactory by the reviewers.
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#
Measure
Status
#
Measure
3.3
Maintain a profiling towards labour markets based on professionalism, ethics and integrity
Adopt remuneration principles of the Corporate Governance Code for Board members
3.4
Assess the mindset and drivers for behaviour of partners and professionals
Ensure partner remuneration is based primarily on quality of work
3.5
Implement a claw back policy for audit partners
3.6
Implement a private investment policy for partners to safeguard ethics & independence
3.8
Implement a mandatory pension scheme for audit partners
Culture 1.3 1.4
Governance 2.1
Install a Supervisory Board at firm holding level
2.2
Implement NBA selected principles of the Corporate Governance Code
2.3
Define clear tasks and mandate for the Supervisory Board
2.4
Ensure the Supervisory Board governs the entire organisation in light of public interest
2.5
Install key committees within the Supervisory Board vis-à-vis the Corporate Governance Code
5.1
2.6
Publish a comprehensive report by the Supervisory Board in the annual and transparency report
Report on audit quality indicators in the annual transparency report
5.2
2.7
Compose and install a diverse Board of Management with due regard of stakeholder’s interests
Report to client Supervisory Board’s on planned and actual partner and team involvement
5.3
2.8
Ensure the Board of Management has sufficient time available to manage the firm
Extend scope and depth of engagement quality reviews (EQCR) through a dedicated team
5.5
Draft and execute improvement plans for partners not meeting audit quality standards
5.9
Active involvement in educational institutions for the formal education of qualified professionals
8.1
Report on implementation (this report)
Performance management and remuneration 3.1 3.2
Implement a remuneration policy that is driven by quality Ensure that audit quality is embedded in the promotion policy as prerequisite to promotion
Table 5.Progress on NBA improvement measures.
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Status
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Auditor relationship 4.5
Issue new long-form reporting for all PIE entities and maintain active presence during AGM Monitoring and improving audit quality
= completed
= nearly completed
= partially completed
A detailed overview of the status can be found at our website or the official NBA website.
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Team involvement (Audit) One of the earlier root causes for less than satisfactory rated engagements has been partner and senior manager involvement. We reemphasised the benefit of senior level
involvement for audit quality. Table 6 presents the % of hours per type of engagement and per staff level. A threshold / benchmark for specific percentages per staff level have not yet been established. Overtime amounted to 7.4% of contractual hours (FY 13/14: 5.9%).
2014/2015
2013/2014
OOB
Non-OOB
Other
Internal
Total
OOB
Non-OOB
Other
Internal
Total
29,656
113,363
10,852
118,377
272,248
31,071
108,431
19,327
137,415
296,244
10.9%
41.6%
4.0%
43.5%
100%
10.5%
36.6%
6.5%
46.4%
100%
61,309
274,916
30,073
111,907
478,205
66,753
297,536
52,968
135,096
552,354
12.8%
57.5%
6.3%
23.4%
100%
12.1%
53.9%
9.6%
24.5%
100%
157,909
1,000,314
118,392
291,885
1,568,500
129,516
887,675
189,007
274,535
1,480,733
10.1%
63.8%
7.5%
18.6%
100%
8.7%
59.9%
12.8%
18.5%
100%
248,873
1,388,593
159,317
522,170
2,318,953
227,339
1,293,642
261,303
547,047
2,329,331
Partner
11.9%
8.2%
6.8%
22.7%
11.7%
13.7%
8.4%
7.4%
25.1%
12.7%
Manager
24.6%
19.8%
18.9%
21.4%
20.6%
29.4%
23.0%
20.3%
24.7%
23.7%
Other
63.4%
72.0%
74.3%
55.9%
67.6%
57.0%
68.6%
72.3%
50.2%
63.6%
Total
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Partner
Manager
Other
Total
Table 6. Team involvement in hours and percentage of hours (Audit only).
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Partner and manager involvement for OOB audit engagements are well above the benchmarks of 8% and 20% respectively, and involvement for non-OOB audit engagements is above the set benchmarks of 7% and 17% (average) respectively. In addition to Audit professionals, specialists are also engaged. Other specialists were engaged for 177,839 hours (or 9.2%) for the year under review (FY 13/14: 125,997 or 7.2%). Involvement for IT specialists is listed in table 7. 2014/2015 2013/2014 OOB
25,981
24,428
Non-OOB
48,315
43,416
Total
74,296
67,833
OOB
8.2%
8.6%
Non-OOB
3.0%
3.0%
Table 7. IT specialist involvement in hours and percentage of hours (Audit only).
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FY 14/15
We apply qualitative rather than quantitative benchmarks for IT and other specialists. Involvement of specialists for Tax, Forensic, Financial Instruments and Real Estate is mandatory when requirements are met. During the reporting year 529 engagement quality control reviews (EQCR) were performed on high risk legal audits, representing 23% of all legal audits (FY 13/14: 568 or 24%). EQCR partners spent 3,907 hours on these reviews (FY 13/14: 2,329) or 7.3 hours on average per engagement (FY 13/14: 4.1). This represents 0.8% and 1.0% of all eligible engagement hours for FY 14/15 and FY 13/14 respectively. We increased quality control reviews during FY 14/15 to include EQCR for non-legal audits, (mandatory) financial statements pre-issuance reviews, specific topics quality control review (e.g. going concern or fee independence) and (mandatory) in-flight reviews.
FY 13/14
11
70
%
12 19 66
%
22
Partners/Directors (Senior) Managers Other staff
821
142
160
Partners/Directors
FY 14/15
800
298
250
(Senior) Managers
Other staff
FY 13/14
Figure 7. Engagement team ratio (in FTE and % of FTE).
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Consultation with specialists We have protocols for consultation on and documentation of significant accounting and auditing matters, including procedures that facilitate the resolution of differences of opinion on engagement issues. In total, 72.7 FTE are part of DPP, Compliance Office and QRMG (FY 13/14: 58.9 FTE). The number of partners and managers in those departments is 13.7 FTE and 24.3 FTE respectively in the reporting year (FY 13/14: 11.4 FTE and 22.1 FTE). Consultation has increased by 14%, mainly due to mandatory consultations on materiality thresholds, new long-form audit reports for OOB-entities (both Auditing) and independence consultations as part of the acceptance procedures during mandatory firm rotation (Independence). Contract reviews increased as legal contract reviews by clients is increasing as well. The increase in fraud and anti-bribery consultation is in part the result of our quality improvement programme and increased awareness of and attention for fraud risk in the financial statements audit.
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Subject
2014/2015 2013/2014
Audit Accounting
209
226
Auditing
303
241
Fraud and anti-bribery
116
85
Subtotal
628
552
Audit & Advisory Risk Management
104
124
Independence
142
86
Legal / Contract Review
352
309
Subtotal
598
519
1,226
1,071
Total
Table 8. Number of consultations (Audit & Advisory).
Robust Risk Management Audit fees versus Advisory fees Table 9 provides the breakdown of the revenue of the firm for FY 14/15 (table 10 contains FY 13/14) segmented by service type. All amounts are based on our taxonomy of services and per legal client entity. Statutory legal audits are those where there is the legal obligation to have the financial statements audited by an independent auditor. These come in two forms: audits for OOB clients and for non-OOB clients. Other audit reports and assurance (related) reports include other financial statement audits, attestation reports, sustainability assurance, ISAE 3402 attestation, IT audits etcetera. Advisory engagements consist of all engagements free of elements of attestation or audit.
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Other statutory audits
Statutory legal audits
Other auditor reports and assurance (related) reports
Total Assuranceservices
Advisory
Statutory legal audits – OOB clients
39.5
80%
4.4
9%
3.9
8%
47.8
100%
Statutory legal audits – other clients
95.9
68%
17.3
12%
8.4
6%
121.6
86%
19.4
Statutory audits – other clients
0.0
0%
56.6
72%
10.9
14%
67.6
86%
Other auditor reports and assurance (related) reports – other clients
0.0
0%
0.0
0%
11.0
38%
11.0
Other clients
0.0
0%
0.0
0%
0.0
0%
135.5
31%
78.3
18%
34.1
7.7%
Total
Total 47.8
100%
14%
141.0
100%
11.3
14%
78.9
100%
38%
18.2
62%
29.2
100%
0.0
0%
144.7
100%
144.7
100%
248.0
56.1%
193.6
43.9%
441.5
100%
Table 9. Segmentation of revenue per type of service in EUR million (FY 2014/2015).
Other statutory audits
Statutory legal audits
Other auditor reports and assurance (related) reports
Total Assuranceservices
Advisory
Total
Statutory legal audits – OOB clients
40.2
77%
6.4
12%
3.5
7%
50.1
95%
2.4
5%
52.5
100%
Statutory legal audits – other clients
85.5
62%
21.1
15%
11.4
8%
118.0
86%
19.1
14%
137.1
100%
Statutory audits – other clients
0.0
0%
51.8
69%
10.1
14%
61.9
83%
12.8
17%
74.7
100%
Other auditor reports and assurance (related) reports – other clients
0.0
0%
0.0
0%
19.0
44%
19.0
44%
23.7
56%
42.7
100%
Other clients
0.0
0%
0.0
0%
0.0
0%
0.0
0%
141.6
100%
141.6
100%
125.7
28%
79.3
18%
44.0
10%
249.0
56%
199.6
44%
448.6
100%
Total
Table 10. Segmentation of revenue per type of service in EUR million (FY 2013/2014)2. 2
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Restated for comparison purposes.
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Compliance with the internal system of quality controls Personal independence In FY 14/15 154 (2013/14: 86) professionals across the Firm were subject to Personal Independence audits. Professionals with compliance violations were dealt with in accordance with our disciplinary policy for independence. The 22 and 24 sanctions in FY 14/15 and FY 13/14 respectively represent 1.9% and 1.9% of the total number of employees. As in previous years, none of the violations relate to personal loans from (SEC) audit clients, insurance policies with (SEC) audit clients and bank deposits or credit cards at (SEC) audit clients. In addition, no violations relate to prohibited services. Furthermore, all violations were remedied. Non-compliance with internal procedures To be the standard in the industry demands a relentless focus on compliance with our internal system of quality controls. We see an overall decrease in the total number of non-compliances as compared to last year. We distinguish between discipline related non-compliance and quality related non-compliance. We recorded 101 quality related breaches during the reporting year (FY
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2014/2015
2013/2014
Partners
Other
Total
Partners
Other
Total
Audit
2
5
7
5
7
12
Advisory
7
6
13
4
8
12
Support
-
2
2
-
-
-
Total
9
13
22
9
15
24
Table 11. Ethics & Independence violations / disciplinary actions per function.
13/14: 127). These breaches mainly relate to training attendance, quality performance review ratings a late submittance of compliance affidavits. In spite of the overall decrease, we are actively working on further reductions in the current year. We received 11 notifications in total (FY 13/14: 9) through our whistle blowing hotline. We followed up on all notifications and identified 3 issues. Two issues were related to the system of quality controls and are included in the Compliance Office Issue Tracker. One notification is still pending. All non-compliances were followed up by either the Compliance Officer or the respective Heads of Audit or Advisory depending on the seriousness of the non-compliance.
2014/2015
2013/2014
1
2
KPMG Investment Compliance System (KICS) updates
21
22
Total
22
24
Prohibited investments
Table 12. Violations per type.
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We demonstrate social responsibility KPMG BRIGHT
Key figures 2010-2014
28 KPMG people 2 WEEKS
9
+ their knowledge and expertise
PRO BONO advisory work delivered for NGO’s in developing countries
2.240 H URS
Sustainable Procurement Sustainable purchasing is part of supply chain management at KPMG. Corporate Responsibility team on behalf of the Board of Management together with Corporate Procurement and experts from KPMG Sustainability in this area, implemented an ambitious plan titled “Sustainable Procurement”, premised on KPMG requesting its suppliers to join forces with KPMG to achieve the ambitions and goals in the field of environmental and social commitment stated by KPMG.
OUR COMMUNITY successfully implemented social projects by KPMG Netherlands including: Bright about money, So Professioneel, True Value on secondary schools, KPMG Social Engine Innovation and ‘Verbinden Verbetert’.
2010-2014
Bright about money
scholars KPMG making more financially
+ 1.543 savvy scholars
Community Projects OUR APPROACH TO CLIMATE CHANGE Our Community Programmes revolve around the subject of Lifelong 2010-2014 Learning It can be key in unlocking potential and helping people out of a life in poverty. Through our ongoing collaboration with organizations such as Enactus and ECHO, ‘Expertisecentrum Diversiteitsbeleid’, Compensation ofand CO2 purchase ofprojects Voluntary our own KPMG initiated projects like BRIGHT andthrough forthcoming * KPMG NL excl. Meijburg Emission Reductions (VER’s) e.g. ‘So Professioneel’ and ‘True Value at Secondary Schools’ we also Invest in wind KPMG INTERNATIONAL invest in and develop future leaders. We invested EUR 947,062 in the energy projects GLOBAL GREEN INITIATIVE Community Programmes (FY 13/14: EUR 802,309).
CO2*
7%
2010 2015
Dutch Refugees organizations
KPMG
During the last year performed ‘skilled and non-skilled‘ voluntary work for numerous community projects such as: Enactus, ECHO, Stichting Alzheimerlab, Nederland Cares, NLdoet, KPMG BRIGHT, Restless Development, Child Helpline International and ‘Stichting Weet Wat Je Besteedt’.
OUR BUSINESS PROCESSES In selecting our top 20 suppliers and purchases over 25k, the social and green ambitions of these companies are important selection criteria.
51
15%
The instability in Sub-Saharan Africa, the Middle-East including the civil CHARGING STATIONS at KPMG throughout the war in Syria has led to the fled millions of people, but offices foremost Syrians Netherlands who have fled Syria and live in refugee camps around the world. Also in the Netherlands, a large number of refugees are looking for shelter. At STAKEHOLDER DIALOGUE Contributionthe to the interna-of Directors felt a strong KPMG, many colleagues, including Board tional report of the Carbon need to offer support to this compelling issue. KPMG the Netherlands Disclosure Project Annual participation an organisation discloses the Foundation and the had several dialogues with the Dutchthat Refugee greenhouse gas emissions of major in Transparency As a member of UN Central Agency for the Reception of Asylum Seekers (COA) to explore corporations Benchmark of the Global Compact KPMG
LEARNING AND DEVELOPMENT CR is partly embedded in our programmes Integrated Report 2014-2015 NS © 2015 KPMG N.V. All rights reserved. ERATIOnt D I S N e O vironm ENT C
41
Target CO2 decrease
in cooperation with
NAMED
Ministry of Economic Affairs in the Netherlands
Since 2011 we publish an integrated annual report with limited assurance on our
International annually reports on the progress we make regarding United Nation’s ten principles
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whether and how KPMG could assist them with the increasing flow of refugees in the Netherlands. This resulted in KPMG Advisory / Management Consulting, starting with a pro-bono engagement on the restructuring of the organization at COA, with the aim to manage the flow of refugees more effectively and efficiently.
Compact KPMG International is a signatory to the United Nations Global Compact (UNGC), which is the world’s largest voluntary Corporate Citizenship initiative. KPMG the Netherlands is a member of the Dutch affiliate of UN Global Compact and participates in the Dutch UNGC Board. The Global Compact’s 10 principles resonate highly with the KPMG Values, which define our member firms’ culture and our commitment to the highest standards of personal and professional conduct. There are four core areas that Global Compact focuses on, which KPMG responds to in different ways. To learn more about our commitment to the UNGC 10 principles, please see our Communication on Progress Report.
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Environment KPMG is committed to further decreasing its CO2 emissions. Following the global ambition set by KPMG International, KPMG NL aims to contribute to a 15% reduction in Net Greenhouse Gas Emissions per FTE by 2015 (from 2010 baseline). This year, we were able to better collect the data on our gross usage as well as arriving at more accurate conversion factors. Sustainability performance is measured per calendar year and hence lags a year behind our fiscal year. To decrease our carbon footprint further, the Board of Management supports collaborated action by the Human Resources, Facilities, Mobility, CSR and Finance staff departments by encouraging the use of economical (hybrid) cars, electric cars, use of electric taxis, company bicycles, promotion of fuel-efficient driving, and video conferencing and web meetings.
Category
2014
2013
Gas
0.1846
0.1819
Electricity
0.4680
0.4590
Petrol
2.2917
2.3018
Diesel
2.6480
2.6502
Other
1.5000
1.4906
Rail
0.0280
0.0300
Air flights (average)
0.1466
0.1631
Table 14. Conversion factors per KPMG International.
The CO2 conversion factors developed by KPMG International are based on generally accepted conversion protocols such as DEFRA. For air flights detailed factors are available per type (economy class, business class, et cetera). Conversion for car travel is done per litre.
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Early 2015 KPMG adopted a communication tool mirroring our environmental ambitions and results in understandable and transparent data on narrowcasting screens and intranet at our offices. In addition, energy saving tips are shared, e.g. recycling is promoted and the usage of bicycles to visit local clients. This project, initiated by KPMG Facilities and in line with the guidelines of ISO 14001:2004, creates awareness amongst our employees about our environmental goals and what they can do to contribute to realise our ambitions in this area.
CY 2014
CY 2013
2,909
4,685
10,959
11,157
96%
97%
Paper usage (in kg)
112,470
115,686
Total waste (in kg)
499,284
477,868
Recycled waste (in kg)
399,056
321,891
Water usage (in 1,000 litres)
18,850
15,566
Air travel (in 1,000 km)
22,525
22,501
4,626
5,037
5,665
5,973
11,419
12,350
2,519
2,751
77
63
Gross CO2 emission
19,680
21,137
Emission reductions (renewable energy and VER)
-19,680
-21,137
Natural gas consumption (in 1,000 kWh) Electricity consumption (in 1,000 kWh) Renewable electricity consumption
Car travel (in 1,000 litres) CO2 emissions (in tonnes) Gas, Electricity, Heating & Cooling Car Travel Air Travel (average) Train travel
Table 15. Environmental data3.
3
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As KPMG NL shares its offices and facilities with KPMG Meijburg & Co, the figures in this table represent the combined data
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Innovation and thought leadership Audit Audit is actively involved in development of long-form audit reporting. According to NBA research KPMG issued 23 long-form reports in the reporting year, representing 30% of the entire eligible population. We committed EUR 24 million over the course of 3 years in innovating Audit. eAudIT is the global audit solution used daily to help guide the audit process, provide industry knowledge, and document audit findings. Next generation eAudIT, which is in its pilot phase,
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will bring together powerful data & analytics to support audit teams to examine journal entry populations, provide industry benchmarks and assist in choosing the optimal audit approach with proprietary audit algorithms. We launched the Electronic Performance Support System (EPSS). EPSS provides audit professionals with knowledge and help specific to the activity there are working on in eAudIT. EPSS includes videos, links to intranet sites and excerpt of the KPMG Audit Methodology. EPSS is interactive and users can provide direct feedback on activity screens to enhance future guidance.
Advisory To serve clients by helping them grow and improve we invest in Strategic Growth Initiatives supported by a central Innovation Programme, led by the Partner in Charge of Innovation and monitored by an Innovation Council. These Strategic Growth Initiatives are as follows:
–– –– –– –– –– ––
Cyber Security Regulatory Compliance Data & Analytics Deal Services Transformation Asset Based Consulting
The common theme in the majority of these initiatives is that of Big Data and Big Data Grids. In the recent past we recruited a number of Big Data specialists from non-traditional sources to strengthen our knowledge and experience in this area. We are now seeing the first results of these efforts with projects launched with clients. Our thought leadership and contributions in the abovementioned areas can be found at www.kpmg.com/nl/nl/topics. Our professional publish their thoughts and insights on a variety of business related topics on the KPMG Blog to alert clients on issues and challenges. We continue to share our collective insights through our social media app KPMG One, which is available to all stakeholders through the iTunes App store and shortly at Google Play too.
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Our peopl e Toareourextrastakehol d ers ordinary
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06
Overview To underpin our commitment to our people we have formulated the following critical success factors: –– We are caring and courageous and share a lasting pride in our firm –– We are smart, curious and relish a challenge –– We thrive on developing the leaders of tomorrow
Performance target
Assessment
Trend
Key Indicators
Our partners lead by example
Employee surveys
Consistent high levels of engagement and performance
Employee surveys Training investment Performance Management
Diversity in our workforce
Male / Female ratio Ethnic diversity
Our performance targets in this area are: –– Our partners lead by example –– Consistent high levels of engagement and performance –– Diversity in our workforce
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Our people are extraordinary 06
General One of the key drivers of quality is ensuring that our professionals have the skills and experience appropriate to contribute to our value creation such that we deliver on our vision. This requires recruitment, development, promotion and retention of professionals and a robust capacity and resource management processes. We believe it is essential to attract and retain the best people. During FY 14/15 520 (FY 13/14: 357) FTEs joined our Firm, while 487 (FY 13/14: 492) FTEs left the Firm. The retention rate – the percentage ofprofessionals remaining with the Firm – is 82.0% (FY 13/14: 83.0%). Overall absenteeism remained relatively low at 2.7% (FY 13/14: 2.7%). We actively manage our high-potential talent pool across our group through our Emerging Leaders Programme, in which currently 65 people are enrolled (FY 13/14: 55). Of those Emerging Leaders 22% is female (FY 13/14: 29%).
FY14/15 Partners (Senior) Managers Other staff
FY13/14
4.4%
2.1%
10.0%
7.2%
2.9%
3.8%
15,4
17,4 11,6 11,6
2,9 Partners/Directors
Table 16. Attrition rates for high potential Audit professionals.
FY 14/15
(senior) Managers
3,2
Other staff
FY 13/14
Figure 8. Average years of experience per Audit functional level.
Audit Advisory Corporate
Total
FY 14/15 Equity Partners
76
55
9
140
Professionals
1,190
935
-
2,125
Support staff
107
62
418
587
1,373
1,052
427
2,852
85
56
8
149
Professionals
1,261
934
-
2,195
Support staff
103
59
419
581
1,449
1,049
428
2,925
Total FY 13/14 Equity Partners
Total Table 17. FTEs per function per FY.
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Our people are extraordinary 06
Our partners Consistent high levels lead by of engagement and example performance
58
Leadership engagement
Employee engagement
In light of the events last year, we initiated dialogue sessions, where partners invited professionals and fellow partners to discuss the purpose and values of KPMG and improving our culture of delivering quality through collaboration. We survey employees on a quarterly basis (GPS) on leadership engagement and while we see progress with an 8% increase in perceptions on partner behaviour and another 8% increase in consistency of behaviour we continue our focus as overall perception is still below average.
Employee engagement is measured through the Employee Engagement Index (EEI) as part of the people survey. The EEI measures employee motivation to contribute and display organisational citizenship behaviour (trust, respect, growth and development). The EEI increased as compared to last year with 7% to 52%, mainly as a result of clear communication on purpose, vision and values as well as reinforcing leading by example by partners and directors. Pride in KPMG rose to 62%, which is an increase of 12% as compared to FY 13/14. Commencing this fiscal year we monitor perception on quality improvement and in the last Pulse survey a majority of 83% of all employees was positive thereto.
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Skill development and knowledge contribution We provide knowledge and support to professional bodies such as the Netherlands Institute of Chartered Accountants (‘Neder landse Beroepsvereniging Accountants’), the Dutch Council for Accounting Standards (‘Raad voor de Jaarverslaggeving’) and the Dutch Institute for IT Auditors (‘Nederlandse Orde van Register EDP Auditors’) for the development of new standards, guidance or methodologies. In addition, we contribute to thought leadership by educating new generations of professionals. The KPMG community includes 6 professors, 19 PhD’s and 8 professionals working on their PhD-thesis. In FY 14/15 we invested 14,269 hours (FY 13/14: 14,189 hours) in professional
Our people are extraordinary 06
development activities (e.g. NBA committees, university involvement and publishing articles). In view of the importance we place on training and development, we increased our investment in training as seen in table 17. We invested 9,539 internal hours (FY 13/14: 8,253) on developing and delivering training on top of the trainings developed by the KPMG network.
Cost (EUR 1,000)
Average cost per FTE
Average hours per FT
Cost (EUR 1,000)
Average cost per FTE
Average hours per FT
FY 14/15
FY 14/15
FY 14/15
FY 13/14
FY 13/14
FY 13/14
Audit
5,068
3,692
186.4
3,295
3,295
178.33
Advisory
3,605
3,440
80.52
2,556
2,556
71.11
459
1,015
23.17
731
731
19.93
9,132
3,178
122.09
2,633
2,633
115.09
Business Support Total
Table 18. Average training cost and hours per function per FY (internal and external training)4.
4
59
Restated for comparison purposes.
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Our people are extraordinary 06
Diversity in our workforce Leadership engagement Diversity is a challenging subject in terms of gender as well as in terms of diversity in personalities (see figure 6). We gradually and increasingly see the results of those targets. Overall, however, we do not meet the requirement of 30% as set by the Dutch Charter Talent to the Top. We will therefore further upscale our efforts in this particular area put in place a diversity task force to develop a long term plan.
40 35
Partners
30
Director
25
Senior Manager
20
Managers Ass. Manager
15
We apply uniform and equal employment benefits for all employees, including wages and salaries. The actual salaries and bonuses are based on the performance evaluation, and we actually do see a difference between male and female employees in both base pay and bonus pay. In terms of base pay the overall ratio for female professionals is 84.8% against male professionals (FY 13/14: 98.9%) and for bonus pay this ratio is 64.6% (FY 13/14: 79.2%).
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Supervisor/Adv.
10
Senior
5 0
Trainee/Jr. Adv. Oct - 10
Oct - 11
Oct - 12
Oct - 13
Oct - 14
Figure 9. Female diversity per job level.
Our people are extraordinary 06
Remuneration report by the Supervisory Board General As part of the change initiatives remuneration policies for partners have changed. The model focuses on quality, measurable performance and long term impact. Remuneration is linked to performance on the 4 vision areas (Public Trust/Quality, Clients, People and Operational Excellence). Underperformance in the area of quality cannot be compensated by performance in one of the other vision areas.
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We introduced a deferred profit-sharing scheme and a claw-back scheme. Audit partners will have a deferred profit-sharing scheme, under which KPMG retains 30% of the variable profit payment each year. This retained profit will be released after a period of six years. Both Audit and Advisory partners will be subject to a claw-back scheme, under which KPMG will be able to recover any damages for demonstrably culpable conduct from individual partners’ profit shares. Finally, we reduced the exit arrangements for partners. The period of notice was reduced from one year to six months. And on leaving, a partner receives a maximum of one year’s salary, depending on the number of years of service at KPMG (was 2 years).
2014/2015 Jan Hommen
700,000
Andrew Cranston
1)
Han van Delden
550,000
Bert Ferwerda
400,000
Rob Fijneman
550,000
Marc Hogeboom
550,000
Barbara Lamberts
350,000
Total
3,100,000
Table 19. Board remuneration for FY 2014/2015 (full year remuneration). 1) Remuneration for Andrew Cranston is paid by KPMG International.
Board of Management remuneration
Supervisory Board remuneration
Members of the Board of Management receive a fixed salary. Board members who are also equity partners with the firm receive a maximum of 10% in variable pay. Non-equity partner board members do not receive variable pay.
Commencing 1 May 2015 Supervisory Board members receive a fixed remuneration. Previous board members were equity partners of KPMG and therefore did not receive additional remuneration for their board
Our people are extraordinary 06
positions. The chairman of the supervisory board receives an annual remuneration of EUR 60,000. Other members of the board, including the vice-chair, receive EUR 45,000 in annual remuneration. Remuneration is expected to cover all cost with the exception of travel cost.
Quality
Clients
People
Operational Excellence
Compliance Letter availability
Client Satisfaction ratings
360-feedback from professionals
Financial performance
Compliance with Continuous Professional Development
Client feedback (qualitative)
Personal development
Hygiene
Equity partner remuneration
Acting as Professional Practice Partner
Portfolio development
Leading by example
The management fee that is payable to an equity partner is remuneration for professional services performed and for entrepreneurial risk. Partners must make their own pension arrangements and pay social security costs from this fee.
Acting in a Quality related role
Partners set their personal goals for the year and commit to these goals in the performance management system. Progress is monitored through interim reviews and a final year-end review. The Firm appraises partner performance against relevant performance criteria (see table 20). The partner assessment process is monitored and the individual rating is determined by the Board of Management after consultation with the Remuneration Committee.
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Upward appraisals
Acting as Engagement Quality Control Reviewer Acting as training at technical training updates Acting as Quality Performance Reviewer Non-compliance with policies and procedures Regulatory findings and ratings Quality Performance Review ratings Table 20. Performance metrics.
Our people are extraordinary 06
The Board of Management determines the grade of each equity partner after consultation with the leadership teams of Audit and Advisory. The partner grade determines the base remuneration for the designated partner. Final remuneration is dependent on the partner’s performance and the overall profitability of KPMG N.V. The bandwidth for variable pay is maximised at +25% or -25% relative to ‘on target’ performance as determined during the annual goal setting process. The Board of Management has the discretion to grant additional variable income depending on (exceptional) performance relative to agreed targets. Within our performance management process we distinguish 5 internally developed scales an external auditor can obtain during the annual appraisal process: 1 for Outstanding Performance, 2 for Highly Effective Performance, 3 for Effective Performance, 4 for Inconsistent Performance, and 5 for Unsatsifactory Performance. Criteria supporting each of these scales are internally developed. As the scales and criteria represent a balanced view on performance with hard and soft skill aspects, the performance ratings / grading do not necessarily 1:1 reflect compliance with external laws and regulations.
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Audit Rating
Advisory
2014/ 2015
2013/ 2014
2014/ 2015
2013/ 2014
1
1
2
3
1
2
23
16
16
18
3
52
62
27
33
4
7
5
4
2
5
-
3
3
1
Table 21. Performance Management scores for equity partners.
Partners with 5 or 4 scores are, however, closely monitored for quality purposes and where considered appropriate or necessary, requisite action is taken by the Audit or Advisory leadership team.
Performance rating
Below target
On-target
Above target
Total
Average partner remuneration for the year is EUR 342,000 (FY 13/14: EUR 423,000). Table 22 lists the distribution of partners relative to their performance appraisal. The percentage for on-target remuneration is 53% for FY 14/15 (FY 13/14: 55%). Above target and below target performance is 38% and 9% for FY 14/15 respectively (FY 13/14: 30% and 15%).
2014/ 2015
2013/ 2014
75%90%
5
6
90%95%
3
7
95%100%
5
10
100%
77
85
100%105%
19
20
105%110%
19
17
110%125%
18
10
146
155
Table 22 Allocation in numbers of partner remuneration (equity partners).
During the year 18 equity partners (10 for Audit and 8 for Advisory) left the firm, 3 of which in relation to audit quality performance. The Board of Management appointed 10 new equity partners as of 1 October 2015.
Our people are extraordinary 06
Non-equity partner remuneration The performance management process for non-equity partners and directors is equal to that of equity partners, but instead of a partner grading and remuneration an salary scale applies, set annually by the leadership teams of Audit and Advisory. Scaling depends on the role and the responsibility of the individual non-equity partner or director. A bonus incentive can be granted based on past year performance. The amount of that incentive is proposed by the respective leadership teams for Audit and Advisory and is approved by the Board of Management.
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Audit Rating
Advisory
2014/ 2015
2013/ 2014
2014/ 2015
2013/ 2014
1
-
6
2
5
2
19
17
16
18
3
37
35
36
34
4
3
2
10
8
5
-
1
2
-
Table 23. Performance Management scores for non-equity partners.
Our people are extraordinary 06
Our cl i e nts Toseeourthe stakehol d ers difference
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07
Overview Our critical success factors in the area of Clients and Markets are that: –– We deliver quality that is unparalleled –– We build enduring relationships –– We bring leading insight and innovative solutions
Performance target
Assessment
Trend
Key Indicators
Top brands want to work with KPMG
Market share
Leading multidisciplinary solutions to address our clients issues
Multidisciplinary offerings
Clients are promoting KPMG, its clients and its solutions
Net Promoter Score Client Satisfaction Scores
Our performance targets in this area are: –– Top companies want to work with KPMG for ‘life’ –– Leading multidisciplinary solutions that address our clients’ issues –– Clients are promoting KPMG, its people and its solutions
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Our clients see the difference 07
Top brands want to work with KPMG ‘for life’ Market share KPMG is one of the Big 4 professional service firms with a stronghold in Listed Clients and Financial Services. Revenue per service line is presented in our financial statements disclosure and depicted in figure 10. All revenue is generated within the Netherlands and although we distinguish regions within the Netherlands for management control purposes, there are no specific differences to be reported thereto.
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Figure 11 provides the details for the Audit revenue of the Firm. In accordance with the IFAC threshold, no audit client accounted for more than 10% of the total fees received by the Firm over the last two years. Over the last 5 years, we have seen a decline in audit revenue, mainly as a result of economic downturn and increased audit fee pressure. The decrease in revenue for our Audit services reflects the impact of mandatory firm rotation leading to a fall in our dominant share of the market. As we aim for long-term relationships with our clients, we will undertake initiatives to provide advisory services for clients where we will rotate off as auditors. In terms of network revenue KPMG ranks 4th among the Big 4 firms (FY 12/13: 4th) with a market share of roughly 24% in terms of total Big 4 revenues. Tax is a separate member firm within the KPMG network and is therefore outside our sphere of governance.
Figure 10. Segmentation of revenue in the Netherlands in EUR million.
230
245
212
210
151
2014 / 2015
146
2013 / 2014
Network turnover Audit
Advisory
Tax
Figure 11. Audit revenue in EUR million (FY 11/12 Audit adjusted for comparison purposes).
120
110
2014 / 2015
115
130
2013 / 2014
KPMG Accountants N.V. Statutory legal audits
Other services
The recent outcome of proposals due to mandatory firm rotation evidence that KPMG is considered a strong successor to client’s current audit firms. KPMG historically has a large representation in OOB audit clients and we will no longer be able to provide audit services in the near future.
Our clients see the difference 07
Leading multidisciplinary solutions to address our clients issues
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We provide clients a broad range of services in the Audit and Advisory domain. Our work is usually performed by multidisciplinary teams wherein Audit & Advisory specialists collaborate together to provide clients with real results. We also tap into the power of the KPMG international network to ensure we can bring global knowledge to local engagements as well as service cross-border engagements to the fullest extent possible. Our sector specific knowledge includes sectors such as:
–– –– –– –– –– –– –– –– –– –– ––
Banking & Leasing Insurance Building & Construction Energy & Natural Resources Consumer Goods Healthcare Public Sector Family-owned businesses Industrial Manufacturing Pharmaceuticals and Life sciences Telecommunications & Media
For more details on our full range of service offerings please visit our website: Service Portfolio
Our clients see the difference 07
Clients are promoting KPMG, its people and its solutions We operate a formal programme (Client Insights NL) where we actively solicit feedback from management and those charged with governance on the quality of specific services that we have provided.
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The feedback that we receive from this programme is considered by the firm and individual client service teams to ensure that we continually learn and improve the levels of client service that we deliver. Any urgent actions suggested by client feedback are followed up by the engagement partner to ensure that concerns on quality are dealt with on a timely basis. Our Net Promoter Score decreased from 41.3 to 38.0 during the year under review. The Audit NPS decreased slightly from 32.2 to 31.2 and the Advisory NPS decreased from 46.2 to 44.5. Key themes mentioned by clients were: 1. Clients appreciate our proactive dialogue regarding issues and incidents.
In a recent benchmark by Intercompany we ranked #3 in overall client satisfaction for the categories Accountancy & Tax and Corporate Finance. Overall client satisfaction continues at a high level (see figure 12 where the combined scores for ‘very satisfied’ and ‘satisfied’ are shown) though it has has decreased slightly compared to last year as clients have been more neutral about their satisfaction, which resonates with the decrease in Added Value. We see similar high levels in the scores for our brand attributes, with slight decreases in Forward Thinking and Passion. Figure 13 provides the combined scores for ‘completely’ and ‘to a high extent’ for our brand attributes.
2. The majority of clients appreciate our added value. They value our tailored approach, as well as our ability to provide new insights and go the extra mile. 3. Clients value their relationship with their engagement team. Increased audit regulation or compliance is challenging in terms of managing expectations.
Our clients see the difference 07
FY 13/14 (%) 91.4
FY 12/13 (%) 96.0
92.6
Overall satisfaction
95.7
90.3
Relationship
90.7
76.0
Quality of Service
81.9
Added Value
Figure 12. Satisfaction scores (FY 14/15 n=403 and FY 13/14 n=259 5).
FY 13/14 (%) 79.6
80.3
Passionate
FY 12/13 (%) 70.2
69.5
Value Adding
63.0
64.1
Forward Thinking
67.8
63.3
Global Mindset
74.4
73.4
Expert
Figure 13. Brand Attributes scores (FY 14/15 n=403 and FY 13/14 n=259 6).
5+6
70
Adjusted for comparison purposes.
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Our clients see the difference 07
Operati o nal ToExcel our lence stakeholders
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08
Overview Our critical success factor and performance target in this area is to: –– Continuously renew and improve to pass a stronger and better organization to the next generation
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Performance target
Assessment
KPMG continuously renews and improves itself to pass on a stronger and better organization to the next generation
8
Trend
Key Indicators Core financial and operational metrics including: profitability and strength of financial position, training investment, acquisitions, innovation
Operational Excellence 08
Discussion of trends and results
73
Audit
Advisory
Corporate
Total
229,957
212,374
-802
441,529
292
4,735
-5,027
-
Other income
-
-
23,011
23,011
The financial figures for the Firm are presented in the financial statements section of this report from page 103 onwards. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (EU IFRS). The consolidated financial statements have also been drawn up in accordance with Section 362(9), Book 2 of the Netherlands Civil Code.
Total income
230,249
217,109
17,182
464,540
57,630
59,754
-67,429
49,955
The profit before tax in Audit decreased by EUR 21.7 million (27.3%) and the profit before tax in Advisory decreased by EUR 7.1 million (10.6%). The decrease in Audit is mainly caused by a reduction in revenues resulting from the mandatory audit firm rotation and the divestment of KPMG MKB B.V., higher costs for outsourced work, costs for claims and outlays on investments in quality. The decrease in profit before tax in Advisory is due to higher personnel expenses and costs of outsourced work. Corporate costs decreased due to lower rental costs as well as a grant received from KPMG International. Fees paid to partners under management agreements decreased by EUR 12.6 million (21.3%).
Revenue
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Revenue Revenue from intersegments
8
Profit before tax
Table 24. Segmented financials for KPMG N.V. for FY 2014/2015 (in EUR 1,000).
Audit
Advisory
Corporate
Total
244,711
204,656
-743
448,624
584
3,232
-3,816
-
Other income
-
1,712
16,974
18,686
Total income
245,295
209,600
12,415
467,310
79,325
66,876
-76,245
69,956
Revenue from intersegments
Profit before tax
Table 25. Segmented financials for KPMG N.V. for FY 2013/2014 (in EUR 1,000).
Operational Excellence 08
Statement on Toeffecti our veness stakehol d ers of quality controls and independence 74
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09
The measures and procedures that serve as the basis for the system of quality controls for KPMG Accountants N.V. outlined in this report aim to provide a reasonable degree of assurance that the statutory audits carried out by the Firm comply with the relevant laws and regulations. Because of its inherent limitations, the system of quality controls is not intended to provide absolute assurance that noncompliance with relevant laws and regulations would be prevented or detected. The Board of Management has considered:
Taking all of this evidence, the Board of Management confirms with a reasonable level of assurance that the system of quality control within the Firm operated effectively and a structured process to ensure that our professionals maintain their level of knowledge and skills, including continuous professional education, is in place. Further, the Board of Management confirms that an internal review of independence compliance within the Firm has been conducted.
–– The design and operation of the quality management systems as described in this report;
Amstelveen, 2 December 2015
–– The findings from the various compliance programmes operated by the Firm (including the KPMG International Compliance Programmes and our local compliance monitoring programmes);
Albert Röell Han van Delden Egbert Eeftink Bert Ferwerda Rob Fijneman Rob Kreukniet Barbara Lamberts
–– Findings from regulatory and internal inspections; –– Subsequent follow-up and/or remedial actions, in particular the true blue programme, as also explained in this report.
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Statement on effectiveness of quality controls and independence 09
Governance To& our Ri s k stakehol d ers Management
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10
Who we are KPMG is the registered trademark of KPMG International and is the name by which the member firms of KPMG International are commonly known.
KPMG N.V. (also: the Firm or KPMG NL) delivers cross-border Audit and Advisory services to help its national and international clients negotiate risks and thrive in the varied environments in which they do business. Tax services are delivered by KPMG Meijburg & Co, which has a separate member firm agreement with KPMG International. KPMG N.V. has its registered office at Laan van Langerhuize 1-11, 1186 DS Amstelveen, the Netherlands and operates out of 11 offices in the Netherlands. The Firm’s consolidated financial statements for the year include the financial statements of the Firm and its subsidiaries and the Firm’s investments in associates. The Company’s current financial year runs from 1 October 2014 to 30 September 2015.
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Governance & Risk Management 10
Governance Legal structure and ownership KPMG N.V. is the holding company of companies that operate in the Audit or Advisory business segments. Coöperatie KPMG U.A. (‘the Cooperative) holds the shares in KPMG N.V. The individual equity partners are members of the Cooperative through their professional companies. Members of the Cooperative Board are appointed by the equity partner meeting. On the basis of a management agreement the services of the partners are made available to the Cooperative. The Cooperative subsequently makes these services available to KPMG N.V. or its subsidiaries. The legal structure within which of the Firm was set in the reporting year is depicted in figure 13.
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Supervisory Board Cooperative KPMG U.A.
Supervisory Board members are appointed by the shareholder of KPMG N.V.. All appointments are for an initial term of 4 years. The terms of reference are available from our website as are additional positions individual members may hold. The members of the new Supervisory Board also serve as member of the Public Interest Committee referred to in the NBA Audit Firm Code. We refer to chapter 2 for details.
Board of Management Members of the Board of Management are appointed by the Supervisory Board after approval of the shareholder of KPMG N.V.. All appointments are for an initial term of 4 years. The Board of Management of KPMG N.V. bears ultimate responsibility for the organisation and the main pillars of our strategy (see chapter 4). The Board of Management acts as formal policy makers (‘beleidsbepalers’) in the context of the Dutch Supervision Act on Audit Firms (Wet toezicht accountantsorganisaties; hereafter Wta). The Board of Management is supported by Partners in Charge for Quality & Risk and Markets.
KPMG N.V.
KPMG Accountants N.V.
KPMG Advisory N.V.
KPMG Staffing & Facilities B.V.
Figure 13. Legal structure of KPMG NL .
Governance & Risk Management 10
Audit Leadership are co-policymakers
Board of Management
The practice leaders for Corporate Clients, Financial Services and National Practice, together with the Functional Quality and Risk Management Partner Audit and the COO/CFO Audit form the Management Team Audit, chaired by the Head of Audit (member of the Board of Management). Collectively the team is charged with the operational management of the audit organisation. Members of the Audit leadership team are co-policy makers in the context of the Wta.
CQRMP
Compliance Officer
Organisational structure The operational structure of the organisation is depicted in figure 14. In all, the Board distinguishes two main units: Audit and Advisory, which are support by central Business Support. Audit and Advisory are organised around markets or solutions. The main units of Audit are Corporate Clients, Financial Services and National Practice. For Advisory the main units are Management Consulting, Risk Consulting and Deal Advisory. The Office of the Board consists of the Board’s Strategy Office, Corporate Communications, Corporate Social Responsibility and Legal Affairs. Business Support provides services to both Audit and Advisory.
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General Counsel
Office of the Board
Management Team Audit
Deparment of professional Practice
Management Team Advisory
Business Support
Marketing, Sales & Communications
Quality & Risk Management Group
IT Services
Human Resources
Finance
Facilities
Figure 14. Operational structure of KPMG NL
Governance & Risk Management 10
Network arrangements Legal structure KPMG International is an entity which is legally separate from each member firm. KPMG International and the member firms are not a global partnership, joint venture or partnership with each other. No member firm has any authority to oblige or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to oblige or bind any member firm. The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss cooperative which is a legal entity formed under Swiss law.
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Responsibilities and obligations of member firms Under agreements with KPMG International, member firms are required to comply with KPMG International’s policies and regulations including quality standards governing how they operate and how they provide services to clients. This includes having a structure that ensures continuity and stability and being able to adopt global and regional strategies, share resources, service multinational clients, manage risk, and deploy global methodologies and tools. Each member firm takes responsibility for its management and the quality of its work. Compliance with key quality standards (including key aspects of methodologies, tools and management of
risk) is specifically assessed as part of the International Review Programmes. KPMG International can, at its discretion, take a number of actions against the firm concerned – including, ultimately, removal from the KPMG International network for any firm which fails to meet the required quality standards. Details about KPMG International, including the governance arrangements, can be found at: https://home.kpmg.com/xx/en/home/about.html and https://home.kpmg.com/xx/en/home/ about/governance/transparency-report.html
Governance & Risk Management 10
Risk management Executing our strategy and implementing actions to achieve our objectives also bear risks. Risks are a part of everyday life and in that respect we are no different. KPMG implemented an Enter prise Risk Management Framework to identify and mitigate its strategic risks.
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The identification, evaluation, management and monitoring of the most significant risks that face KPMG and could threaten the achievement of our strategic objectives are the responsibility of the Board. Mitigating actions are taken where possible in order to reduce these risks to acceptable levels. The approach to risk management, principal risks and uncertainties facing our Firm are set out below. The quality of our internal controls is periodically assessed to ensure that our mitigating measures remain effective.
Risk Philosophy Our brand value is based on our credibility, quality and commerce. Erosion of our brand may adversely affect our position in the market and the trust the general public places upon our services. We face a number of significant risks and inherent complexities in our business, together with a highly regulated and commercially competitive environment. Risk Management is designed and implemented to ensure the security of our business and the
delivery and impact of our services. We engage in the delivery of professional services only if these services can be provided in such a way that it contributes to our central mission. We only engage in activities in which we are able to make an impact at our clients and for our professionals without compromising the quality and ethical standards we hold ourselves to. We train and develop our professionals to be leaders of tomorrow to ensure that they not only mitigate risks, but likewise act on potential opportunities for KPMG. We ensure that our activities are sustainable and serve and support society as a whole.
Risk Profile The following tables provide insight into how we approach the Firm’s risk profile in terms of likelihood and impact, both of which are the same as last year.
Governance & Risk Management 10
Classification of risk impact
Non-financial
Financial
Quality
Markets
Extensive negative media coverage & enduring disruption of client or industry confidence
Total loss of confidence, Loss of reputation as a breakdown in relation good employer, unable to retain or hire ships, leading to loss effectively of majority of clients
Major
Extended negative national or industry wide coverage & some disruption to client confidence
Loss of confidence Dissatisfied employees, leading to loss of major significant loss of key clients talent
Moderate
Negative local coverage Loss of confidence & short-term disruption leading to loss of to local client some local clients confidence
Dissatisfied employees, some loss of key talent
Negative coverage barely noticeable
Small numbers of dissatisfied employees
Catastrophic
Minor
Isolated cases of dissatisfied clients
People
EUR Going concern
>15m
2.5-15m
< 2.5m
Classification of % likelihood of occurrence Probable
> 60%
Possible
30%-60%
Unlikely
10%-30%
Remote
< 10%
Table 27. Determining risk likelihood.
Top strategic risks and related controls The following table details the top strategic risks, providing context to the risk identified and the related internal controls to mitigate the risk.
Table 26. Determining risk appetite.
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Governance & Risk Management 10
Description
Potential impact
PUBLIC TRUST
–– Reputational damage in marketplace from press –– Independent Supervisory Board and Public publicity resulting in loss of major clients or Interest Committee inability to attract new talent into our Firm –– True blue change programme, including Activ8 –– Regulatory sanctions Your Audit Quality –– License to operate in jeopardy –– External members within the Board of Management –– Active stakeholder dialogue
Failure to ensure that our behaviour including (audit) service delivery acknowledges public trust and public interest.
REGULATORY RELATIONSHIPS Failure to maintain good relationships with audit regulators or deal with any adverse findings from regulatory inspections to the regulator’s satisfaction.
AUDIT FAILURE Major or multiple audit failures (as a consequence of signing an incorrect audit opinion and/or poor quality auditing) resulting in litigation and/or regulatory action.
Measures
–– Loss of major audit clients –– We nominated specific individuals responsible –– The inability to attract new talent into our Firm for interaction with regulatory authorities and –– Reputational damage in marketplace from press a clear framework for understanding local publicity regulatory matters –– Regulatory sanctions –– Majority of our Board are ’Qualified Individuals’ with appropriate (audit) experience and background –– Relevant leadership have visibility of local regulatory findings –– The loss of a number of audit clients due to reputational damage –– The inability to attract new talent –– Regulatory fines and/or temporary or permanent loss of audit licence –– Litigation and claims
Next to Activ8 Your Audit Quality, our audit quality controls include: –– A tone from the top which emphasises quality, ethics and integrity –– Our client and engagement acceptance procedures –– Clear standards and robust audit methodology and tools –– Controls over recruitment, development and assignment of our professionals –– Commitment to technical excellence including performance management –– Controls to deliver an effective and efficient audit –– Commitment to continuous improvement through monitoring
Table 28. Strategic risks and responses.
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Governance & Risk Management 10
Description
Potential impact
Measures
MAJOR LITIGATION / REGULATORY INVESTIGATION
–– Significant defence costs and/or settlement costs incurred/ regulatory sanctions –– Reputational damage and resulting regulatory Major litigation or regulatory investigation arising scrutiny as a result of actual or suspected failure of our services which we delivered either domestically, in –– Excessive use of leadership time in resolving issues another jurisdiction or jointly together with other firms in the KPMG network.
–– General engagement quality and risk management controls –– Default position of engagement contracts being prepared under local law and jurisdiction –– Rigorous and robust inter-firm contracting protocols when working with other KPMG member firms
APPROPRIATENESS OF CLIENTS AND SERVICES
–– Reputation in the marketplace impacted by working for the wrong clients or delivering the wrong service Acceptance of clients that are inappropriate to –– Regulatory sanctions including temporary loss our brand and/or delivery of services which are of licence either illegal, unethical, contravene professional – – Loss of major clients standards, or are otherwise perceived by investors, –– Increased risk of litigation regulators or other stakeholders as inappropriate.
–– Our internal quality control system including: –– Our client and engagement acceptance procedures, including our proprietary system which checks for conflicts of interest –– Detailed policies and procedures around auditor independence –– Strict new products and services approval processes –– Our routine compliance programmes –– Our Code of Conduct and Values –– Whistle-blowing hotlines in operation –– Money laundering reporting procedures in place
REGULATORY CHANGE
–– An established plan for regulatory liaison –– Robust contingency planning in place for each of the potential likely regulatory outcomes –– Board programme for Mandatory Firm Rotation
Major change in regulation impacting on our business model from either the European Commission, national legislation, international or national regulators or from clients themselves in anticipation of regulatory changes.
–– Audit only firms undermining the multi disciplinary partnership concept –– Caps for market share for audit clients –– Joint audits –– Mandatory rotation or retendering –– Further prohibitions on auditors providing nonaudit services to their audit clients
Table 28. Strategic risks and responses.
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Description
Potential impact
Measures
DATA LOSS
–– Reputational damage –– Loss of clients –– Potential litigation or regulatory action/fines
–– Robust IT security policies and processes –– ISO 27001 accreditation –– Ongoing training and awareness campaigns
–– Failure to quickly and fully exploit growth opportunities resulting in loss of revenue –– Failure to match resource to demand could result in an excessive cost base in areas of reducing demand –– Failure to develop future leaders with the right experience and international mind set –– Quality implications of having the wrong people deliver services
–– Monitoring of resource levels and functional hot spots –– Partner career paths and development –– Partner succession planning –– Global mobility programme in place –– Engagement acceptance processes consider skills and competencies of the team –– Partner in Charge for Innovation and Innovation Council
–– Demotivated staff leading to service delivery issues and a reduction in quality –– Lower productivity –– Loss of key talent –– Loss of reputation in marketplace as an ‘employer of choice’ –– Less adherence to our Values & Code of Conduct
–– true blue change programme –– An embedded group of People Management Leaders –– Sophisticated appraisal and reward processes –– Ongoing review of global performance management and development programmes –– Ongoing initiatives to address feedback from people surveys
–– Loss of reputation in marketplace as an ‘employer of choice’ –– Not achieving our objectives, goals and ambitions –– Reduced morale among partners and professionals
–– –– –– ––
Failure to protect client confidential or personal data.
REACTING TO NEW TRENDS Inability to quickly and effectively match key skills to growth areas due to organisational barriers; skills shortages; slowness in identifying/recruiting appropriate skills; or a lack of staff mobility and/or flexibility.
PEOPLE ENGAGEMENT Reduced morale potentially caused by high workloads impacting work life balance; poor internal communications; uncertainty around career development; and reward packages being perceived as uncompetitive.
FOCUSED EXECUTION Inability to execute our strategy against our business planning to ensure the future success of our firm
Central Project Management Office New Board governance true action programme Cascading strategic KPIs to individual professionals
Table 28. Strategic risks and responses.
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Governance & Risk Management 10
Description
Potential impact
Measures
TALENT MANAGEMENT
–– Loss of talent leading to service delivery issues and a reduction in quality –– Loss of reputation in marketplace with clients –– Succession planning fails –– Loss of opportunities for multi-disciplinary engagement revenue
–– Special training programme in place focusing on leaders of the future –– Annual promotion process and pay review –– Defined partner career paths and development framework –– Partner succession planning
Inability to recruit and retain sufficiently qualified, motivated and experienced people or to build lead partner capability.
Table 28. Strategic risks and responses.
Financial risks The financial risks, such as credit risk and liquidity risk are disclosed in the financial statements section.
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Governance & Risk Management 10
Appendi c es To our
stakeholders
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11
Public Interest Entities The following list represents public interest clients as at 30 September 2015 for which KPMG partners have either signed an audit opinion on behalf of KPMG Accountants N.V. or commenced work on the legal audit (in accordance with the Wta: ‘organisaties van openbaar belang’).
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ABN AMRO Bank N.V.
ASM International N.V.
Cadogan Square CLO V B.V.
ABN AMRO Captive N.V.
ASN Beleggingsfondsen N.V.
Cairn CLO I B.V.
Access Finance B.V.
ASR Aanvullende
Cairn CLO II B.V.
Ageas Finance N.V.
Ziektekostenverzekeringen N.V.
Caja Vital Finance B.V.
Air Berlin Finance B.V.
ASR Bank N.V.
Chapei 2007 B.V.
Airbus Group Finance B.V.
ASR Basis Ziektekostenverzekeringen N.V.
Chapel 2003-1 B.V.
Airbus Group N.V.
ASR Levensverzekering N.V.
Colonnade Securities B.V.
AKZO Nobel Assurantie N.V.
ASR Nederland N.V.
Contego CLO I B.V.
Akzo Nobel N.V.
ASR Schadeverzekering N.V.
Corsair (Netherlands) B.V.
Allianz Finance II B.V.
Asset Repackaging Trust Five B.V.
Credit Europe Bank N.V.
Allianz Finance III B.V.
Asset Repackaging Trust SIX B.V.
Creditor B.V.
Allianz Holland Paraplufonds N.V.
Azivo Zorgverzekeraar N.V.
Daimler International Finance B.V.
Allianz Nederland Asset Management B.V.
Banque Artesia Nederland N.V.
Dalradian European CLO I B.V.
Allianz Nederland Levensverzekering N.V.
BASF Finance Europe N.V.
Dalradian European CLO II B.V.
Allianz Risk Transfer N.V.
Beluga Master Issuer B.V.
Dalradian European CLO III B.V.
Amsterdam Trade Bank N.V.
Boats Investments (Netherlands) B.V.
Dalradian European CLO IV B.V.
Anadolubank Nederland N.V.
Bunq B.V.
De Eendragt Pensioen N.V.
AnderZorg N.V.
Cadogan Square CLO B.V.
DECO 14 - Pan Europe 5 B.V.
Ansvar Verzekeringsmaatschappij N.V.
Cadogan Square CLO II B.V.
Deutsche Bank Nederland N.V.
Anthos Bank B.V.
Cadogan Square CLO III B.V.
Dolphin Master Issuer B.V.
Ares European CLO III B.V.
Cadogan Square CLO IV B.V.
Dryden 29 Euro CLO 2013 B.V.
Appendices 11
Dryden 32 Euro CLO 2014 B.V.
Gresham Capital CLO I B.V.
Hyde Park CDO B.V.
Duchess IV CLO B.V.
Gresham Capital CLO II B.V.
IMCD N.V.
Duchess V CLO B.V.
Gresham Capital CLO III B.V.
Jubii Europe N.V.
Duchess VI CLO B.V.
Gresham Capital CLO IV B.V.
Jubilee CDO II B.V.
Duchess VII CLO B.V.
Groothandelsgebouwen N.V.
Jubilee CDO III B.V.
EDP Finance B.V.
Grosvenor Place CLO I B.V.
Jubilee CDO I-R B.V.
Eolo Investments B.V.
Grosvenor Place CLO II B.V.
Jubilee CDO IV B.V.
Eurocommercial Properties N.V.
Grosvenor Place CLO III B.V.
Jubilee CDO IX B.V.
Europeesche Verzekering Maatschappij N.V.
Holland Homes MBS 2000-1 B.V.
Jubilee CDO V B.V.
Exfin Capital B.V.
Holland Homes Oranje MBS B.V.
Jubilee CDO VI B.V.
Fishbowl Master Issuer B.V.
Holland Mortgage Backed Series (Hermes) X B.V.
Jubilee CDO VII B.V.
Flowtraders Fornax (Eclipse 2006-2) B.V. Fugro N.V. Fugu CLO B.V. GarantiBank International N.V. Global Re N.V.
Holland Mortgage Backed Series (Hermes) XII B.V. Holland Mortgage Backed Series (Hermes) XV B.V.
Goldfish Master Issuer B.V.
Holland Mortgage Backed Series (Hermes) XVIII B.V.
Grand Harbour I B.V.
Home Credit B.V.
Green Park CDO B.V.
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Jubilee CDO VIII B.V.
Lowland Mortgage Backed Securities 2 B.V. Lowland Mortgage Backed Securities 3 B.V. LSP Life Sciences Fund N.V. LUKOIL International Finance B.V. Malin CLO B.V. MEI- Tsjechië en Slowakije Fonds N.V. Menzis N.V. Menzis Zorgverzekeraar N.V. Monastery 2004-I B.V. Monastery 2006-I B.V.
Jubilee CLO 2015- XV B.V.
N.V. Amersfoortse Algemene Verzekering Maatschappij
Koninklijke DSM N.V.
N.V. Interpolis Kredietverzekeringen
Koninklijke Philips Electronics N.V.
N.V. Levensverzekering-Maatschappij “De Hoop”
Koninklijke Ten Cate N.V. Leoforos B.V. Linde Finance B.V. Lowland Mortgage Backed Securities 1 B.V.
N.V. Luchthaven Schiphol N.V. Nationale Borg-Maatschappij N.V. Nederlandsche Apparatenfabriek Nedap
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PEARL Mortgage Backed Securities 2 B.V.
Robeco Solid Mix N.V.
Triodos Vastgoedfonds N.V.
PEARL Mortgage Backed Securities 4 B.V.
Robein Leven N.V.
TVM Zakelijk N.V.
PGGM Levensverzekeringen N.V.
Roche Finance Europe B.V.
Unilever Insurances N.V.
PPF Co3 B.V.
Rockall CLO B.V.
Unilever N.V.
Propertize B.V.
Rolinco N.V.
Univé Dichtbij Brandverzekeraar N.V.
Prospero CLO I B.V.
Rothschilds Continuation Finance B.V.
Univé Oost Brandverzekeraar N.V.
Prospero CLO II B.V.
Sinfonia Finance B.V.
Univé Regio+ Brandverzekering N.V.
Proteq Levensverzekeringen N.V.
SMILE Securitisation Company 2007 B.V.
Verenigde Assurantiebedrijven
Qiagen N.V.
SNS Bank N.V.
Nederland N.V.
REAAL Schadeverzekeringen N.V.
SNS Beleggingsfondsen N.V.
VVAA Levensverzekeringen N.V.
Redexis Gas Finance B.V.
SNS REAAL N.V.
VVAA Schadeverzekeringen N.V.
Regent’s Park CDO B.V.
SPP Infrastructure Financing B.V.
Wereldhave N.V.
Robeco Afrika Fonds N.V.
SRLEV N.V.
Wood Street CLO 1 B.V.
Palmer Capital Emerging Europe Equity Fund N.V.
Robeco Balanced Mix N.V.
St. James’s Park CDO B.V.
Wood Street CLO II B.V.
Robeco Duurzaam Aandelen N.V.
Stichting Holland Homes III
Wood Street CLO III B.V.
Palmer Capital Emerging Europe
Robeco Dynamic Mix N.V.
Syngenta Finance N.V.
Wood Street CLO IV B.V.
Property Fund N.V.
Robeco Growth Mix N.V.
ThinkCapital ETF’s N.V.
Wood Street CLO V B.V.
Palmer Capital Russian Midcap Fund N.V.
Robeco Hollands Bezit N.V.
Triodos Bank N.V.
Wood Street CLO VI B.V.
Pangaea ABS 2007-1 B.V.
Robeco Life Cycle Funds N.V.
Triodos Cultuurfonds N.V.
PEARL Mortgage Backed Securities 1 B.V.
Robeco Safe Mix N.V.
Triodos Groenfonds N.V.
Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V. Nederlandse Waterschapsbank N.V. Neways Electronics International N.V. Nieuwe Steen Investments N.V. Oceanarium Master Issuer B.V. OCI N.V. Onderlinge Levensverzekering Maatschappij ‘s Gravenhage Onderlinge Verzekering Maatschappij Univé Hollands Onderlinge Waarborgmaatschappij AZVZ U.A. Onderlinge Waarborgmaatschappij voor Instellingen in de Gezondheidszorg
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Appendices 11
Summary of our system of quality controls Commitment to continuous improvement
Performance of effective and engagements
Association with the right clients
Tone from the top
Commitment to technical excellence and quality service delivery
Clear standards and robust tools
Recruitment, development and assignment of appropriately qualified personnel
Figure 15. Our system of quality controls.
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Tone at the top Strong leadership or tone at the top means that our leadership clearly demonstrates and communicates its commitment to clients, stakeholders, and society at large. That commitment primarily consists of quality, ethics and integrity. That is why Purpose & Values sit at the core of our value creation and helps ensure that the right behaviours permeate across our entire firm. Our explicitly codified Values are embedded into our working practices. For example, they are reflected in the performance appraisal process that our people follow and adherence to these Values is also reviewed when our people are considered for promotions to more senior positions, including partner. Our Code of Conduct defines the standards of ethical conduct that we require from our firms and our people. It sets out KPMG’s ethical principles, and helps partners and employees to understand and uphold those principles. In addition, it emphasises that each partner and employee is personally responsible for following the legal, professional, and ethical standards that apply to his or her job function and level of responsibility. It has provisions that require KPMG people to:
–– Comply with all applicable laws, regulations and KPMG policies –– Report any illegal acts, whether committed by KPMG personnel, clients or other third parties; –– Report breaches of risk management policies by KPMG firms or people; –– Uphold the highest levels of client confidentiality; –– Not offer, promise, make, solicit or accept bribes (whether directly or through an intermediary). The Board has particularly made it an objective to ensure public trust and public interest is part of our internal processes. We installed a fully independent Supervisory Board and our Board consists of three external members. In doing so, we will open up to external peer pressure and input. In addition, the Board has personally committed itself to driving the fundamental principles of professionalism, integrity, objectivity, technical excellence and confidentiality throughout the organisation using the cascading of key performance indicators linked to the strategic objectives and
Appendices 11
value chain. As Board drives and protects our corporate values and does not shy away from acting on any non-compliances or value behaviour that is under par. Furthermore, the Board made it a personal target to have active and regular stakeholder dialogue to ensure stakeholder expectations and the public’s trust and interest in auditor’s reports are front and centre stage in its decision making process. This of course applies also to our Advisory engagements, where focus on maintaining high quality services is key as well. All actions in our True Blue change programme are ultimately geared towards regaining public trust.
Association with the right clients Before accepting a client, we undertake an evaluation of the prospective client. This involves an assessment of its principles, its business, and other service-related matters. This also involves background checks on the prospective client, its key management and beneficial owners. A key focus is on the integrity of management at a prospective client. A second partner, as well as the evaluating partner, approves the prospective client evaluation.
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Where the client is considered to be ‘high risk’ a Quality and Risk Management Partner is involved in approving the evaluation.
including a review of any non-audit services provided to the client and of other relevant relationships.
We undertake an annual re-evaluation of all clients and engagements. We will decline or discontinue any client who is unable to meet to our expected level of quality.
Depending on the overall risk assessment of the prospective client and engagement, additional safeguards may be introduced to help mitigate the identified risks. Any potential independence or conflict of interest issues are documented and resolved prior to acceptance. We will decline a prospective client or engagement if a potential independence or conflict issue cannot be resolved satisfactorily in accordance with professional and firm standards, or there are other quality and risk issues that cannot be appropriately mitigated. We also use the re-evaluation process to consider whether or not any additional risk management or quality control procedures need to be put in place.
Each prospective engagement is also evaluated; in practice this may be completed at the same time as the client evaluation, particularly in respect of audit appointments. The engagement partner evaluates a prospective engagement in consultation with other senior personnel and quality and risk management leadership as required. A range of factors is considered as part of this evaluation, including potential independence and conflict of interest issues (including use of SentinelTM, our worldwide online tool for accepting engagements), as well as a range of factors specific to the type of engagement, including for audit services, the competence of the client’s financial management team. In addition, when taking on a statutory (legal) audit for the first time, the prospective engagement team is required to perform additional independence evaluation procedures
Clear standards and robust tools We provide a range of tools to support our professionals in meeting our standards for quality. This includes relevant requirements of accounting, auditing, ethics, and quality control standards, and other relevant laws and regulations.
Appendices 11
Independence We provide all relevant personnel (including all partners and client service professionals) with annual independence training appropriate to their grade and function and provide all new personnel with relevant training when they join. All personnel are required to sign an independence confirmation upon joining one of our operating firms. Thereafter, professionals are required to provide an annual confirmation that they have remained in compliance with applicable ethics and independence policies throughout the period. KPMG International policy extends the IESBA Code of Ethics restrictions on ownership of audit client securities to every member firm partner in respect of any audit client of any member firm. Non-audit services and conflicts of interest Every engagement entered into by any KPMG member firm is required to be included in the system prior to starting work. The system then enables lead audit engagement partners for restricted entities to review and approve, or deny, any proposed service wherever in the world the service is proposed to be provided and wherever the member firm is based.
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SentinelTM system is also used to identify and manage potential conflicts of interest within and across member firms. Any potential conflict issues identified are resolved in consultation with other parties as applicable, and the resolution of all matters is documented. If issues remain unresolved, the engagement is declined or terminated. Business relationships/suppliers We have policies and procedures in place that are designed to ensure that business relationships are maintained in accordance with the IESBA Code of Ethics and any additional applicable independence requirements. Methodology and tools Our methodology encourages engagement teams to exercise professional scepticism in all aspects of planning and performing an audit. The methodology encourages the use of specialists when appropriate and also requires the use of certain specialists in the core audit engagement team when certain criteria are met. Audit methodology and tools Significant resources are dedicated to keeping our standards and tools complete and up to date. Our global audit methodology, developed
by the Global Service Centre (GSC), is based on the requirements of International Standards on Auditing (ISAs). The methodology is set out in the KPMG Audit Manual (KAM) and includes additional requirements that go beyond the ISAs where KPMG believes these enhance the quality of our audits. KAM contains, among other things, procedures intended to identify and assess the risk of material misstatement and procedures to respond to those assessed risks. Advisory methodologies and tools The Advisory Service Directory is developed and updated, in response to specific needs articulated by Advisory leadership. Importantly, development is both a field-driven and collaborative process. It brings together representatives of member firms with KPMG’s Global Services Centre to produce globallyavailable resources that address client needs. The toolkits library contains methods, tools and knowledge resources that have been developed to support Advisory professionals as they deliver services and build client relationships in today’s challenging business environment. The Advisory Services Directory features the most current information regarding approved global offerings that are available, or are currently under development,
Appendices 11
to help address our client’s business needs. Methodologies and tools are available for multiple service lines and engagement types. Client confidentiality, information security and data privacy We are committed to providing a secure and safe environment for the personal data and confidential information we hold, as well as protecting the privacy of our clients, service providers and our third parties. The importance of maintaining client confidentiality is emphasised through a variety of mechanisms including through regular communication on the topic, the Code of Conduct, training and the annual affidavit/ confirmation process, which all of our professionals are required to complete. Policies and practices are communicated to all personnel and reinforced through guidance, awareness and training. Policies for effective and appropriate use of KPMG information technology resources, and data privacy are also in place governing the handling of personal information. We have appointed a National IT Security Officer (NITSO), with the necessary authority,
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skills and experience, to lead the information security function. The NITSO is in charge of the operating firm’s information security programme and works closely with the local IT services and Quality and Risk Management Group (QRMG).
Recruitment, development and assignment of appropriately qualified personnel We provide opportunities for professionals to develop the skills, behaviours and personal qualities that form the foundations of a successful career in Audit or Advisory. Recruitment All candidates applying for professional positions are required to submit an application and are employed following a variety of selection processes, which may include application screening, competency-based interviews, psychometric and ability testing, and qualification/reference checks. Upon joining our firm, new personnel are required to participate in a comprehensive on-boarding programme, which includes training in areas such as ethics and
independence, quality and risk management principles and our people management procedures. Performance evaluation, promotion and compensation All professionals undergo annual goal-setting and performance reviews. Each professional is evaluated on attainment of agreed-upon goals, demonstration of the KPMG global behaviours for their level, and adherence to the KPMG values and attributes. These evaluations are conducted by performance managers and partners who are in a position to assess the professionals’ performance. The performance grades directly influence the total amount of remuneration that professionals are paid. The results of the annual counselling are also considered when promotion decisions are being made. All engagement leaders within our firm are issued with standardised quality and risk metrics which are fed into their annual counselling process. The quality and risk metrics include a number of parameters, such as the results of external regulatory reviews, timely completion of training, and the outcome
Appendices 11
95
of internal monitoring programmes. As part of these metrics, an overall grading is awarded. We have compensation and promotion policies that are clear, simple, and linked to the performance evaluation process so that our people know what is expected of them and what they can expect to receive in return. Our compensation policies do not permit audit partners to be compensated for the sale of non-audit services to their audit clients. A common senior grading model and career path framework has been implemented for all partners across our Firm. This outlines the various roles a partner may undertake throughout his/her career, the level of seniority associated with the roles and the potential career routes a partner may take to achieve the roles/level of seniority. Expectations of each role are described through a role profile.
Performance evaluation and compensation For some time now, the ‘glue’ that binds all of our people processes and policies together for our employees has been our Core Values. We use these to shape their performance management process, to underpin the learning and development offering and also the promotion processes.
Personal development Courses are available to enhance personal effectiveness and develop technical, leadership and business skills. We further develop our personnel for high performance through coaching and mentoring on the job, stretch assignments, country rotational and global mobility opportunities and the like.
Commitment to technical excellence and quality service delivery
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Assignment We have procedures in place to assign both the engagement partners and professionals to a specific engagement by evaluating their individual skill set, relevant professional and industry experience, and the nature of the assignment or engagement. The function heads are responsible for the process of allocating particular engagement partners to clients.
Professional Practice Support Technical support is available to our operating firms for work on SEC foreign registrants through the International Standards Group (ISG) as well as the US Capital Markets Group, based in New York or ELLP’s US Accounting
and Reporting Group based in London. Commencing FY 13/14 the Dutch partner in charge of the NL US desk is a fully accredited SEC Reviewing Partner, relatively uncommon outside of the US member firm, enabling the Dutch member firm to provide full audit services to its SEC registered audit clients. The ISG works with global IFRS and ISA topic teams with geographic representation from around the world to promote consistency of interpretation of IFRS between member firms, identify emerging issues and develop global guidance on a timely basis. The ISG has a network of contacts and holds regular calls both in relation to auditing and IFRS to update country professional practice representatives. Accreditation and licensing All KPMG professionals are required to comply with applicable professional licence rules in the jurisdiction where they practice. We use internal accreditation and licensing policies to ensure professionals have the appropriate knowledge and experience for their assigned engagements. This enables us to apply business understanding and industry knowledge to deliver valued insights and to maintain quality.
Appendices 11
We have requirements for many of our services (for example for US audit and accounting work, International Financial Reporting Standards, Transactions Services and Corporate Finance) which ensure that only partners and employees with the appropriate training and experience are assigned to clients and are appropriately licensed where necessary. In addition, we require that all eligible professionals satisfy the Continuing Professional Development requirements of their professional bodies. Access to specialist networks Our engagement teams have access to a network of local and global specialists in KPMG member firms. Engagement partners are responsible for ensuring that their engagement teams have the appropriate resources and skills. The need for specialists (e.g. Information Technology, Tax, Treasury, Pensions, Forensic) to be assigned to a specific audit engagement is considered as part of the audit engagement acceptance and continuance process. Technical training In addition to personal development discussed earlier, our policies require all professionals to maintain their technical competence and to
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comply with applicable regulatory and professional development requirements. Our technical training curriculum covers all grades of staff with a core training programme for junior staff and periodic and annual update training for qualified and experienced staff and partners. In addition to structured technical training, there is a coaching culture that encourages consultation, on-the-job training and mentoring. Training attendance and completion is monitored at country level through a Learning Management System. This allows individuals to monitor their compliance both with their ongoing Continuing Professional Development requirements and with KPMG’s mandatory training and accreditation requirements. Non-attendance at mandatory training is captured as one of the measures on the quality and risk metrics.
Performance of effective and efficient engagements The engagement partner is a key participant in planning meetings, reviews key documentation. The engagement partner is responsible for all engagement deliverables.
In particular documentation relating to significant matters arising during the engagement and conclusions reached. The engagement manager assists the partner in meeting these responsibilities and in the day-to- day liaison with the client and team. Involvement and leadership from the engagement partner early in the engagement process helps set the appropriate scope and tone for the engagement and helps the engagement team to obtain maximum benefit from the partner’s experience and skill. Timely involvement of the engagement partner at other stages of the engagement allows the engagement partner to identify and appropriately address matters significant to the engagement, including critical areas of judgement and significant risks. Critical assessment of audit evidence with emphasis on professional scepticism The analysis of the audit evidence requires each of our team members to exercise professional judgement and maintain professional scepticism to obtain sufficient appropriate audit evidence.
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Our Audit Quality Framework emphasises the importance of maintaining an attitude of professional scepticism throughout the audit. Professional judgement training has been embedded in our core Audit technical training programme for junior staff as well as being included in our periodic and annual update training for qualified and experienced staff and partners. Ongoing mentoring and on-the-job coaching, supervision and review We understand that skills build over time and through exposure to different experiences. To invest in the building of skills and capabilities of our professionals, without compromising on quality, we use a continuous learning environment. We support a coaching culture throughout KPMG as part of enabling personnel to achieve their full potential. A key part of effective monitoring, coaching and supervision is timely review of the work performed so that significant matters are promptly identified, discussed and addressed.
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Appropriate involvement of the Engagement Quality Control (EQC) reviewer An EQC reviewer is required to be appointed for all engagements that are graded high risk (such as the audits, including any related review(s) of interim financial information, of all listed entities, non-listed entities with high public profile, engagements that require an EQC review under applicable laws or regulations, and other (Advisory) engagements as designated by the Country Quality & Risk Management Partner. The engagement is completed only when the EQC reviewer is satisfied that all significant questions have been raised and that those questions have been resolved.
Commitment to continuous improvement We have processes in place to proactively identify emerging risks and to identify opportunities to improve quality and provide insights. To that extent we have recently installed an Audit Quality Issues Council to assess quality related findings, to monitor the
enhanced root cause analysis process and subsequent track mitigating actions. The Council works closely together with QRMG Quality and the FQRMP Audit to monitor the implementation and effectiveness of audit quality remedial actions and ensure compliance with external and internal audit quality requirements. In addition, the Council reports to Audit Leadership, the CQRMP, Board of Management and Supervisory Board on audit quality issue trends, measures and remedial action taken by the firm and the effectiveness of those remedial actions. Compliance with our system of quality controls The Compliance Officer and Compliance Office perform specific procedures on compliance related topics, which are out of scope of the operational audits. In addition, the Compliance Office monitors internal compliance with the system of quality controls through its issue tracker. The Compliance Officer reports findings on a quarterly basis to the policy makers for further follow up.
Appendices 11
Risk Compliance Programme (RCP) The objectives of the RCP are to monitor, assess, and document compliance with the system of quality control established through KPMG International’s quality and risk management policies and applicable legal and regulatory requirements as they relate to the delivery of professional services. Global Compliance Review (GCR) GCRs are performed by reviewers independent of the member firm led by the Global Compliance Group and are carried out once in a three-year cycle. These reviews focus on significant governance, risk management and independence and finance processes (including an assessment of the robustness of the firm’s Risk Compliance Programme). Each major review area is assigned a rating by the GCR review team, ranging from ‘Green’, ‘Yellow’ to ‘Red’. The rating is dependent on the level of serious deficiencies a firm has.
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Quality Performance Review (QPR) The QPR is the cornerstone of our efforts to monitor engagement quality and one of our primary means of ensuring that member firms are collectively and consistently meeting both KPMG International’s requirements and applicable professional standards. The QPR identifies opportunities to improve engagement quality. Remedial action plans fare required at an engagement and operating firm level. We disseminate our findings from the QPR to our professionals through written communications, internal training tools, and meetings. All partners receiving a LTS rating are subject to a review in the following year and all partners receiving an unsatisfactory rating are subject to a review of at least one other engagement in the current year. The ratings from the annual QPR are included in the annual quality & risk metrics generated for all partners.
Appendices 11
NBA Quality Indicators Nr
Indicator
Page
Nr
Input – General team composition
Page
Input – Quality measures
1
Number and ratio partners / directors, (senior) managers and other team members
47
12
Hours and percentage of hours per audit phase of the audit engagement before and after client’s year-end
N/A
2
Average experience per partner, (senior) manager and other team members
57
13
48
3
Attrition rate of partners, (senior) managers and other team members split by high potentials and other
57
FTE’s partners, (senior) managers and other team members working for Department of Professional Practice, Compliance and Quality & Risk Management Group (including Ethics & Independence)
4
Number and percentage of hours spent by partners, (senior) managers and other team members on audit engagements (OOB and non-OOB), other engagements and internal assignments
46
14
Number of consultations with DPP regarding accounting and auditing
48
15
Number and percentage of overtime relative to the total available hours
46
Number of pre-issuance financial statement reviews next to FY14/15: 64 the reviews by the engagement team prior to issuing the audit FY13/14: N/A opinion
16
Number of Engagement Quality Control Reviews (EQCR) and percentage of total statutory audits
47 47
5
Input – Training and coaching
99
Indicator
6
Average hours of training and education per employee (internal 59 and external education)
17
Number and average of hours spent by partners, (senior) managers and other team members on EQCR
7
Average investment (€) per employee in training and education 59
18
8
Number of internal hours spent on development and delivery of trainings
Average number of hours for EQCR relative to the total number 47 of engagement hours with EQCR requirements
19
47
9
Average ratio of hours by partners, (senior) managers and other 46 team members (leverage) for OOB and non-OOB audit engagements
Number and percentage of hours by IT specialists on audit engagements (OOB and non-OOB)
20
Benchmark for percentage of hours by IT specialists
47
21
Number and percentage of other specialists on audit engagements
47
22
Number of hours spent on professional development through university, NBA, et cetera
59
59
10
Benchmark for the ratio of hours
47
11
Results of employee satisfaction surveys on aspects of coaching and audit quality
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Appendices 11
NBA Quality Indicators Nr
Indicator
Page
Outcome
100
Nr
Indicator
Page
34
Number of claims received and their status
FY14/15: 1 FY13/14: 1 FY14/15: 8 FY13/14: 11
23
Total number of audit opinions for legal audits (OOB and other) 3
24
Number of non-compliances with independence policies; n total and as percentage of employees
50
35
Number of incidents reported to the regulator
25
Number of sanctions for non-compliance with independence policies; in total and as percentage of employees
50
36
Number of disciplinary procedures with the Dutch Court and their FY14/15: 7 status FY13/14: 6
26
Number of files subject to Quality Performance Review, including findings and mitigating actions
50
37
Number of complaints and results from the whistle-blowing hotline
27
Number of files and subject to regulatory review, including findings and conclusions
44
28
Mitigating actions by the audit firm based on reviews from the regulator
11
29
Number and amount of fines received from the regulator
44
30
Number of external auditors delisted from the AFM register as a result of quality related issues; in total and as a percentage of all partners
63
31
Number of restated financial statements where KPMG was the auditor for the prior year and as percentage of issued audit opinions
FY14/15: 3 FY13/14: 1
32
Number of restated financial statements requested by the regulator and as percentage of issued audit opinions
Nil
33
Number and percentage of terminated audit engagement contracts
12
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50
Appendices 11
Financial Statements
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12 Financial Statements 12
Contents Report of the Board of Management
103
Report of the Supervisory Board
105
Financial statements 107 - Consolidated statement of profit or loss
107
and other comprehensive income - Consolidated statement of financial position
108
- Consolidated statement of cash flows
109
- Consolidated statement of changes in equity
110
- Notes to the consolidated financial statements
111
- Separate statement of financial position
146
- Separate statement of profit or loss and other
147
comprehensive income - Notes to the separate financial statements
Other information
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148
155
Financial Statements 12
Report of the Board of Management KPMG N.V. offers Audit and Advisory services in The Netherlands and is part of the international KPMG network of member firms offering audit, tax and advisory services. Our purpose is to inspire confidence and empower change. KPMG N.V. is located in Amstelveen, The Netherlands. KPMG N.V. (hereafter: KPMG) has three directly held 100% subsidiaries: • KPMG Accountants N.V. (Amstelveen, The Netherlands) • KPMG Advisory N.V. (Amstelveen, The Netherlands) • KPMG Staffing & Facility Services B.V. (Amstelveen, The Netherlands) Results Revenues decreased in the financial year by 1.6% to EUR 442 million. Profit before income tax decreased by 28.6% to EUR 50 million. Revenues decreased 6.0% in Audit and increased in Advisory by 3.8%. Personnel costs increased by 3.7%, mainly as a result of higher average salary costs per FTE. The decrease in FTEs was fully caused by a decrease in FTEs in Audit. The average number
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of partners and staff decreased by 73 FTEs (2.5%) to 2,852 FTEs. The number of partners decreased by 9 FTEs to 140 FTEs. The number of professional staff has decreased by 70 FTEs (3.2%) to 2,125 FTEs, while the number of support staff has increased by 6 FTEs (0.1%) to 587 FTEs. The decrease in professional staff is due to a decrease in Audit of 71 FTEs (5.6%) caused by the divestment of KPMG MKB B.V. and lower revenues within Audit, and an increase of 1 FTE (0.0%) in Advisory. The dedicated team for KPMG in India has grown by 24 FTEs to 159 FTEs. As of 1 October 2015, the board consists of 1 female and 6 male board members. The Board of Management is aware of the 30% diversity criterion with respect to female board members and the longer term goal still is to meet this criterion. As of 1 October 2015, the Supervisory Board consists of 2 female and 3 male board members. For the remuneration of the Board of Management and Supervisory Board we refer to note 29.3 of the consolidated financial statements. Other operating expenses amounted to EUR 137 million and are in line with previous year. Included in the other expenses are accruals for legal claims
and legal expenses, amongst others related to a dispute with the Dutch Tax Authorities and the public prosecutor regarding the tax treatment of a part of the development costs of the Laan van Langerhuize 1 building in Amstelveen. The higher other employee expenses related to higher costs for outsourced work and education costs for employees. Premises costs decreased due to lower rental costs. The profit before tax in Audit decreased by EUR 21.7 million (27.3%) and the profit before tax in Advisory decreased by EUR 7.1 million (10.6%). The decrease in Audit is mainly explained by a reduction in revenues resulting from the mandatory audit firm rotation and the divestment of KPMG MKB B.V., higher costs for outsourced work, costs for claims and significant investments in quality. The decrease in profit before tax in Advisory is explained by higher personnel expenses, including education costs and costs of outsourced work. Corporate costs decreased due to lower rental costs as well as a grant received from KPMG International. Included in income tax is an income tax assessment relating to the above mentioned tax dispute, taking into account temporary differences for which a deferred tax
Financial Statements 12
asset has been accounted for and previous years adjustments. Contractual fees payable to Coöperatie KPMG U.A. decreased by EUR 12,6 million (21.3%). Investments in property, plant and equipment remain limited and were mainly made to replace computer and communication equipment. On an ongoing basis KPMG invests not only to innovate our services but also to provide valuable insights to our clients and the community. The investments in intangible assets relate to the acquisition of Culture Factory B.V. (in previous year Innovation Factory B.V.).
The organisation is exposed to price, credit, liquidity and cash flow risks in the normal course of its business. As a result of the size and diversity of clients of KPMG, the price, liquidity and cash flow risk is minimal. KPMG makes limited use of financial derivatives and follows procedures and guidelines to limit the size of the credit risk with each counterparty and market. Cash is placed with banks which are rated A or higher. With regard to services still to be invoiced and receivables there were no significant concentrations of credit risk on the reporting date. For a more detailed explanation of financial instruments and risks see note 25 in the financial statements.
especially in the Advisory business, increase audit quality through improving our processes and increasing the number of professional staff, and the adjustment of the organization. The investment plan gives us confidence in terms of profitability in the coming years. The total number of staff in the Netherlands is expected to increase slightly as a result of increasing revenues and the investment program. The Board of Management would like to thank all who contributed to our success in the past challenging year. Amstelveen, 25 November 2015
Financing is provided by loans from (former) partners through the shareholder Coöperatie KPMG U.A. At the end of the year this amounted to EUR 48.3 million, a decrease of EUR 8.6 million compared to previous year (EUR 56.9 million). In addition, KPMG has an external loan facility of EUR 50 million which is partly used to provide guarantees. The solvency ratio (taking into account equity and partner financing) amounts to 35%. During the past financial year, cash increased by EUR 9.5 million to EUR 37.3 million. This is mainly explained by increased cash from operating activities.
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We expect a further decline in Audit revenues in 2016 and a stabilisation in the following years. For Advisory, we expect revenues to increase in the coming years. KPMG will further implement an investment plan, co-financed by grants from KPMG International and increased partner financing through its shareholder. The execution of the investment plan aims at realizing KPMG’s ambition to be the standard in its sector. The plans and the underlying EUR 54 million investment program for the next three years will focus on three priorities: continued growth,
Board of Management under the Articles of Association: A.A. Röell (chairman) J. van Delden E. Eeftink B. Ferwerda R.G.A. Fijneman R.P. Kreukniet B. Lamberts
Financial Statements 12
Report of the Supervisory Board On 1 May 2015 KPMG formally installed a Supervisory Board with only external members replacing KPMG’s former, internal, Supervisory Board that was in function for the earlier period of the financial year. As new Supervisory Board members were appointed Mr. Wientjes (Chairman), Mrs. Griffith (Vice Chairman), Mr. Van Schilfgaarde and Mr. Slagter. Mrs. Sap was appointed on 19 August 2015. Until May 2015 the Supervisory Board consisted of Mr. Weusten (Chairman), Mrs. Aleman, Mr. Smeets and Mr. Sloterdijk. All new appointed Supervisory Board members qualify as independent in accordance with KPMG’s policy for Supervisory Board members based on the applicable rules and regulations. The Supervisory Board is responsible for supervising and advising the Board of Management of KPMG and overseeing the general course of affairs and strategy of KPMG. Its roles and responsibilities are laid down in the Articles of Association and in the Rules of Procedure of the Supervisory Board (“Reglement Raad van Commissarissen”). The Supervisory Board operates fully independently, which
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also is reflected by its mandate similar to a Supervisory Board at a large Dutch corporate (“structuurvennootschap”). The internal Supervisory Board held 6 meetings during the financial year up to the moment of its replacement in May 2015 by the external Supervisory Board. The new Supervisory Board held 5 formal meetings since May 2015 up until the end of the financial year. In addition, a sounding session was organized in August 2015 to further enable the Supervisory Board to supervise and advise on the structure and consequences of the grant agreement with KPMG International. The new Supervisory Board also held several private meetings without other attendees to be able to independently discuss and review certain matters. The agenda of the internal supervisory board meetings consisted among other things of: - Selection and appointment of the external functional professionals, Mr. Ferwerda and Mrs. Lamberts, for the Board of Management positions “HR Director” and “CFO”;
- Succession Chairman Board of Management; - Remuneration Board of Management members; - Selection and nomination of external candidates for the new Supervisory Board; - Business, financial and legal updates; - Partner remuneration; claw back/deferred payment; - Review annual accounts KPMG N.V.; - Business Plan and Budget 2014/2015. The agenda of the (new) Supervisory Board meetings consisted among other things of: - Succession Chairman Board of Management, Head of Audit and COO; - Management Board composition and remuneration;
Financial Statements 12
- Business, financial and legal updates; - Approval of three year plan for financial years 2015/2016 through 2017/2018; - Regulatory related topics, including the implementation of the recommendations made by the AFM to further improve the quality in the accountancy sector in its governance documents; - Co-investment program by KPMG International and the conditions in relation thereto.
Committees The responsibilities of the Audit & Risk Committee of the Supervisory Board are laid down in the “Reglement van de audit & risk commissie van de raad van commissarissen”, as published on the KPMG website. Its primary responsibilities are supervising compliance of independence and internal risk management systems, relevant laws and regulations and supervising financing and financial reporting.
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The responsibilities of the Remuneration and Appointment Committee of the Supervisory Board are laid down in the “Reglement van de remuneratie- en benoemingscommissie van de raad van commissarissen”, as published on the KPMG website. Its primary responsibilities are advising and preparing proposals on remuneration and (re)appointments of the Board of Management.
Supervisory Board: B.E.M. Wientjes (chairman) L.J. Griffith J.C.M. Sap S. van Schilfgaarde J.M. Slagter
The committee public interest supervises the safeguarding of the public interest of the auditor’s declaration. In addition, the committee supervises the remuneration of the auditors as well as of the partners and Board of Management members. The Supervisory Board would like to thank the Board of Management and all employees for their dedication in the past year. Amstelveen, 25 November 2015
Financial Statements 12
Financial statements Consolidated statement of profit or loss and other comprehensive income For the year ended 30 September 2015 Note
2014/2015
2013/2014
(in thousands of euros)
Note
2014/2015
2013/2014
Income tax expense
8
-971
7,816
Contractual fees payable to Coöperatie KPMG U.A.
9
46,314
58,876
4,612
3,264
-
-
4,612
3,264
Owners of the company
10,462
3,264
Non-controlling interest
-5,850
-
4,612
3,264
(in thousands of euros)
Revenue
2
441,529
448,624
Other income
3
23,011
18,686
464,540
467,310
Total income
Profit for the year Costs of outsourced work and other external charges
46,061
38,891
4
218,488
210,609
10, 11
9,263
9,636
5
137,344
136,920
Total expenses
411,156
396,056
Results from operating activities
53,384
71,254
1,019
280
-4,448
-1,578
-3,429
-1,298
49,955
69,956
Employee benefits expenses Depreciation and amortisation Other expenses
Finance income Finance costs 6
Net finance costs Profit before income tax
Other comprehensive income after tax Total comprehensive income for the year Profit and total comprehensive income attributable to:
The notes on pages 113 to 143 inclusive are an integral part of these consolidated financial statements.
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Financial Statements 12
Consolidated statement of financial position As at 30 September 2015 Note
30 September 2015
30 September 2014
Note
30 September 2015
30 September 2014
(in thousands of euros)
(in thousands of euros)
Assets
Non-controlling interest
-5,344
6
Non-current assets
Total equity
23,697
21,530
Property, plant and equipment
10
16,557
21,026
Intangible assets and goodwill
11
19,200
21,000
Receivables
12
458
393
Associates
13
1,300
-
Other investments, including derivatives
14
2,536
1,225
8
5,939
-
45,990
43,644
Deferred tax assets
Non-current liabilities Coöperatie KPMG U.A. relating to: - loans from former partners
20
3,299
3,726
Employee benefits
21
3,083
2,978
Bank loans
22
358
423
Provisions
23
7,449
3,532
14,189
10,659
Current assets Unbilled services
15
23,316
31,935
Current liabilities
Trade receivables
16
81,773
81,205
Coöperatie KPMG U.A. relating to:
8
4,563
-
Other receivables, prepayments
17
15,649
Cash and cash equivalents
18
Income tax receivable
Total assets
- loans from partners
20
30,174
39,473
14,011
- loans from former partners
20
14,856
13,651
37,286
27,835
- VAT liability
20
-
2,059
162,587
154,986
Advance billings
15
27,760
24,032
208,577
198,630
Trade and other payables
24
52,423
50,156
Income tax payable
8
16,080
8,531
Employee benefits
21
24,701
25,948
Equity and liabilities Equity
19
Share capital
5,500
5,500
Bank loans
22
275
339
Share premium
9,700
10,400
Provisions
23
4,422
2,252
Reserves
3,379
2,360
170,691
166,441
Profit for the year
10,462
3,264
Total liabilities
184,880
177,100
Total equity attributable to equity holders of the Company
29,041
21,524 Total equity and liabilities
208,577
198,630
The notes on pages 113 to 143 inclusive are an integral part of these consolidated financial statements.
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Financial Statements 12
Consolidated statement of cash flows For the year ended 30 September 2015 Note 2014/2015
2013/2014
Note 2014/2015 (in thousands of euros)
(in thousands of euros) Profit for the year
4,612
3,264
Adjustments for:
Acquisition of property, plant and equipment
10
-1,496
-2,147
Proceeds from sale of property, plant and equipment
10
44
120
Acquisition of businesses net of cash
11
-846
27
Investment in back office software
11
-196
-26
-
1,319
13, 14
-2,028
-1,225
6
1,019
280
-3,503
-1,652
800
600
Income tax expense
8
-971
7,816
Contractual fees payable to Coöperatie KPMG U.A.
9
46,314
58,876
Gain on sale of businesses
3
-
-1,712
Other investments, including derivatives
10, 11
9,263
9,636
Interest received
14
-583
-
Finance income
6
-1.019
-280
Finance costs
6
4,448
1,578
62,064
79,178
Depreciation and amortisation Other investments, including derivatives
Cash flows before movements in working capital and provisions Change in unbilled services and advance billings
15
12,347
1,975
Change in trade receivables
16
-568
8,174
Change in other receivables and prepayments
17
-1,638
-2,178
Change in trade and other payables
24
208
1,385
Change in provisions
23
6,087
3,720
Change in employee benefits
21
-1,142
3,019
77,358
95,273
Cash flows from operating activities Interest paid
6
-3,116
-678
Income tax paid
8
-1,982
-1,546
72,260
93,049
Net cash from operating activities
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2013/2014
Divestment
Net cash used in investing activities Addition to share premium by new partners (Decrease)/increase in financing by partners
20
-9,299
35
Increase/(decrease) in financing by former partners
20
778
-1,978
Contractual fees payable to Coöperatie KPMG U.A.
9
-46,314
-58,876
Interest paid to partners and former partners
6
-1,397
-950
-3,745
-5,426
-129
-74
-59,305
-66,669
Dividends paid to Coöperatie KPMG U.A. Payment on bank loans
22
Net cash from financing activities Net increase in cash and cash equivalents
18
9,451
24,728
Cash and cash equivalents at 1 October
18
27,835
3,107
37,286
27,835
Cash and cash equivalents at 30 September
The notes on pages 113 to 143 inclusive are an integral part of these consolidated financial statements.
Financial Statements 12
Consolidated statement of changes in equity
Share capital
Share premium
Reserves
Profit for the year
Total equity attributable to equity holders
Noncontrolling interest
Total equity
5,500
12,600
2,360
2,626
23,086
6
23,092
-
-
2,626
-2,626
-
-
-
-
-
-
3,264
3,264
-
3,264
Dividend paid
-
-2,800
-2,626
-
-5,426
-
-5,426
Additions
-
600
-
-
600
-
600
Balance at 30 September 2014
5,500
10,400
2,360
3,264
21,524
6
21,530
Balance at 1 October 2014
5,500
10,400
2,360
3,264
21,524
6
21,530
-
-
3,264
-3,264
-
-
-
-
-
-
10,462
10,462
-5,850
4,612
Dividend paid
-
-1,500
-2,245
-
-3,745
-
-3,745
Additions
-
800
-
-
800
500
1,300
5,500
9,700
3,379
10,462
29,041
-5,344
23,697
(in thousands of euros) Balance at 1 October 2013 Transfer Total comprehensive income for the year Profit for 2013/2014 Transactions with owners of the Company, recognised directly in equity
Transfer Total comprehensive income for the year Profit for 2014/2015 Transaction with owners of the Company, recognised directly in equity
Balance at 30 September 2015
The notes on pages 113 to 143 inclusive are an integral part of these consolidated financial statements.
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Financial Statements 12
Notes to the consolidated financial statements
1. Accounting policies General KPMG N.V. (‘the Company’) is the holding company of companies that operate in the Audit or Advisory business segments (KPMG). Coöperatie KPMG U.A. holds the shares in KPMG N.V. The only members of the Cooperative are the practice companies of the partners. On the basis of a management agreement the services of the partners are made available to the Cooperative. The Cooperative subsequently makes the services of the partners available to KPMG N.V. or its subsidiaries. Coöperatie KPMG U.A. is the ultimate parent company of KPMG N.V. KPMG N.V. is registered with the trade register in The Netherlands and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (‘KPMG International’), a Swiss entity. KPMG N.V. has its registered office at Laan van Langerhuize 1-11, 1186 DS Amstelveen, The Netherlands. The Company’s consolidated financial statements for the year include the
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financial statements of the Company and its subsidiaries and the Company’s investments in associates. The Company’s financial year runs from 1 October to 30 September of the following calendar year. The financial statements for 2014/2015 were approved for issue by the Board of Management on 25 November 2015. Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (EU IFRS). The consolidated financial statements have also been drawn up in accordance with Section 362(9), Book 2 of the Netherlands Civil Code. Accounting policies adopted for the preparation of consolidated financial statements General These consolidated financial statements are presented in euro, which is the Company’s functional currency. All amounts have been
rounded to the nearest thousand, unless otherwise indicated. The preparation of financial statements in conformity with EU IFRS requires the Board of Management to make judgements, estimates and assumptions that affect the application of policies and the reported values of assets and liabilities, income and expenses. The estimates and associated assumptions are based on past experience and various other factors considered reasonable in the circumstances. The results form the basis for the Company’s assessment of the carrying amounts of the assets and liabilities that are not readily evident from other sources. The actual results may differ from these estimates. The estimates and underlying assumptions are assessed periodically. Any revised estimates are accounted for in the period in which they are revised, if such revision only affects that period, or the period in which the revision is made and future periods, if the revision has implications for both the period under review and future periods. Judgements made by the Board of Management in the application of adopted EU IFRS that have
Financial Statements 12
a significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 30. The accounting policies set out below have been applied consistently by all entities forming part of KPMG and have been applied consistently to all periods presented in these consolidated financial statements. New standards and interpretations not yet adopted A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2015, and have not been applied in preparing these consolidated financial statements. With regard to future applicable standards, such as IFRS 9, IFRS 15 and IFRS 16, the Company is currently preparing an impact assessment. None of the other new standards are expected to have a significant effect on the consolidated financial statements of the Company.
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Basis of consolidation Business combinations For business combinations, fair values that reflect conditions at the date of the business combination and the terms of each business combination are attributed to the identifiable assets, liabilities and contingent liabilities acquired. Consideration is measured at the fair value of liabilities incurred by the Company to the previous owners. Goodwill is recognized where the cost of the business combination exceeds the total of the fair values off the identifiable assets, liabilities and contingent liabilities acquired. Where the excess is positive, goodwill is capitalized, subject to annual impairment testing. Where the excess is negative it is recognized immediately in the consolidated statement of profit or loss and other comprehensive income.
Therefore, the underlying interests are presented as already owned by the Company, both in the statement of profit or loss and other comprehensive income and the statement of financial position, even though legally they are still non-controlling interests.
For the consolidation of Innovation Factory the anticipated-acquisition method is applied. Under the anticipated-acquisition method the interests of the non-controlling shareholders that hold the written put options or forwards are derecognised when the financial liability is recognised.
Transactions eliminated on consolidation Intra-group balances and any unrealised gains or losses on transactions within KPMG, or income and expenses from such transactions, are eliminated in preparing the consolidated financial statements.
Subsidiaries Subsidiaries are entities controlled by the Company. The Company controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.A list of significant subsidiaries is included in note 27.
Financial Statements 12
Unrealised gains on transactions with equity accounted investees and jointly controlled entities are eliminated to the extent of KPMG’s interest in the entity. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Foreign currency Income and expenses in foreign currencies are translated at the exchange rate at the date of the transaction. Monetary assets and liabilities are translated at the exchange rate at the reporting date. Foreign exchange differences arising on translation are recognised in the statement of profit or loss and other comprehensive income. Hedge accounting When derivative financial instruments are used to hedge exposure to foreign exchange risks of recognised monetary assets or liabilities, hedge accounting is not applied. A gain or loss on the hedging instrument is recognised in the statement of profit or loss and other comprehensive income.
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Property, plant and equipment Owned assets Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Where property, plant and equipment consist of significant parts that have different useful lives, they are accounted for as separate items under property, plant and equipment. Subsequent costs The carrying amount of an item of property, plant and equipment includes the cost of replacing part of the asset when such costs are incurred if it is probable that future economic benefits relating to the asset will accrue to KPMG and the cost of the asset can be measured reliably. All other costs are recognised as expenses in the statement of profit or loss and other comprehensive income when they are incurred. Depreciation Depreciation is recognised in the statement of profit or loss and other comprehensive income in accordance with the straight-line method over the estimated useful life of each part of an item of property, plant and equipment.
The estimated useful lives are as follows: • fittings, fixtures and alterations 5 to 10 years depending on the lease term; • computers and communications equipment 5 to 8 years; • office furniture and equipment 5 years. The estimated useful lives and residual values are reviewed periodically. Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Intangible assets and goodwill Goodwill is stated at cost less any accumulated impairment losses. Customer relationships and order books are acquired through business combinations and stated at cost less accumulated amortisation and impairment losses. Back office software is stated at cost less accumulated amortisation and impairment losses.
Financial Statements 12
Each category is amortised over its estimated useful life for the current years, as follows: • customer relationships 5 years; • order books 3 months; • back office software 8 years. Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Unbilled services This refers to services performed at cost plus profit recognised to date, less a provision for foreseeable losses, and less instalments billed in line with the state of completion. Unbilled services relate to the stage of completion of the relevant engagement at the reporting date. The stage of completion is determined by assessing the status of the work performed. For each client it is determined whether services are yet to be billed or have been billed in advance. Advance billings (prepayments) are shown under current liabilities. Profit is recognised in proportion to the service performed. Expected losses are recognised immediately in the statement of profit or loss and other comprehensive income.
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Receivables Trade and other receivables are stated at amortised cost less impairment. Cash and cash equivalents Cash represents cash at bank and in hand and call deposits. Impairment Financial Assets measured at amortised cost The Company considers evidence of impairment for these assets at both an individual asset and a collective level. All individually significant assets are individually assessed for impairment. Those found not to be impaired are then collectively assessed for any impairment that has been incurred but not yet individually identified. Assets that are not individually significant are collectively assessed for impairment. Collective assessment is carried out by grouping together assets with similar risk characteristics. In assessing collective impairment, the Company uses historical information on the timing of recoveries and the amount of loss incurred, and makes an adjustment if current economic and credit conditions are such that the actual losses
are likely to be greater or lesser than suggested by historical trends. An impairment loss is calculated as the difference between an asset’s carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account. When the Company considers that there are no realistic prospects of recovery of the asset, the relevant amounts are written off. If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, then the previously recognised impairment loss is reversed through profit or loss. Non-financial assets The recoverable amount of assets is the greater of their fair value less costs of disposal and the value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the
Financial Statements 12
asset. For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Goodwill is tested annually for impairment. Impairment losses in respect of goodwill are not reversed. In respect of assets other than goodwill, an impairment loss is reversed when there has been a change in the estimates used to determine the recoverable amount leading to a decrease of the impairment loss. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Share capital Ordinary shares are classified as equity.
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Employee benefits Pension schemes The Company has a pension plan (het.kpmg. pensioen) for all employees. This pension plan is an individual defined contribution plan and is administered by an insurance company. The above only applies to employees. Partners are expected to make their own pension arrangements. Long-term employee benefits The net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their services in the current and prior periods. The obligation is calculated using the projected unit credit method and is discounted to determine its present value. The discount rate is the yield at the reporting sheet date on AA+ credit-rated corporate bonds that have maturity dates approximating to the term of the obligations. These employee benefits relate primarily to supplementary WAO (Occupational Disability Insurance Act) benefits and a provision for long-service benefits.
Provisions A provision is recognised in the statement of financial position when, as a result of a past event, the Company has a legal or constructive obligation that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the obligation. A provision for onerous contracts is recognised when the expected benefits to be derived by the Company from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Company recognises any impairment loss on the asset associated with that contract.
Financial Statements 12
Revenue Revenue from services performed is recognised in the statement of profit or loss and other comprehensive income in proportion to the stage of completion of the relevant engagement at the reporting date. The stage of completion is determined by assessing the status of the work performed. No revenue is recognised if there is significant uncertainty regarding the collection of the fee due or the costs involved. Other income Amounts billed to third parties for services other than audit and advisory services are classified as other income. This relates primarily to premises, IT costs, IHQ staff expenditures charged to third parties that occupy buildings belonging to the Company and a grant of KPMG International. Grant amounts are recognised in the same period as the relevant expenses. Grants are recognised as receivable upon the actual occurrence of, or an earlier obligation to incur, the related investment or expense. Grants are recognised in other income in the same period as the relevant expenses. To the extent that
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grants recognised relate to depreciable assets, grant amounts are recognised in other income over the periods and in the proportions in which depreciation expense on those assets is recognised. Operating lease payments Payments made under operating leases are recognised in the statement of profit or loss and other comprehensive income on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. Finance cost and income Finance cost Finance costs comprise interest payable on borrowings, calculated using the effective interest method, and foreign exchange gains and losses. Finance income Interest income is recognised as it accrues in the statement of profit or loss and other comprehensive income using the effective interest method.
Contractual fees payable to Coöperatie KPMG U.A. In accordance with the regulations of KPMG N.V. and the management agreements, the partners are entitled to all of the profits of KPMG N.V. The Company is obliged to distribute all earnings that constitute profits as contractual fees to Coöperatie KPMG U.A. or as dividend, except for the amount the Board of Management proposes to add to the reserves. These profits are distributed to the practice companies of the partners through Coöperatie KPMG U.A., except for the amounts the Board of Management of Coöperatie KPMG U.A. proposes to add to the reserves. Income tax It has been agreed with the Dutch Tax Authorities that the partners’ practice limited companies will be entitled to the Company’s profits and that these practice limited companies will be liable to pay tax on these profits. As a result, the amount of income tax payable by the Company itself will be limited.
Financial Statements 12
Deferred tax Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for: • temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; • temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and • taxable temporary differences arising on the initial recognition of goodwill. Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is
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probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves. Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. For the financial year 2014/2015 the tax rate applied was 25%. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if certain criteria are met. Principles for presentation of the consolidated cash flow statement The cash flow statement is prepared according to the indirect method. The funds in the cash flow statement consist of cash and cash equivalents. Cash equivalents can be considered to be highly liquid investments. Cash flows in foreign currencies are translated at the rate at the date of the cash flow. Exchange rate differences concerning finances are shown separately in the cash flow statement. Corporate income taxes, issuance of share capital, interest received, interest paid and dividends received are presented under the cash flow from operating activities and investing activities if applicable. Dividends paid are presented under the cash flow from financing activities.
Financial Statements 12
2. Segment reporting An operating segment is a component of KPMG that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of KPMG’s other components. All operating segments’ operating results are reviewed regularly by the Board of Management to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.
The pricing of intersegment transactions is determined in accordance with objective and commercial principles. KPMG has the following primary business segments: • Audit • Advisory
Segment results that are reported to the Board of Management include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, head office expenses, and income tax assets and liabilities. As the Company operates in the Netherlands, there is only one geographic segment.
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Financial Statements 12
Segmentation 2014-2015 Audit
Advisory
Corporate and intersegment eliminations
Total
Revenue and profit Revenue
229,957
212,374
-802
441,529
292
4,735
-5,027
0
230,249
217,109
-5,829
441,529
Other income
-
-
23,011
23,011
Total income
230,249
217,109
17,182
464,540
Profit before tax
57,630
59,754
-67,429
49,955
Profit before tax/revenue (%)
25.1
28.1
Revenue from intersegment transactions
Audit
Advisory
Corporate and reconciliations
Total
Capital expenditure
-
-
1,342
1,342
Depreciation
-
19
5,902
5,921
48,325
53,828
2,936
105,089
-
14,686
88,802
103,488
Property, plant and equipment
Assets by segment Unbilled services and trade receivables Other assets
208,577
11.3 Liabilities by segment
Taxation
971
Fees paid to partners under agreements
-46,314
Prepayments Other liabilities
20,345
7,415
-
27,760
9,645
4,798
166,374
180,817 208,577
Profit (loss) for the year
4,612
FTEs Partners
76
55
9
140
Professionals
1,190
935
-
2,125
Support staff
107
62
418
587
1,373
1,052
427
2,852
Total FTEs
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Financial Statements 12
Segmentation 2013-2014 Audit
Advisory
Corporate and intersegment eliminations
Total
Revenue and profit Revenue
Audit
Advisory
Corporate and reconciliations
Total
Capital expenditure
-
-
2,147
2,147
Depreciation
-
-
6,577
6,577
58,950
49,991
4,199
113,140
5,000
13,264
67,226
85,490
Property, plant and equipment
244,711
204,656
-743
448,624
584
3,232
-3,816
0
245,295
207,888
-4,559
448,624
Other income
0
1,712
16,974
18,686
Assets by segment
Total income
245,295
209,600
12,415
467,310
Unbilled services and trade receivables
79,325
66,876
-76,245
69,956
32.4
32.7
Revenue from intersegment transactions
Profit before tax Profit before tax/revenue (%)
Other assets
198,630
15.6
Taxation
-7,816
Fees paid to partners under agreements
-58,876
Profit (loss) for the year
3,264
Liabilities by segment Prepayments Other liabilities
18,387
5,645
-
24,032
1,056
5,105
168,437
174,598 198,630
FTEs Partners
85
56
8
149
Professionals
1,261
934
-
2,195
Support staff
103
59
419
581
1,449
1,049
427
2,925
Total FTEs
120
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Financial Statements 12
3. Other income
4. Employee benefits expenses 2014/2015
2013/2014
Premises costs charged externally
4,237
3,908
Salaries
IT services charged externally
1,854
2,890
KPMG International employee expenses charged externally
9,963
10,176
-
1,712
6,957
-
23,011
18,686
Gain on sale of business activities Grant KPMG International
Premises costs and IT services charged externally relate primarily to Meijburg & Co and KPMG International. Employee expenses attributable to KPMG International charged externally are the result of the employment of personnel working for KPMG International at KPMG Staffing & Facility Services B.V. These costs have been rebilled in full to KPMG International. KPMG is party to a grant agreement of USD 33.9 million with KPMG International, based on mutually agreed terms, to accelerate the realisation of its business plan. Under the agreement, grants can be made available over the period up to 30 September 2018.
2014/2015
2013/2014
182,899
174,393
Social security costs
21,824
22,621
Pension costs
13,387
13,570
378
25
218,488
210,609
Long-term employee benefits
The average salary per FTE increased by 4.2% (previous year: increase of 1.5%). This increase is related to investments in highly qualified personnel, the divestment of KPMG MKB B.V. and indexation.
Number of staff and partners
2,125
2,195
521
515
66
66
2,712
2,776
140
149
2,852
2,925
Number of staff: Professional staff
Support staff for KPMG International
Partners
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2013/2014
(Average FTEs)
Support staff
121
2014/2015
Financial Statements 12
6. Net finance costs
5. Other expenses 2014/2015
2013/2014
Other employee expenses
35,059
29,747
Finance income
Travelling, car leases and representation expenses
29,188
31,179
Finance costs due to partners
Premises costs
25,187
33,483
Office and IT expenses
10,570
11,926
Other expenses
37,340
30,585
137,344
136,920
The increase in other employee expenses is explained by higher education costs and higher costs for outsourced work. The decrease in travelling, car leases and representation expenses is due to lower costs for car leases. Premises costs decreased due to lower rental costs. Office and IT expenses decreased mainly due to lower IT costs. Other expenses mainly increased due to the accrual of legal claim costs and higher legal expenses.
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Finance costs due to former partners Other finance costs
2014/2015
2013/2014
1,019
280
-1,100
-691
-297
-259
-3,051
-628 -4,448
-1,578
-3,429
-1,298
The finance costs due to partners in 2013/2014 include a reversal of an overstated accrual. The increase in other finance costs is due to interest payable on tax assessments.
Financial Statements 12
7. Acquisitions of businesses On 4 February 2015 the Company obtained 50% of the shares in the newly founded company Culture Factory B.V. The activities of this subsidiary consist primarily of the exploitation of intellectual property and the related databases and consulting activities. Although the Company owns 50% of the shares, management has concluded that the Company controls this entity by virtue of an agreement with the other shareholder. As the intellectual property was still in development at the date of acquisition it would not have contributed to the revenue and results of the Company prior to the acquisition.
The acquisitions had the following effect on the group’s assets and liabilities at acquisition: Intangible assets Property, plant and equipment
1,202 110
Other receivables
39
Non-controlling interest
-500
Trade and other payables
-226
Employee benefits
-19
Net identifiable assets, liabilities and contingent liabilities
606
Negative goodwill on acquisition
-276
Consideration paid
330
The negative goodwill is recognised in other expenses in the consolidated statement of profit or loss and other comprehensive income. Revenue and profit after taxation of Culture Factory for the eight months ended 30 September 2015 are included within these consolidated financial statements.
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As the company was newly founded no pro-forma information is presented. As the intellectual property was still in development at the date of acquisition it would not have contributed to the revenue and results of the Company prior to the acquisition. On 6 May 2014 the Company obtained 40% of the shares of Innovation Factory B.V., Innovation Factory Intellectual Property B.V. and Innovation Factory Software Services B.V. The activities of these three companies consist primarily in the development and exploitation of software and the exploitation of these. Although the Company owns less than half of Innovation Factory Intellectual Property B.V., Innovation Factory Software Services B.V. and Innovation Factory B.V. and has less than half of their voting power, management has determined that the Company controls these three entities by virtue of an agreement with one of its other shareholders. In the period prior to the acquisition the businesses contributed revenue of EUR 842 and gain of EUR 1 to the Company’s results. If the acquisitions had occurred on 1 October 2013, management estimates that consolidated
Financial Statements 12
revenue would have been EUR 449 million, and consolidated profit for the year would not have changed. In determining these amounts, management has assumed that the fair value adjustments, determined provisionally, that arose on the date of acquisition would have been the same if the acquisition had occurred on 1 October 2013.
The goodwill is attributable mainly to the skills of the professionals and synergies expected to be achieved from integrating the businesses into the Company’s existing business. None of the goodwill recognised is expected to be deductible for income tax purposes. Revenue and profit after taxation of Innovation Factory for the five months ended 30 September 2014 are included within these consolidated financial statements in the comparative financial information.
The acquisitions had the following effect on the group’s assets and liabilities at acquisition: 2014/2015 Intangible assets
1,697
Trade and other receivables
1,317
Cash and cash equivalents
27
Trade and other payables
-1,470
Net identifiable assets, liabilities and contingent liabilities
1,571
Goodwill on acquisition
1,516
Total consideration
3,087
Of which to be paid
-3,087
Consideration paid
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0
8. Income taxes Under management agreements, all earnings of KPMG N.V. are distributed to the partners, through Coöperatie KPMG U.A., who pay tax on these earnings. As a result of a ruling with the Dutch Tax Authorities, the income tax payable by the Company itself is limited and determined by applying a formula. Tax on the profit share of KPMG N.V. is calculated using the average rate applicable to the year. For 2014/2015, the average rate was 24.9% (2013/2014: 24.9%).
The Company’s effective tax rate was -1.9% (2013/2014: 11.2%). The decline in percentage is caused by an accrual made in 2013/2014 for income tax related to a dispute as mentioned in the next paragraph, of which part was released this year. Additional taxes are levied at partner level. A subsidiary of the Company has a dispute with the Dutch Tax Authorities and the public prosecutor regarding the tax treatment of a part of the development costs of the Laan van Langerhuize 1 building in Amstelveen. This subsidiary received a corporate income tax assessment of EUR 15.5 million (including EUR 1.5 million of interest) and value added tax assessment of EUR 3.0 million. These tax assessments are accounted for in the financial statements.
Financial Statements 12
Movement in deferred tax balances
Amounts recognised in profit or loss 2014/2015
2013/2014
64
7,816
4,904
-
4,968
7,816
Net balance at 1 October 2014
Recognised in profit or loss (see 8)
Net balance at 30 September 2015
Intangible assets
-
9
9
Property, plant and equipment
-
5,930
5,930
Net tax liabilities
-
5,939
5,939
Current tax expense Current year Adjustments for prior years
Deferred tax expense Recognised deductible temporary differences
Tax expense on continuing operations
-5,939
-
-5,939
-
-971
7,816
The Company believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience. The adjustments for prior years mainly relates to a tax assessment received by a subsidiary of the Company, KPMG-gebouw Amstelveen II B.V. of EUR 14.0 million. This is partly offset by the tax effect of depreciation of related assets in KPMG N.V. for the period 2009-2015 of EUR 4.1 million and the release of a provision accounted for this matter in prior year of EUR 5.0 million. The Company has also recorded a deferred tax asset of EUR 5.9 million, reflecting the future depreciation of these assets involved.
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9. Contractual fees payable to Coöperatie KPMG U.A. The management fee that is payable to a partner, through Coöperatie KPMG U.A., is remuneration for professional services performed and for entrepreneurial risk. Partners must make their own pension arrangements and pay social security costs from this fee. The level of the management fees payable to individual partners reflects their roles and specific responsibilities as well as corresponding levels of performance and to a certain extent reflects growth based on seniority in the initial years.
Financial Statements 12
In addition to their management fee, the practice companies of the partners also received expense allowances amounting to a total of EUR 2.9 million (2013/2014: EUR 3.2 million) and interest on financing totalling EUR 1.4 million (2013/2014: EUR 1.0 million). These costs are shown in the statement of profit or loss and other comprehensive income under other expenses and finance costs, respectively.
10. Property, plant and equipment Fixtures, fittings and alterations
Computers and communications equipment
Office furniture and equipment
Total
15,036
16,783
21,142
52,961
79
1,992
76
2,147
-
11
25
36
Disposals
-1,385
-1,536
-873
-3,794
Balance at 30 September 2014
13,730
17,250
20,370
51,350
Balance at 1 October 2014
13,730
17,250
20,370
51,350
327
932
83
1,342
-
151
3
154
-15
-7,176
-301
-7,492
14,042
11,157
20,155
45,354
Balance at 1 October 2013
7,529
10,221
9,651
27,401
Depreciation for the year
1,383
2,613
2,581
6,577
-
5
15
20
-1,385
-1,417
-872
-3,674
7,527
11,422
11,375
30,324
Cost Balance at 1 October 2013 Additions Acquisition of subsidiaries
Additions Acquisition of subsidiaries Disposals Balance at 30 September 2015 Depreciation and impairment losses
Acquisition of subsidiaries Disposals Balance at 30 September 2014
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Financial Statements 12
Property, plant and equipment, with the exception of assets under construction, are subject to a first pledge in favour of Coöperatie KPMG U.A. to secure the loans advanced.
Balance at 1 October 2014
7,527
11,422
11,375
30,324
Depreciation for the year
1,213
2,182
2,526
5,921
-
43
1
44
-15
-7,176
-301
-7,492
8,725
6,471
13,601
28,797
At 1 October 2013
7,507
6,562
11,491
25,560
At 30 September 2014
6,203
5,828
8,995
21,026
At 30 September 2015
5,317
4,686
6,554
16,557
Goodwill
Customer relationships and similar items
Back office software
Total
Balance at 1 October 2013
6,261
7,583
11,148
24,992
Acquisition of subsidiaries
1,516
1,697
-
3,213
-
-
26
26
Balance at 30 September 2014
7,777
9,280
11,174
28,231
Balance at 1 October 2014
7,777
9,280
11,174
28,231
Acquisition of subsidiaries
-
1,202
-
1,202
Additions
-
144
196
340
Disposals
-
-290
-
-290
7,777
10,336
11,370
29,483
Acquisition of subsidiaries Disposals Balance at 30 September 2015 Carrying amounts
11. Intangible assets and goodwill
Cost
Additions
Balance at 30 September 2015
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Financial Statements 12
No impairment is necessary as all acquisitions are part of Advisory and it is expected that the recoverable amount of this CGU, based on the future cash flows, are higher than the asset amounts presented. The recoverable amount for this CGU is based on the value in use. Key assumptions used in the calculation of recoverable amounts are weighted average costs of capital (WACC), indefinite growth rate and profit before tax of cash generating unit (CGU). These assumptions are as follows: –– WACC 6% –– Indefinite growth rate 0.0% –– Back office software relates to the implementation of a new system developed by KPMG International.
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Amortisation and impairment losses Balance at 1 October 2013
-
3,536
636
4,172
Amortisation for the year
-
1,658
1,401
3,059
Balance at 30 September 2014
-
5,194
2,037
7,231
Balance at 1 October 2014
-
5,194
2,037
7,231
Amortisation for the year
-
1,939
1,403
3,342
Disposals
-
-290
-
-290
Balance at 30 September 2015
-
6,843
3,440
10,283
At 1 October 2013
6,261
4,047
10,512
20,820
At 30 September 2014
7,777
4,086
9,137
21,000
At 30 September 2015
7,777
3,493
7,930
19,200
Carrying amounts
Financial Statements 12
12. Receivables
14. Other investments, including derivatives
Receivables refers to a loan which was granted to a third party regarding the management buy-out of the BPO activities. The interest rate is 8% and will be added to the loan. The loan is measured at fair value at inception and is subsequently measured at amortized cost.
Investments in securities – available for sale Derivatives at fair value through profit or loss
30 September 2015
30 September 2014
1,953
1,225
583
-
2,536
1,225
13. Associates 30 September 2015
30 September 2014
1,300
-
Associates
The investment in associates refers to an initial payment of EUR 1,300 relating to the acquisition of a 5% interest in KPMG Investments Malta Ltd.
The investments in securities available for sale refers to initial payments in creating a 2.9% interest in the KPMG Capital Holding Ltd. The fund is being established to invest in opportunities that will generate benefits across a number of KPMG International member firms and will operate through a new entity. During the year a payment of EUR 728 was made. Derivatives relate to a call option over 25% of the shares in KPMG Investments Malta Ltd. KPMG’s fair value information related to other investments is disclosed in note 25. Information about the Group’s exposure to credit and market risks, and fair value measurement, is included in note 25 on pages 140 and 142.
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Financial Statements 12
15. Unbilled services and advance billings
17. Other receivables, prepayments
30 September 2015
30 September 2014
Unbilled services
23,316
31,935
Advance billings
27,760
24,032
Balance of unbilled services and advance billings
-4,444
7,903
30 September 2015
30 September 2014
Other receivables
7,472
7,854
Prepayments
8,177
6,157
15,649
14,011
Unbilled services are subject to a first pledge in favour of Coöperatie KPMG U.A. as security for loans advanced.
All other receivables are due within one year. The prepayments include assurance premiums.
16. Trade receivables
18. Cash and cash equivalents
All trade receivables are due within one year. They are subject to a first pledge in favour of the bank in connection with the credit facility provided and a second pledge in favour of Coöperatie KPMG U.A. as security for loans advanced.
Bank balances, including business savings accounts, are subject to a first pledge in favour of Coöperatie KPMG U.A. to secure loans advanced.
Trade receivables are shown net of impairment losses amounting to EUR 5,286 (2013/2014: EUR 5,830). In the statement of profit or loss and other comprehensive income an expense of EUR 1,876 (2013/2014: expense of EUR 1,381) has been recognised under other expenses.
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Financial Statements 12
19. Equity
20. Coöperatie KPMG U.A.
The Company has an authorised capital of EUR 20 million (2013/2014: EUR 20 million), which is divided into 800 shares of EUR 25 each (2013/2014: 800 shares of EUR 25 each). The issued share capital consists of 220 (2013/2014: 220) shares at a nominal value of EUR 25 (2013/2014: EUR 25) each, representing a total nominal value of EUR 5.5 million (2013/2014: EUR 5.5 million). All of the shares are fully paid up. The number of shares in issue at 30 September was 205 (2013/2014: 205). KPMG N.V. is obliged to distribute all earnings that constitute profits as contractual fees to Coöperatie KPMG U.A. or as dividend, except for the amount the Board of Management proposes to add to the reserves.
30 September 2015
30 September 2014
30,174
39,473
3,299
3,726
14,856
13,651
18,155
17,377
-
2,059
48,329
58,909
2014/2015
2013/2014
Balance at the beginning of the year
39,473
39,438
Fees to partners under management agreements
46,314
58,876
Interest due to Coöperatie KPMG U.A. relating to partners
1,100
691
-56,713
-59,532
30,174
39,473
Partners: - current loans Coöperatie KPMG U.A. Former partners: - non-current loans Coöperatie KPMG U.A. - current loans Coöperatie KPMG U.A. VAT liability
Movements in financing by partners:
Other movements (net withdrawal) Balance at the end of the year
Other movements refer mainly to amounts withdrawn by partners.
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Financial Statements 12
Current loans from Coöperatie KPMG U.A. relating to partners The interest charged on current loans is 2.3% (2013/2014: 2.7%). Loans from former partners Non-current loans from former partners have an average term of 3.3 years (2013/2014: 3.1 years) and an average interest rate of 0.8% (2013/2014: 1.6%). The average interest on current loans from former partners is 1.5 % (2013/2014: 1.6%). The fair value of loans from Coöperatie KPMG U.A. approximates the carrying amount.
30 September 2015 < 1 year
> 1 year
Total
< 1 year
> 1 year
Total
Long-term employee benefit obligations
2,771
3,083
5,854
437
2,978
3,415
Short-term employee benefit obligations
21,930
-
21,930
25,511
-
25,511
24,701
3,083
27,784
25,948
2,978
28,926
Movements in long-term employee benefits: 2014/2015
2013/2014
3,415
3,598
Interest
50
41
Utilised
-370
-386
Addition
2,755
131
4
31
5,854
3,415
21,930
25,511
27,784
28,926
Balance at 1 October
21. Employee benefits Employee benefits consist of long-term pension plans that supplement WAO (Occupational Disability Insurance Act) benefits, provisions for longservice entitlements, and a number of special schemes and current employee benefit obligations relating to accrued holiday allowances, bonuses and overtime as well as holiday entitlements.
Change in discount rate Balance at 30 September Short-term employee benefit obligations
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30 September 2014
Financial Statements 12
22. Bank loans Bank loans refers to a loan to Innovation Factory at 6.45%. The loan expires on 1 January 2022 and is repayable in quarterly instalments.
23. Provisions
The provision for legal claims relates to claims and fines received by KPMG Accountants N.V., including related legal expenses. The amounts provided for are based on management’s best estimate of the amounts expected to be incurred by the Company to settle these cases. The periods within which provisions are expected to be utilised are as follows:
Movements in provisions in 2014/2015:
30 September 2015 Legal claims
Vacant properties
Total
Balance at 1 October
-
5,784
5,784
Utilised
-
-3,526
-3,526
Added
9,571
42
9,613
Balance at 30 September
9,571
2,300
11,871
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30 September 2014
< 1 year
> 1 year
Total
< 1 year
> 1 year
Total
Legal claims
3,300
6,271
9,571
-
-
-
Provision for vacant properties
1,122
1,178
2,300
2,252
3,532
5,784
4,422
7,449
11,871
2,252
3,532
5,784
Financial Statements 12
25. Financial instruments
24. Trade and other payables
Trade payables Tax and social insurance contributions Other current liabilities Accruals
30 September 2015
30 September 2014
6,338
8,905
27,693
22,564
4,307
7,117
14,085
11,570
52,423
50,156
Trade payables decreased mainly due to payables to car lease companies. Other current liabilities decreased due to lower goodwill obligations regarding the acquisition of Innovation Factory and a lower liability for AFM costs. Accruals have been made primarily to cover premises costs, charges for third-party services still to be paid and insurance premiums. Included in Tax and social security contributions is a liability with respect to a VAT assessment imposed by the Tax authorities with respect to fiscal year 2010 relating to the tax treatment of development costs in KPMG-gebouw Amstelveen II B.V.
Financial instruments that are used by KPMG N.V. arise directly from normal business operations. Share capital and any liabilities to, and receivables from, partners and former partners through Coöperatie KPMG U.A. are also regarded as financial instruments. These financial instruments are used to finance normal business activities. During the period under review it was KPMG N.V.’s policy not to trade in financial instruments. The Company is exposed to credit, interest, liquidity and foreign exchange risks as part of its normal business operations. KPMG N.V. does not trade in financial derivatives and has procedures and policies in place to limit the credit risk relating to counterparty default or market risk. If a counterparty defaults in its payments due to KPMG N.V., any resulting losses will be limited to the fair value of the instruments concerned. The contract values or notional principals of the financial instruments are only an indication of the extent to which such financial instruments are used, and do not reflect credit or market risks. These notes provide information about the extent to which KPMG N.V. is exposed to the specified risks and also the objectives, policies and processes relating to the measurement and management of these risks as well as management of capital by KPMG N.V. The Board of Management evaluates and confirms the policy for mitigating each of these risks as summarised below. There were no changes to the policy during the period under review.
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Financial Statements 12
The Board of Management has general responsibility for establishing and supervising risk management. KPMG N.V.’s risk management policy is used to identify and analyse the risks to which KPMG N.V. is exposed, to set risk limits and controls and to monitor and minimise risks. The risk management policy and the relevant systems are regularly tested against changes in market conditions and KPMG N.V.’s business activities. Based on an agreement between KPMG Advisory N.V. and IF Holding B.V., IF Holding B.V. has granted a put option to KPMG to, according to agreed conditions, sell the shares held by KPMG in Innovation Factory Intellectual Property B.V., Innovation Factory Software Services B.V. and Innovation Factory B.V. to IF Holding B.V. for one euro. Based on the same agreement KPMG will acquire 40% of the shares in the coming two years for a maximum amount of EUR 4 million. For the remaining 20% of the shares of
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Innovation Factory Intellectual Property B.V., Innovation Factory Software Services B.V. and Innovation Factory B.V. from IF Holding B.V., IF Holding B.V. has granted a call option to KPMG to acquire, according to agreed conditions, these shares for a maximum amount of EUR 4 million. Based on an agreement between KPMG Advisory N.V. and KPMG Holdings limited, KPMG Holdings limited has granted a call option to KPMG to, according to agreed conditions, acquire 25% of the shares in KPMG Investments Malta limited (KIML). The option can be exercised in tranches with a minimum of 5% in each tranche in the 14 day period after 31 March 2016 and 31 March 2017, at a price per share paid at the day of acquisition of KIML. Based on an agreement between KPMG Advisory N.V. and THT Consultancy B.V. (THT), THT has granted a call option to KPMG to, according to agreed conditions, acquire 50% of the shares in Culture Factory B.V. Under agreed conditions, THT has the right to acquire 50% of
the shares in Culture Factory B.V. from KPMG. The call option of KPMG to purchase the remainder of the shares in the Culture Factory B.V. can be exercised in up to 3 tranches during the exercise periods, being from 31 December 2018 for three years (2/5th of the shares held by THT), from 31 December 2019 for three years (2/3rd of the shares held by THT) and from 31 December 2020 for three years (remaining shares) at market value. Credit risk It is inherent in the nature of the activities of the organisation that it is exposed to credit risk. This risk relates to the loss that may be incurred if a counterparty defaults. It is limited mainly by depositing cash with rated A or higher banks and by the large number and diversity of parties that owe amounts to the organisation for unbilled services. The carrying amount of each financial asset represents the maximum credit risk.
Financial Statements 12
Trade and other receivables/trade and other payables The exposure to credit risks is monitored continuously, and the creditworthiness of all clients is checked for transactions exceeding a certain amount. KPMG N.V. does not require protection in respect of non-current financial assets. Credit risk exposure is mitigated by the large number and diversity of clients and therefore by diversifying risk. Only a limited percentage of revenue is attributable to each single client and, as a result, there is no major concentration of credit risk at the level of individual clients. The recoverable amount of unbilled services and trade receivables is estimated on an ongoing basis. Profit is recognised on a pro rata basis in relation to the progress of the project concerned. The important factors to be considered when estimating unbilled services and trade receivables are the terms and conditions of the contract and the progress and results of the work performed. The financial position of the debtor is important when assessing the provision for doubtful debts. The measurement of unbilled services and trade receivables is assessed on an ongoing basis. A different estimate of the value of unbilled services and trade receivables can lead to
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different amounts of income and other expenses being recognised and to different figures for unbilled services and trade receivables recognised in the statement of financial position. Guarantee deposits Guarantee deposits are only permitted with counterparties whose creditworthiness is comparable to or higher than that of KPMG N.V. Exposure to credit risk Maximum exposure to credit risk at 30 September. 2015
2014
458
393
5,939
-
Unbilled services
23,316
31,935
Trade receivables
87,058
87,035
Current tax assets
4,563
-
Other receivables
7,472
7,854
37,286
27,835
166,092
155,052
Non-current receivable Deferred tax assets
Cash and cash equivalents
Financial Statements 12
Provision for doubtful debts Debtor ageing analysis: 30 September 2015
30 September 2014
Gross
Provision
Gross
Provision
Not yet due: age 0-15 days
36,681
16
32,724
0
Overdue: age 16-180 days
43,973
832
45,102
320
Overdue: age 181-365 days
3,076
1,331
3,863
1,555
Overdue: age over 365 days
3,328
3,106
5,346
3,955
87,058
5,285
87,035
5,830
Liquidity risk Liquidity risk is the risk that KPMG N.V. will be unable to meet its financial liabilities as they fall due. KPMG N.V.’s liquidity management policy is to ensure as far as possible that there are sufficient liquid funds available to be able to meet its liabilities when due without incurring unacceptable losses or damaging its reputation. The aim of KPMG N.V.’s treasury policy is to ensure that there are sufficient funds available to finance day-to-day activities. Surplus funds are deposited in business savings accounts or held for specified periods.
Provisions for doubtful debts are determined for each individual debtor. It has been established on the basis of historical insolvency frequency data and the current economic conditions that no additional provisions for impairment are necessary.
KPMG N.V. has a loan facility of EUR 50 million (2013/2014: EUR 50 million), of which a draw down was made of EUR 9.7 million (2013/2014: EUR 0.1 million) in the form of guarantees. A first right of pledge has been granted on trade receivables as security.
Movement in the provision for doubtful debts:
KPMG has to maintain a certain solvency ratio in connection with the credit facility made available by the bank. This solvency ratio is defined as equity plus loans granted by Coöperatie KPMG U.A., less capitalised intangible assets and goodwill and less amounts due from Coöperatie KPMG U.A., divided by consolidated total assets. It should amount to at least 20%. At 30 September 2015 the solvency ratio was 21.6% (30 September 2014: 26.3%).
2014/2015
2013/2014
Balance at 1 October
5,830
5,572
Added
6,536
7,412
Written off
-1,607
-1,160
Released
-5,474
-5,994
Balance at 30 September
5,285
5,830
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Financial Statements 12
Summary of financial liabilities: Carrying amount
Contractual cash flows
Due within 1 year
Due after 1 year
Coöperatie KPMG U.A.
48,329
48,390
45,030
3,360
Trade and other payables
52,423
58,073
58,073
-
Employee benefits
27,429
27,429
24,346
3,083
633
830
293
537
128,814
134,722
127,742
6,980
Coöperatie KPMG U.A.
58,909
60,392
56,597
3,795
Trade and other payables
50,156
55,069
55,069
-
Employee benefits
28,926
28,926
25,948
2,978
762
1,036
361
675
138,753
145,423
137,975
7,448
30 September 2015
Bank loans 30 September 2013
Bank loans
Market risk Market risk is the risk that changes in market prices, such as exchange rates and interest rates, will affect the income of KPMG N.V. or the value of its assets. The aim is to keep these market risks within acceptable limits, while maximising income. In the longer term, however, permanent changes in exchange and interest rates will have an impact on consolidated profits. Interest rate risk The financial assets of KPMG N.V. consist primarily of investments in non-current assets, trade receivables and cash and cash equivalents. Trade and other receivables do not bear interest. It is estimated that as at 30 September 2015, a general rise in interest rates by one percentage point would have a negative effect on the Company’s profit before tax of EUR 0.1 million (30 September 2014: no effect) and no effect on equity (30 September 2014: no effect). The table on the next page presents the effective interest rates for interestbearing financial assets and financial liabilities at the reporting date and the contractual maturities for these assets and liabilities (excluding interest receipts and payments):
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Financial Statements 12
Effective interest rate
< 1 year
> 1 year < 2 year
> 2 year < 3 year
> 3 year < 4 year
> 4 year < 5 year
longer than 5 years
Total carrying ammount
Receivables
8.0%
-
-
-
-
458
-
458
Cash and cash
0.1%
37,286
-
-
-
-
-
37,286
Loans from partners
2.3%
-30,174
-
-
-
-
-
-30,174
Loans from former partners
0.8%
-14,856
-1,088
-839
-457
-271
-644
55
6.45%
-275
-68
-68
-68
-68
-86
-633
-8,019
-1,156
-907
-525
119
-730
-11,218
2014/2015
Bank loans Total 204/2013 Receivables
8.0%
-
-
-
-
393
-
393
Cash and cash equivalents
0.1%
27,835
-
-
-
-
-
27,835
Loans from partners
2.7%
-39,473
-
-
-
-
-
-39,473
Loans from former partners
1.6%
-13,651
-1,925
-850
-604
-231
-116
-17,377
6.45%
-339
-68
-68
-68
-68
-151
-762
-25,628
-1,993
-918
-672
94
-267
-29,384
Bank loans Total
Currency risk In the normal course of business, foreign currency risks are limited as transactions are carried out in foreign currency on a limited basis, and assets and liabilities are also usually denominated in euros. During the financial year, KPMG entered into a grant agreement of USD 33.9 million with KPMG International, to accelerate the realisation of its business plan.
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Under the agreement, grants in USD can be made available over the period up to 30 September 2018. The majority of the related expenses will be denominated in euros. When derivative financial instruments are used to hedge exposure to foreign exchange risks associated with recognised monetary assets or liabilities, hedge accounting is not applied and any gain or loss on a hedging instrument is
recognised in the statement of profit or loss and other comprehensive income. It is estimated that a general drop in the value of the euro by one percentage point relative to other currencies would have reduced the Company’s profit before tax for 2014/2015 by approximately EUR 0.1 million (2013/2014: EUR 0.1 million) and no effect on equity (30 September 2014: no effect).
Financial Statements 12
Fair value The principal methods and assumptions used to estimate the fair values of financial instruments are set out below. For all instruments below the fair value measurement is based upon level 3, unobservable inputs. Securities designated as at fair value through profit or loss The fair value of investments in securities designated as at fair value through profit or loss is calculated using a binomial option pricing model. The following parameters have been used in the valuation: the strike price is set to the contractual EUR 0.83 per share, the stock price is EUR 0.83, the time to expiration of the option is set to 1.5 years, the risk free interest is set to -.26% based on Dutch Government interest rates for a 1.5 year period per 30 September 2015 (source: Bloomberg) and the volatility is set to 30.26% based on the median volatility over the last 1.5 years of a peer group of listed companies. Deposits In view of the short maturity of deposits, their fair value is equal to nominal value. Interest-bearing loans Fair value is calculated based upon discounted future repayments and interest payments. In view of the short remaining maturity of interestbearing loans, their fair value is assumed to be equal to nominal value. Trade and other receivables/trade and other payables For receivables and payables with a maturity of less than one year, face
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value is considered to be a reflection of fair value. All other receivables and payables are discounted to determine their fair values. Capital management The Board of Management’s policy aims at maintaining a strong capital position in order to retain the confidence of clients, creditors and finance providers and to ensure future development of business activities. The Company is largely financed by Coöperatie KPMG U.A., partly by a contribution of EUR 100 per partner to the Company’s equity, and partly via loans. Of the total other reserves amount of EUR 13.8 million, EUR 8.9 million will be paid out as dividends during the 2015/2016 financial year. Average financing per partner (excluding other reserves) amounted to EUR 334 as at 30 September 2015, compared with EUR 372 as at 30 September 2014. Total financing by partners as at 30 September 2015 amounted to 21.8% of total assets (30 September 2014: 27.9%). The Company may repurchase shares from Coöperatie KPMG U.A. and sell them back to Coöperatie KPMG U.A. in connection with partners who are leaving or joining the Company. These transactions are carried out at nominal value plus a share premium. During the year, the Company has started preparations to improve the capital structure of the company, amongst others by a planned increase in partner financing through its shareholder. Neither the Company nor its subsidiaries are subject to externally imposed capital requirements.
Financial Statements 12
26. Operating leases and other commitments The Company has long-term property leases, operating leases for cars, personal computers, photocopiers and printers, and commitments under long-term sponsorship agreements totalling EUR 247,990 (2013/2014: EUR 285,108). The nominal commitments fall due as follows:
The future rental income from sub-leases is as follows:
30 September 2015 Property leases
Operating leases (cars)
Other contracts
Total
Within 1 year
19,775
13,745
6,615
40,135
Between 1 - 5 years
68,076
16,024
7,151
91,251
116,046
-
558
116,604
203,897
29,769
14,324
247,990
After 5 years
30 September 2014 Property leases
Operating leases (cars)
Other contracts
Total
Within 1 year
21,593
15,097
9,956
46,646
Between 1 - 5 years
74,935
19,436
12,911
107,282
130,282
-
898
131,180
226,810
34,533
23,765
285,108
After 5 years
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30 September 2015
30 September 2014
4,405
4,325
Between 1 and 5 years
13,233
13,204
After 5 years
19,894
29,173
37,532
46,702
Within 1 year
The following operating lease and rental expenses were recognised in the consolidated statement of profit or loss and other comprehensive income for the year ended 30 September 2015: 2014/2015
2013/2014
Properties
21,952
22,920
Cars
16,894
14,254
9,956
6,719
Other contracts
Financial Statements 12
27. List of subsidiaries Unless otherwise stated, the following subsidiaries are wholly owned by KPMG N.V. KPMG Accountants N.V. KPMG Advisory N.V. KPMG Management Services B.V. KPMG Staffing & Facility Services B.V. KPMG-gebouw Amstelveen II Holding B.V. KPMG-gebouw Amstelveen II B.V. (70%) EquaTerra B.V. EquaTerra Sourcing Management B.V. Plexus Medical Group N.V. Bridging Solutions B.V. Innovation Factory Intellectual Property B.V. (40%) Innovation Factory Software Services B.V. (40%) Innovation Factory B.V. (40%) Culture Factory B.V. (50%)
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Amstelveen Amstelveen Amstelveen Amstelveen Amstelveen Amstelveen De Meern De Meern Amsterdam Hilversum Amsterdam Amsterdam Amsterdam Amstelveen
Although KPMG owns less than half of Innovation Factory Intellectual Property B.V., Innovation Factory Software Services B.V. and Innovation Factory B.V. and has less than half of their voting power, management has determined that the Company controls these three entities by virtue of an agreement with one of its other shareholders. The other 60% of the shares of these three entities is hold by the non-controlling interest. During the reporting period no profit or loss was allocated to the non-controlling interest. Although KPMG owns half of Culture Factory B.V. and has half of the voting power, management has determined that the Company controls this entity. The Company controls this subsidiary by virtue of an agreement with one of its other shareholders. The other 50% of the shares of Culture Factory B.V. is held by the non-controlling interest. During the reporting period a loss of EUR 82 was allocated to the non-controlling interest. During the financial year 2014/2015 KPMG MKB B.V. and its subsidiary KPAS B.V. were sold.
Financial Statements 12
28. Contingencies KPMG entered into a reimbursement agreement with KPMG Coöperatie U.A. where KPMG Coöperatie U.A. will reimburse KPMG N.V. for agreed specified items. Bank guarantees are issued as per 30 September 2015 for EUR 9.7 million (2013/2014: EUR 0.1 million guarantees).
A subsidiary of the company has a dispute with the Dutch Tax Authorities and the public prosecutor regarding the tax treatment of a part of the development costs of the Laan van Langerhuize 1 building in Amstelveen. This subsidiary received a corporate income tax assessment of EUR 15.5 million and value added tax assessment of EUR 3.0 million. These tax assessments are accounted for in the financial statements. KPMG N.V. has provided a guarantee to the tax authorities for the payment of corporate income tax to a total amount of EUR 15.5 million maximum in respect of the abovementioned assessments. KPMG did not provide for the dispute with the public prosecutor given the current uncertainty.
KPMG N.V. has issued a letter of comfort relating to a facility of USD 400 million for KPMG International. In this letter of comfort KPMG N.V. confirms that it is a member of KPMG International and that it will pay its contribution in accordance with the Articles of Association of KPMG International and the ‘Membership Agreement’. The comfort letter has a duration of 5 years as from August 2015.
29. Collaboration agreements and related parties
Claims have been filed and proceedings have been instituted against the Company and its subsidiaries on the grounds of alleged failure to perform professional duties. These claims are being opposed. KPMG N.V. carries professional indemnity insurance.
Meijburg & Co In the Netherlands, the Company collaborates with an independent firm of tax consultants, Meijburg & Co. The financial figures of this firm are not included in the consolidated financial statements of KPMG N.V.
Pursuant to Section 403 of Book 2 of the Netherlands Civil Code, KPMG Staffing & Facility Services B.V. is severally liable for the debts arising from legal acts of KPMG-gebouw Amstelveen II Holding B.V.
KPMG International KPMG N.V., registered with the trade register in the Netherlands, is a subsidiary of Coöperatie KPMG U.A. and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (‘KPMG International’), a Swiss entity.
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Collaboration agreements
Financial Statements 12
The members of the Board of Management who are equity partners of the Company are required to fund their pension provision and social security costs from this remuneration. The Supervisory Board members have received a remuneration of EUR 87 (2013/2014: EUR 0).
As a result of this affiliation, the Company collaborates closely with other member firms. Identity of related parties In addition to direct and indirect equity holdings, KPMG N.V. has a relationship with Coöperatie KPMG U.A. The members of the Cooperative are the practice companies owned by partners. Under these agreements, the services of the partners are made available to the Cooperative, which in turn makes these services of the partners available to KPMG N.V. and its subsidiaries.
Transactions with KPMG International This fiscal year KPMG N.V. paid EUR 12.8 million membership fees to KPMG International and received EUR 18.5 million in total regarding the recharging of staff costs, office and IT expenses and a grant to accelerate the realisation of its business plan. Of this grant EUR 3.0 million is receivable as per year end.
Transactions with key management personnel The following information relates to the Company’s Board of Management. 2014/2015
2013/2014
Number of members of the Board of Management during the year
5,87
3,40
Fees paid under management agreement/salaries
2,695
2,151
Severance payment
-
1,419
Expense allowances
108
73
41
15
Interest paid on partners’ accounts
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Financial Statements 12
30. Accounting estimates and judgements Critical accounting estimates have been made in respect of the following items: • Measurement of unbilled services and trade receivables Every quarter, the recoverable amounts of unbilled services and trade receivables are estimated. Profit is recognised pro rata in relation to the progress of each project concerned. The important factors to be considered when estimating unbilled services and trade receivables are the terms and conditions of contract, work progress and results of work performed. The financial position of the debtor is important when assessing the provision for doubtful debts. The measurement of unbilled services and trade receivables is assessed quarterly. A different estimate of the value of unbilled services and trade receivables can lead to different amounts of income and other expenses being recognised and to different figures for unbilled services and trade receivables presented in the statement of financial position. • Provision for claims/legal proceedings The provision for claims/legal proceedings is determined following an evaluation of the matters that resulted in the group entity being held liable by third parties, or the matters in which the relevant circumstances are such that it is reasonable to assume that they will result in the group entity being held liable on the grounds of alleged failure to perform professional duties. A decision is taken on a case-by-case basis as to whether it is probable that settlement of the case will involve an outflow
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of resources from the Company. The estimates of both the probability of an outflow of resources and the amounts required are subjective. In general, such proceedings are long-term in nature and estimates are therefore revised from time to time. • Provision for vacant properties The key factors that determine the provision for leased vacant properties are the tenancy period and the other terms and conditions of the lease, an assessment of the options to surrender the lease or to sublet the space leased to third parties, and an estimate of any rental income that may be earned as a result. • Intangible assets The key factors that determine the valuation of intangible assets as a result of acquisitions, are based upon contractual conditions, existing clients and engagements, past results and scenarios of future results, and discount factors based upon the type and maturity of the organization, and the industry the company is part of. For further disclosures on the determination of the recoverable amount in respect of the impairment test of goodwill, we refer to note 11. • Deferred tax assets The key factors that determine the valuation of deferred tax assets are the probability of future taxable profits, the tax rates that are expected to be applied to temporary differences when they reverse and the assumption that it is expected that the carrying amount can be recovered.
Financial Statements 12
Separate statement of financial position
The statement of financial position was drawn up prior to the distribution of profit.
Note
30 September 2015
30 September 2014
(in thousands of euros) Equity and liabilities
Note
30 September 2015
30 September 2014
Equity
4
(in thousands of euros)
Share capital
5,500
5,500
Assets
Share premium
9,700
10,400
Non-current assets
Reserves
3,379
2,360
Non-current financial assets:
Profit for the year
4,622
3,264
23,201
21,524
3,299
3,726
Investments in group companies
2 9,624
8,940
Receivables
458
393
Receivables
5,930
16,012
Total equity Non-current liabilities 9,333
Current assets
Coöperatie KPMG U.A. relating to: Loans from former partners
Amounts due from group companies
65,433
87,986
Income tax receivable
4,563
-
Cash and cash equivalents
3 37,251
Total assets
Current liabilities
22,772
Coöperatie KPMG U.A. relating to:
5
107,247
110,758
- loans from partners
30,174
39,473
123,259
120,091
- loans from former partners
14,856
13,651
-
2,059
Amounts owed to group companies
14,814
16,082
Tax and social insurance contributions
17,473
23,576
Provision for subsidiaries
19,442
-
97,029
94,841
Total liabilities
100,328
98,567
Total equity and liabilities
123,259
120,091
- VAT liability
The notes on pages 150-156 inclusive form an integral part of these separate financial statements.
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Financial Statements 12
Separate statement of profit or loss and other comprehensive income
For the year ended 30 September 2015 2014/2015
2013/2014
Profits of group companies
4,968
11,043
Other income and expenses
45,968
51,097
Contractual fees payable to Coöperatie KPMG U.A.
-46,314
-58,876
4,622
3,264
(in thousands of euros)
Profit after tax
The notes on pages 150-156 inclusive form an integral part of these separate financial statements.
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Financial Statements 12
Notes to the separate financial statements
All amounts are in thousands of euros unless otherwise stated.
1. Accounting policies General The separate financial statements form part of the 2013/2014 financial statements of KPMG N.V. Accounting policies These separate financial statements were prepared in accordance with Title 9, Book 2 of the Netherlands Civil Code , whereby KPMG N.V. has elected to exercise the option provided under Section 362(8) of Book 2.This means that the same accounting policies have been used for the separate financial statements of KPMG N.V. as for the consolidated EU IFRS financial statements. Equity accounted investees over which significant influence is exercised have been measured according to the equity accounting method. These consolidated EU IFRS financial statements have been drawn up in accordance with the standards (‘EU IFRS’)
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approved by the International Accounting Standards Board and adopted by the European Union. Details of these policies are provided in notes 1 to 1.21 to the consolidated financial statements.
KPMG Staffing & Facility Services B.V. to the companies concerned, and less expenses that they are required to bear themselves – must be paid to KPMG N.V. for the provision of services by partners and finance.
The share of profit or loss of group companies in which KPMG N.V. has an interest comprises the latter’s share of profit or loss of these group companies. Gains or losses on transactions involving the transfer of assets and liabilities between KPMG N.V. and its equity accounted investees, or the transfer of assets and liabilities between equity accounted investees, are not recognised to the extent that they are regarded as unrealised.
Other Since the figures of KPMG N.V. are included in the consolidated financial statements that form part of these financial statements, the Company’s statement of comprehensive income has been presented in abridged form in accordance with Section 402, Part 9, Book 2 of the Netherlands Civil Code.
Profits of group companies The terms governing profits of group companies are laid down by contract between KPMG N.V. and its operating companies, which specifies that 97.5% of their revenue – less any amount payable by the relevant companies to KPMG Staffing & Facility Services B.V. for services provided by
Financial Statements 12
2. Non-current financial assets
3. Cash and cash equivalents
This represents investments in group companies. Movements in these investments during the 2013/2014 financial year:
Cash and cash equivalents comprise cash at hand and bank balances and are freely available. The interest rate applicable to business savings accounts was 0.4%; in the previous year 0.7% over the first EUR 2.5 million.
2014/2015
2013/2014
8,940
7,716
Additions
729
1,224
Disposals
-25
-
4,968
11,043
Dividends received from group companies
-10,828
-11,043
Provision for subsidiaries
5,840
-
Balance at 30 September
9,624
8,940
Balance at 1 October
Profits of group companies
A list of significant subsidiaries is disclosed in note 27 of the consolidated financial statements.
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Financial Statements 12
4. Equity Movements in equity can be specified as follows: Share capital
Share premium
Reserves
Profit for the year
Total equity attributable to equity holders
5,500
12,600
2,360
2,626
23,086
-
-
2,626
-2,626
-
-
-
-
3,264
3,264
Dividend paid
-
-2,800
-2,626
-
-5,426
Additions
-
600
-
-
600
Balance at 30 September 2014
5,500
10,400
2,360
3,264
21,524
Balance at 1 October 2014
5,500
10,400
2,360
3,264
21,524
-
-
3,264
-3,264
-
-
-
-
4,622
4,622
Dividend paid
-
-1,500
-2,245
-
-3,745
Additions
-
800
-
-
800
5,500
9,700
3,379
4,622
23,201
(in thousands of euros) Balance at 1 October 2013 Transfer Total comprehensive income for the year Profit for 2013/2014 Transaction with owners of the Company, recognised directly in equity
Transfer Total comprehensive income for the year Profit for 2014/2015 Transaction with owners of the Company, recognised directly in equity
Balance at 30 September 2015
Other details of equity are disclosed in note 19 to the consolidated financial statements and the consolidated statement of changes in equity.
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Financial Statements 12
5. Coöperatie KPMG U.A. 30 September 2015
30 September 2014
30,174
39,473
Partners: - current loans Coöperatie KPMG U.A. Former partners: - non-current loans Coöperatie KPMG U.A. - current loans Coöperatie KPMG U.A.
3,299
3,726
14,856
13,651
VAT liability
18,155
17,377
-
2,059
48,329
58,909
2013/2014
2013/2014
Balance at the beginning of the year
39,473
39,438
Fees paid to partners under management agreements, through Coöperatie KPMG U.A.
46,314
58,876
Other movements (net withdrawal) Balance at the end of the year
Loans from Coöperatie KPMG U.A. relating to former partners Non-current loans from former partners have an average term of 3.3 years (2013/2014: 3.1 years) and an average interest rate of 0.8% (2013/2014: 1.6%). The average interest on current loans from former partners is 1.5% (2013/2014: 1.6%).
6. Provision for subsidiaries
Movements in financing by partners:
Interest due to partners
Loans from Coöperatie KPMG U.A. relating to partners The interest charged on current loans is 2.3% (2013/2014: 2.7%). Partners also have the opportunity to subscribe on one year deposits, the total amount subscribed in 2014/2015 was EUR 15.3 million with an interest rate of 4.5 % (2013/2014 EUR 10.6 million at 4.0%).
The Company has made a provision with respect to the negative equity of KPMG-gebouw Amstelveen II B.V. Movement in provision in 2014/2015: 2014/2015 -
Balance at 1 October 1,100
691
-56,713
-59,532
30,174
39,473
Added
19,442
Balance at 30 September
19,442
Other movements refer mainly to amounts withdrawn by partners.
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Financial Statements 12
The periods within the provision is expected to be utilised are as follows:
Liquidity risk Summary of financial liabilities:
30 september 2015
Provision for subsidiaries
< 1 year
> 1 year
Total
19,442
-
19,442
Current tax assets Cash and cash equivalents
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Due within 1 year
Due after 1 year
Coöperatie KPMG U.A.
48,329
48,390
45,030
3,360
Amounts owed to group companies
14,814
14,814
14,814
-
Tax and social insurance contributions
17,473
17,473
17,473
-
80,616
80,677
77,317
3,360
Coöperatie KPMG U.A.
58,909
60,392
56,597
3,795
Amounts owed to group companies
16,082
16,082
16,082
-
Tax and social insurance contributions
23,576
23,576
23,576
-
98,567
100,050
96,255
3,795
30 September 2014
Exposure to credit risk Maximum exposure to credit risk at 30 September.
Amounts due from group companies
Contractual cash flows
30 September 2015
7. Financial instruments
Non-current receivable
Carrying amount
2015
2014
458
393
65,433
87,986
4,563
-
37,251
22,772
107,705
111,151
Other details on financial instruments are provided in note 25 to the consolidated financial statements.
Financial Statements 12
8. Contingencies Joint and several liability and guarantees The Company has given guarantees that its subsidiaries, whose financial figures are included in the consolidated financial statements, will comply with certain contractual obligations. KPMG N.V. has issued a letter of comfort relating to a facility of USD 400 million for KPMG International. In this letter of comfort KPMG N.V. confirms that it is a member of KPMG International and that it will pay its contribution in accordance with the Articles of Association of KPMG International and the ‘Membership Agreement’. The comfort letter has a duration of 5 years as from August 2015. KPMG N.V. has a loan facility of EUR 50 million (2013/2014: EUR 50 million), of which a draw down was made of EUR 9.7 million (2013/2014: EUR 0.1 million) in the form of guarantees.
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KPMG N.V. has provided a guarantee to the tax authorities for the payment of corporate income tax to a total amount of EUR 15.5 million maximum. KPMG did not provide for the dispute with the public prosecutor.
each of the companies of the tax group is, under the relevant standard tax conditions, jointly and severally liable for the tax payable by all of the companies in the tax group.
Tax group Together with its 100% subsidiaries, including KPMG N.V., Coöperatie KPMG U.A. forms a tax group for corporate income tax purposes; each of the companies of the tax group is, under the relevant standard tax conditions, jointly and severally liable for the tax payable by all of the companies in the tax group. As the head of the income tax fiscal unity, the Cooperative pays the income tax assessments. However, KPMG N.V. incurs the total income tax expense of the tax group, except for the amount attributable to the Cooperative under the ruling with the Dutch Tax Authorities.
9. Number of partners On average, 140 (2013/2014: 149) partners were active for the Company under management agreements.
10. Remuneration of the Board of Management Details of the remuneration of members of the Board of Management are disclosed in note 29 to the consolidated financial statements.
KPMG N.V. is part of a tax group for value added tax purposes, headed by Coöperatie KPMG U.A.;
Financial Statements 12
11. Auditors’ remuneration The remuneration of the Company’s auditors for the 2014/2015 financial year was EUR 0.1 million (2013/2014: EUR 0.1 million) and related to the audit of financial statements of the Company. Amstelveen, 25 November 2015 Board of Management under the Articles of Association: A.A. Röell (chairman) J. van Delden E. Eeftink B. Ferwerda R.G.A. Fijneman R.P. Kreukniet B. Lamberts Supervisory Board: B.E.M. Wientjes (voorzitter) L.J. Griffith J.C.M. Sap S. van Schilfgaarde J.M. Slagter
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Financial Statements 12
Other Information Independent auditors’ report Please refer to the report of the independent on the next page. Provisions in the Company’s Articles of Association governing the appropriation of profit Article 26 of the Company’s Articles of Association reads as follows: • Distribution of profit pursuant to the provisions of this article shall be made after approval of the financial statements disclosing that such distribution is permitted. • The profit shall be at the disposal of the General Meeting of Shareholders.
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• The Company may make distributions to the shareholders and other persons entitled to distributable profits only to the extent that its capital and reserves exceed the sum of the issued capital and the reserves that must be maintained by law. • A deficit may only be offset against the statutory reserves to the extent permitted by law. Appropriation of profit KPMG N.V.’s profit totals EUR 4,612 and the Company proposes to pay EUR 3,057 as dividends and EUR 1,555 will be added to the reserves.
Financial Statements 12
2
To the management and Shareholders of KPMG N.V.
Grant Thornton Accountants en Adviseurs B.V. Laan der Continenten 160 P.O. Box 2259 2400 CG Alphen aan den Rijn The Netherlands T 088 - 676 90 00 F 088 - 676 90 10 www.gt.nl
INDEPENDENT AUDITOR’S REPORT
Report on the financial statements
We have audited the accompanying financial statements for the year ended September 30, 2015 of KPMG N.V., Amstelveen. The financial statements include the consolidated financial statements and the company financial statements. The consolidated financial statements comprise the consolidated statement of financial position as at September 30, 2015, the consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended and notes, comprising a summary of significant accounting policies and other explanatory information. The company financial statements comprise the balance sheet position as at September 30, 2015, the company profit and loss account for the year then ended and notes, comprising a summary of significant accounting policies and other explanatory information. Management's responsibility
Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Dutch Civil Code, and for the preparation of the management board report in accordance with Part 9 of Book 2 of the Dutch Civil Code. Furthermore management is responsible for such internal control as it determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion with respect to the consolidated financial statements
In our opinion, the consolidated financial statements give a true and fair view of the financial position of KPMG N.V. as at September 30, 2015 and of its result and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Dutch Civil Code. Opinion with respect to the financial statements
In our opinion, the company financial statements give a true and fair view of the financial position of KPMG N.V as at September 30, 2015 and of its result for the year then ended in accordance with Part 9 of Book 2 of the Dutch Civil Code. Report on other legal and regulatory requirements
Pursuant to the legal requirement under Section 2:393 sub 5 at e and f of the Dutch Civil Code, we have no deficiencies to report as a result of our examination whether the management board report, to the extent we can assess, has been prepared in accordance with Part 9 of Book 2 of this Code, and whether the information as required under Section 2:392 sub 1 at b-h has been annexed. Further we report that the management board report, to the extent we can assess, is consistent with the financial statements as required by Section 2:391 sub 4 of the Dutch Civil Code. Amsterdam, 25 November 2015 Grant Thornton Accountants en Adviseurs B.V.
Auditor's responsibility
Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
N.H.B. Jonker Registeraccountant
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
Grant Thornton Accountants en Adviseurs B.V. is a member firm within Grant Thornton International Ltd (Grant Thornton International).
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Grant Thornton Accountants en Adviseurs B.V. is registered with the Chamber of Commerce of The Hague trade register under number 28105565. To all our services our general conditions, as registered with the Registry of the District Court in The Hague, apply. A copy of these conditions will be sent to you on request. Any liability shall be limited to the amount which is mentioned in the general conditions.
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Financial Statements 12
2
Work performed to reach a conclusion
We carried out the following work for the major KPI’s as disclosed in the transparency report of KPMG N.V., External assurance:
To the readers of the KPMG N.V. Integrated Report 2014/2015 Grant Thornton Accountants en Adviseurs B.V. Laan der Continenten 160 P.O. Box 2259 2400 CG Alphen aan den Rijn The Netherlands T 088 - 676 90 00 F 088 - 676 90 10 www.gt.nl
•
A media analysis and internet search to identify relevant environmental, safety and social issues for KPMG in the reporting period
•
Interviewing staff at corporate level who are responsible for the information provided in the non-financial information;
•
Reviewing the design and implementation of systems and processes for collection and processing, including aggregation of data into non-financial information;
•
Reviewing internal and external documentation on a sample basis to determine whether the non-financial information is adequately supported
INDEPENDENT ASSURANCE REPORT
We have been engaged by the Board of Management of KPMG N.V. (hereafter: KPMG) to provide assurance on the non-financial information as defined in paragraph ‘Report boundary’ (page 31) in the Integrated Report 2014/2015. The non-financial information, including the identification of material issues, is the responsibility of the Board of KPMG. Our responsibility is to issue an assurance report on the non-financial information.
As part of our assurance procedures we discussed changes to the draft reports with KPMG, and reviewed the final version of the non-financial information to ensure that it reflected our findings. The non-financial information in scope for this engagement is defined in the following paragraphs in the Integrated Report 2014/2015:
Scope of assurance engagement
•
Quality Performance Reviews (Table 4, page 42)
•
Client Satisfaction and Net Promotor Score (Table, page 66 / Figure 12 and 13, page70)
•
Employee Engagement (paragraph ‘Employee engagement’, page 58)
•
CO2 emissions (Table 14, page 52 and Table 15, page 53)
Our engagement was designed to provide limited assurance on whether the non-financial information is fairly presented, in all material respects, in accordance with the reporting criteria. The cross references in the non-financial information to other parts of the Integrated Report and the information contained in these other parts are not part of the scope of our assurance engagement. Procedures performed to obtain a limited level of assurance are aimed at determining the plausibility of information and are less extensive than those for a reasonable level of assurance. We do not provide assurance on the feasibility of goals, expectations and ambitions of KPMG. Reporting criteria used by KPMG
KPMG applies the Sustainability Reporting Guidelines (G4) of the Global Reporting Initiative, together with internally developed guidelines, for reporting on non-financial information, as also disclosed in the GRI section of the Integrated Report. The nonfinancial information should be viewed against this disclosure. Assurance standard
We conducted our engagement in accordance with the Dutch Standard 3810N: “Assurance engagements relating to sustainability reports”. This standard requires, among others, that the assurance team possesses the specific knowledge, skills and professional competencies needed to provide assurance on non-financial information, and that they comply with the requirements of the Code of Ethics for Professional Accountants of the International Federation of Accountants to ensure their independence.
Grant Thornton Accountants en Adviseurs B.V. is a member firm within Grant Thornton International Ltd (Grant Thornton International).
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Conclusion
Based on the procedures performed, as described above, we conclude that the non financial information does not, in all material respects, appear to be unfairly stated in accordance with the reporting criteria applied by KPMG.
Amsterdam, 9 December 2015
Grant Thornton Accountant en Adviseurs B.V.
N.H.B. Jonker RA
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Grant Thornton Accountants en Adviseurs B.V. is registered with the Chamber of Commerce of The Hague trade register under number 28105565. To all our services our general conditions, as registered with the Registry of the District Court in The Hague, apply. A copy of these conditions will be sent to you on request. Any liability shall be limited to the amount which is mentioned in the general conditions.
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Financial Statements 12
GRI Disclosure table Disclosure
Further explanation
Page
Reference
Strategic priorities and key topics for the short and medium term with regard to sustainability, including respect for internationally recognised standards and how such standards relate to long term organisational strategy and success.
32-38
Audit Firm Code (AFC) 1.1
Broader trends (such as macroeconomic or political) affecting the organisation and influencing sustainability priorities.
5-12
Key events, achievements, and failures during the reporting period.
5-12
Views on performance with respect to targets.
40,56,66,72
Outlook on the organisation’s main challenges and targets for the next year and goals for the coming 3-5 years.
5-12
Other items pertaining to the organisation’s strategic approach
5-12
Strategy and Analysis G4-1
G4-2
158
Statement from the most senior decision-maker about the relevance of sustainability to the organisation and the organisation’s strategy for addressing sustainability.
SECTION ONE should focus on the organisation’s key impacts on sustainability and effects on stakeholders, including rights as defined by national laws and relevant internationally recognised standards. This should take into account the range of reasonable expectations and interests of the organisation’s stakeholders. This section should include:
Section 1: description of significant economic, environmental and social impacts of the organisation, and 23-31 associated challenges and opportunities. This includes the effect on stakeholders’ rights as defined by national laws and the expectations in internationally recognised standards and norms.
SECTION TWO should focus on the impact of sustainability trends, risks, and opportunities on the long- term prospects and financial performance of the organisation. This should concentrate specifically on information relevant to financial stakeholders or that could become so in the future.
Section 1: an explanation of the approach to prioritising these challenges and opportunities.
23-31
Section 1: key conclusions about progress in addressing these topics and related performance in the reporting period. This includes an assessment of reasons for underperformance or over-performance. A description of the main processes in place to address performance and relevant changes.
5-12 23-31 32-38
Section 2: description of the most important risks and opportunities for the organisation arising from sustainability trends.
81-86
Section 2: Prioritization of key sustainability topics as risks and opportunities according to their relevance for long-term organisational strategy, competitive position, qualitative, and (if possible) quantitative financial value drivers.
81-86
Section 2: Table(s) summarising: --Targets, performance against targets, and lessons learned for the current reporting period --Targets for the next reporting period and medium term objectives and goals (that is, 3-5 years) related to key risks and opportunities.
40,56,66,72
Section 2: concise description of governance mechanisms in place specifically to manage these risks and opportunities, and identification of other related risks and opportunities.
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AFC 1.5
5-12
Financial Statements 12
GRI Disclosure table Disclosure
Further explanation
Page
Reference
Organisational Profile G4-3
Report the name of the organisation.
Cover
G4-4
Report the primary brands, products, and services
68,77
G4-5
Report the location of the organisation's headquarters.
77
G4-6
Report the number of countries where the organisation operates, and names of countries where either the organisation has significant operations or that are specifically relevant to the sustainability topics covered in the report.
77
G4-7
Report the nature of ownership and legal form.
77, 78
G4-8
Report the markets served (including geographic breakdown, sectors served, and types of customers and beneficiaries).
77, 78
G4-9
Report the scale of the organisation, including: a. Total number of employees b. Total number of operations c. Net sales (for private sector organisations) or net revenues (for public sector organisations) d. Total capitalization broken down in terms of debt and equity (for - Quantity of products or services provided
3
G4-10
a. Report the total number of employees by employment contract and gender. b. Report the total number of permanent employees by employment type and gender. c. Report the total workforce by employees and supervised workers and by gender. d. Report the total workforce by region and gender. e. Report whether a substantial portion of the organisation’s work is performed by workers who are legally recognised as self-employed, or by individuals other than employees or supervised workers, including employees and supervised employees of contractors. f. Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries).
57
G4-11
Report the percentage of total employees covered by collective bargaining agreements.
G4-12
Describe the organisation’s supply chain.
31, 37
G4-13
Report any significant changes during the reporting period regarding the organisation’s size, structure, ownership, or its supply chain, including: --Changes in the location of, or changes in, operations, including facility openings, closings, and expansions --Changes in the share capital structure and other capital formation, maintenance, and alteration operations (for private sector organisations) --Changes in the location of suppliers, the structure of the supply chain, or in relationships with suppliers, including selection and termination
31
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Breakdown considered not to be material for detailed disclosure
0%
Financial Statements 12
GRI Disclosure table Disclosure
Further explanation
Page
G4-14
Report whether and how the precautionary approach or principle is addressed by the organisation.
78
G4-15
List externally developed economic, environmental and social charters, principles, or other initiatives to which the organisation subscribes or which it endorses.
51-54
G4-16
List memberships of associations (such as industry associations) and national or international advocacy organisations in which the organisation: --Holds a position on the governance body --Participates in projects or committees --Provides substantive funding beyond routine membership dues --Views membership as strategic
51-54
Reference
Identified Material Aspects and Boundaries G4-17
a. List all entities included in the organisation's consolidated financial statements or equivalent documents. b. Report whether any entity included in the organisation's consolidated financial statements or equivalent documents is not covered by the report. The organisation can report on this Standard Disclosure by referencing the information in publicly available consolidated financial statements or equivalent documents.
Note 27 to the financial statements
G4-18
a. Explain the process for defining the report content and the Aspect Boundaries. b. Explain how the organisation has implemented the Reporting Principles for Defining Report Content.
31
G4-19
List all the material Aspects identified in the process for defining report content.
29
G4-20
For each material Aspect, report the Aspect Boundary within the organisation, as follows: --Report whether the Aspect is material within the organisation --If the Aspect is not material for all entities within the organisation (as described in G4-17), select one of the following two approaches and report either: --The list of entities or groups of entities included in G4-17 for which the Aspect is not material or --The list of entities or groups of entities included in G4-17 for which the Aspects is material Report any specific limitation regarding the Aspect Boundary within the organisation.
29
G4-21
For each material Aspect, report the Aspect Boundary outside the organisation, as follows: --Report whether the Aspect is material outside of the organisation --If the Aspect is material outside of the organisation, identify the entities, groups of entities or elements for which the Aspect is material. In addition, describe the geographical location where the Aspect is material for the entities identified --Report any specific limitation regarding the Aspect Boundary outside the organisation
29
G4-22
Report the effect of any restatements of information provided in previous reports, and the reasons for such restatements.
31
G4-23
Report significant changes from previous reporting periods in the Scope and Aspect Boundaries
31
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No particular changes
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Reference
Stakeholder Engagement G4-24
Provide a list of stakeholder groups engaged by the organisation.
23-31
G4-25
Report the basis for identification and selection of stakeholders with whom to engage.
23-31
G4-26
Report the organisation's approach to stakeholder engagement, including frequency of engagement by type and by stakeholder group, and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process.
23-31
G4-27
Report key topics and concerns that have been raised through stakeholder engagement, and how the organisation has responded to those key topics and concerns, including through its reporting. Report the stakeholder groups that raised each of the key topics and concerns.
23-31
Report Profile G4-28
Reporting period (such as fiscal or calendar year) for information provided.
Cover
Fiscal year
G4-29
Date of most recent previous report (if any).
This report
G4-30
Reporting cycle (such as annual, biennial).
Annual
G4-31
Provide the contact point for questions regarding the report or its contents.
[email protected]
G4-32
Report the 'in accordance' option the organisation has chosen. Report the GRI Content Index for the chosen option (see tables below).
Comprehensive
G4-33
c. Report the organisation's policy and current practice with regard to seeking external assurance for the report. d. If not included in the assurance report accompanying the sustainability report, report the scope and basis of any external assurance provided. e. Report the relationship between the organisation and the assurance providers. f. Report whether the highest governance body or senior executives are involved in seeking assurance for the organisation's sustainability report.
31
Governance G4-34
Report the governance structure of the organisation, including committees of the highest governance body. Identify any committees responsible for decision-making on economic, environmental and social impacts.
Chapter 10
G4-35
Report the process for delegating authority for economic, environmental and social topics from the highest governance body to senior executives and other employees.
Chapter 10
G4-36
Report whether the organisation has appointed an executive-level position or positions with responsibility Chapter 10 for economic, environmental and social topics, and whether post holders report directly to the highest governance body.
161
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AFC 0.3 AFC 2.1 AFC 2.2 AFC 2.3
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Further explanation
Page
G4-37
Report processes for consultation between stakeholders and the highest governance body on economic, 15-22 environmental and social topics. If consultation is delegated, describe to whom and any feedback processes to the highest governance body.
G4-38
Report the composition of the highest governance body and its committees by: --Executive or non-executive --Independence --Tenure on the governance body --Number of each individual’s other significant positions and commitments, and the nature of the commitments --Gender --Membership of under-represented social groups --Competences relating to economic, environmental and social impacts --Stakeholder representation
G4-39
Report whether the Chair of the highest governance body is also an executive officer (and, if so, his or her 15-22 function within the organisation’s management and the reasons for this arrangement).
G4-40
Report the nomination and selection processes for the highest governance body and its committees, and 15-22 the criteria used for nominating and selecting highest governance body members, including: --Whether and how diversity is considered --Whether and how independence is considered --Whether and how expertise and experience relating to economic, environmental and social topics are considered --Whether and how stakeholders (including shareholders) are involved
G4-41
Report processes for the highest governance body to ensure conflicts of interest are avoided and managed. Report whether conflicts of interest are disclosed to stakeholders, including, as a minimum: --Cross-board membership --Cross-shareholding with suppliers and other stakeholders --Existence of controlling shareholder --Related party disclosures
15-22
G4-42
Report the highest governance body's and senior executives' roles in the development, approval, and updating of the organisation's purpose, value or mission statements, strategies, policies, and goals related to economic, environmental and social impacts
15-22
G4-43
Report the measures taken to develop and enhance the highest governance body's collective knowledge 15-22 of economic, environmental and social topics.
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Reference
15-22
AFC 2.1 AFC 2.2 AFC 2.3
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Further explanation
Page
Reference
Report the processes for evaluation of the highest governance body's performance with respect to governance of economic, environmental and social topics. Report whether such evaluation is independent or not, and its frequency. Report whether such evaluation is a self-assessment.
15-22
AFC 1.2 AFC 2.4 AFC 3.2
15-22
AFC 2.3 AFC 2.4 AFC 2.5 AFC 3.2
Report actions taken in response to evaluation of the highest governance body's performance with respect to governance of economic, environmental and social topics, including, as a minimum, changes in membership and organisational practice. G4-45
Report the highest governance body's role in the identification and management of economic, environmental and social impacts, risks, and opportunities. Include the highest governance body's role in the implementation of due diligence processes. Report whether stakeholder consultation is used to support the highest governance body’s identification and management of economic, environmental and social impacts, risks, and opportunities.
G4-46
Report the highest governance body's role in reviewing the effectiveness of the organisation's risk management processes for economic, environmental and social topics.
15-22
G4-47
Report the frequency of the highest governance body's review of economic, environmental and social impacts, risks, and opportunities.
15-22
G4-48
Report the highest committee or position that formally reviews and approves the organisation's sustainability report and ensures that all material Aspects are covered.
15-22
G4-49
Report the process for communicating critical concerns to the highest governance body.
15-22
G4-50
Report the nature and total number of critical concerns that were communicated to the highest governance body and the mechanism(s) used to address and resolve them.
G4-51
g. Report the remuneration policies for the highest governance body and senior executives for the below types of remuneration: ››Fixed pay and variable pay: ››Performance-based pay ››Equity-based pay -- Bonuses -- Deferred or vested shares ››Sign-on bonuses or recruitment incentive payments ››Termination payments ››Clawbacks ››Retirement benefits, including the difference between benefit schemes and contribution rates for the highest governance body, senior executives, and all other employees h. Report how performance criteria in the remuneration policy relate to the highest governance body’s and senior executives’ economic, environmental and social objectives.
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Not disclosed 15-22 61-64
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G4-52
Report the process for determining remuneration. Report whether remuneration consultants are involved 61-64 in determining remuneration and whether they are independent of management. Report any other relationships which the remuneration consultants have with the organisation.
G4-53
Report how stakeholders' views are sought and taken into account regarding remuneration, including the results of votes on remuneration policies and proposals, if applicable.
G4-54
Report the ratio of the annual total compensation for the organisation's highest-paid individual in each country of significant operations to the median annual total compensation for all employees (excluding the highest-paid individual) in the same country.
The ratio between junior trainee and non-equity partner is approximately 6.2:1
G4-55
Report the ratio of percentage increase in annual total compensation for the organisation’s highest-paid individual in each country of significant operations to the median percentage increase in annual total compensation for all employees (excluding the highest-paid individual) in the same country
Not disclosed
61-64
Ethics and Integrity G4-56
Describe the organisation's values, principles, standards and norms of behavior such as codes of conduct 34 and codes of ethics.
G4-57
Report the internal and external mechanisms for seeking advice on ethical and lawful behavior, and matters related to organisational integrity, such as helplines or advice lines.
81-86
G4-58
Report the internal and external mechanisms for reporting concerns about unethical or unlawful behavior, and matters related to organisational integrity, such as escalation through line management, whistleblowing mechanisms or hotlines.
50; 81-86
AFC 0.1 AFC 0.2
Disclosures on Management Approachby G4-DMA
164
i. Report why the Aspect is material. Report the impacts that make this Aspect material. j. Report how the organisation manages the material Aspect or its impacts. k. Report the evaluation of the management approach, including: --The mechanisms for evaluating the effectiveness of the management approach --The results of the evaluation of the management approach --Any related adjustments to the management approach
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23-31
AFC 1.4 AFC 1.6
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Further explanation
Page
Reference
AFC 3.1
Category Economic Economic Performance G4-EC1
a. Report the direct economic value generated and distributed (EVG&D) on an accruals basis including the basic components for the organisation’s global operations as listed below. If data is presented on a cash basis, report the justification for this decision and report the basic components as listed below: ››Direct economic value generated: ››Revenues ››Economic value distributed: ››Operating costs ››Employee wages and benefits ››Payments to providers of capital ››Payments to government (by country) ››Community investments ››Economic value retained (calculated as ‘Direct economic value generated’ less ‘Economic value distributed’) b. To better assess local economic impacts, report EVG&D separately at country, regional, or market levels, where significant. Report the criteria used for defining significance.
Note 2 to the financial statements
G4-EC2
Report risks and opportunities posed by climate change that have the potential to generate substantive changes in operations, revenue or expenditure, including: --A description of the risk or opportunity and its classification as either physical, regulatory, or other --A description of the impact associated with the risk or opportunity --The financial implications of the risk or opportunity before action is taken --The methods used to manage the risk or opportunity --The costs of actions taken to manage the risk or opportunity
81-86
G4-EC3
c. Where the plan’s liabilities are met by the organisation’s general resources, report the estimated value of those liabilities. d. Where a separate fund exists to pay the plan’s pension liabilities, report: --The extent to which the scheme’s liabilities are estimated to be covered by the assets that have been set aside to meet them --The basis on which that estimate has been arrived at --When that estimate was made e. Where a fund set up to pay the plan’s pension liabilities is not fully covered, explain the strategy, if any, adopted by the employer to work towards full coverage, and the timescale, if any, by which the employer hopes to achieve full coverage. f. Report the percentage of salary contributed by employee or employer. g. Report the level of participation in retirement plans (such as participation in mandatory or voluntary schemes, regional or country-based schemes, or those with financial impact).
Note 4 to the financial statements
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h. Report the total monetary value of financial assistance received by the organisation from governments during the reporting period, including, as a minimum: --Tax relief and tax credits --Subsidies --Investment grants, research and development grants, and other relevant types of grants --Awards --Royalty holidays --Financial assistance from Export Credit Agencies (ECAs) --Financial incentives --Other financial benefits received or receivable from any government for any operation i. Report the information above by country. j. Report whether, and the extent to which, the government is present in the shareholding structure.
G4-EC4
Reference No assistance received
Market Presence G4-EC5
a. When a significant proportion of the workforce is compensated based on wages subject to minimum wage rules, report the ratio of the entry level wage by gender at significant locations of operation to the minimum wage. b. Report whether a local minimum wage is absent or variable at significant locations of operation, by gender. In circumstances in which different minimums could be used as a reference, report which minimum wage is being used. c. Report the definition used for ‘significant locations of operation’.
Not applicable
G4-EC6
a. Report the percentage of senior management at significant locations of operation that are hired from the local community. b. Report the definition of ‘senior management’ used. c. Report the organisation’s geographical definition of ‘local’. d. Report the definition used for ‘significant locations of operation’.
Not applicable
Category Environmental Materials G4-EN1
MATERIALS USED BY WEIGHT OR VOLUME
Report the total weight or volume of materials that are used to produce and package the organisation's primary products and services during the reporting period, by: --Non-renewable materials used --Renewable materials used
Not applicable
G4-EN2
PERCENTAGE OF MATERIALS USED THAT ARE RECYCLED INPUT MATERIALS
Report the percentage of recycled input materials used to manufacture the organisation's primary products and services.
Not applicable
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Energy G4-EN3
ENERGY CONSUMPTION WITHIN THE ORGANISATION
e. Report total fuel consumption from non-renewable sources in joules or multiples, including fuel types used. f. Report total fuel consumption from renewable fuel sources in joules or multiples, including fuel types used. g. Report in joules, watt-hours or multiples, the total: --Electricity consumption --Heating consumption - Cooling consumption --Steam consumption h. Report in joules, watt-hours or multiples, the total: --Electricity sold --Heating sold - Cooling sold --Steam sold i. Report total energy consumption in joules or multiples. j. Report standards, methodologies, and assumptions used. k. Report the source of the conversion factors used.
G4-EN4
ENERGY CONSUMPTION OUTSIDE OF THE ORGANISATION
a. Report energy consumed outside of the organisation, in joules or multiples. b. Report standards, methodologies, and assumptions used. c. Report the source of the conversion factors used
Not applicable
G4-EN5
ENERGY INTENSITY
a. Report the energy intensity ratio. b. Report the organisation-specific metric (the ratio denominator) chosen to calculate the ratio. c. Report the types of energy included in the intensity ratio: fuel, electricity, heating, cooling, steam, or all. d. Report whether the ratio uses energy consumed within the organisation, outside of it or both.
Not material
G4-EN6
REDUCTION OF ENERGY CONSUMPTION
a. Report the amount of reductions in energy consumption achieved as a direct result of conservation and 53 efficiency initiatives, in joules or multiples. b. Report the types of energy included in the reductions: fuel, electricity, heating, cooling, and steam. c. Report the basis for calculating reductions in energy consumption such as base year or baseline, and the rationale for choosing it. d. Report standards, methodologies, and assumptions used.
G4-EN7
REDUCTIONS IN ENERGY REQUIREMENTS OF PRODUCTS AND SERVICES
a. Report the reductions in the energy requirements of sold products and services achieved during the reporting period, in joules or multiples. b. Report the basis for calculating reductions in energy consumption such as base year or baseline, and the rationale for choosing it. c. Report standards, methodologies, and assumptions used.
53
Not applicable
Water
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G4-EN8
TOTAL WATER WITHDRAWAL BY SOURCE
a. Report the total volume of water withdrawn from the following sources: --Surface water, including water from wetlands, rivers, lakes, and oceans --Ground water --Rainwater collected directly and stored by the organisation --Waste water from another organisation --Municipal water supplies or other water utilities b. Report standards, methodologies, and assumptions used.
53
G4-EN9
WATER SOURCES SIGNIFICANTLY AFFECTED BY WITHDRAWAL OF WATER
a. Report the total number of water sources significantly affected by withdrawal by type: --Size of water source --Whether or not the source is designated as a protected area (nationally or internationally) --Biodiversity value (such as species diversity and endemism, total number of protected species) --Value or importance of water source to local communities and indigenous peoples b. Report standards, methodologies, and assumptions used.
Not applicable
G4-EN10
PERCENTAGE AND TOTAL VOLUME OF WATER RECYCLED AND REUSED
a. Report the total volume of water recycled and reused by the organisation. b. Report the total volume of water recycled and reused as a percentage of the total water withdrawal reported under Indicator G4-EN8. c. Report standards, methodologies, and assumptions used.
Not applicable
Emissions G4-EN15
168
DIRECT GREENHOUSE GAS (GHG) EMISSIONS (SCOPE 1)
a. Report gross direct (Scope 1) GHG emissions in metric tons of CO2 equivalent, independent of any 53 GHG trades, such as purchases, sales, or transfers of offsets or allowances. b. Report gases included in the calculation (whether CO2 , CH4, N2O, HFCs, PFCs, SF6, NF3, or all). c. Report biogenic CO2 emissions in metric tons of CO2 equivalent separately from the gross direct (Scope 1) GHG emissions. d. Report the chosen base year, the rationale for choosing the base year, emissions in the base year, and the context for any significant changes in emissions that triggered recalculations of base year emissions. e. Report standards, methodologies, and assumptions used. f. Report the source of the emission factors used and the global warming potential (GWP) rates used or a reference to the GWP source. g. Report the chosen consolidation approach for emissions (equity share, financial control, operational control).
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Further explanation
G4-EN16
ENERGY INDIRECT GREENHOUSE GAS (GHG) EMISSIONS (SCOPE 2)
a. Report gross energy indirect (Scope 2) GHG emissions in metric tons of CO2 equivalent, independent 53 of any GHG trades, such as purchases, sales, or transfers of offsets or allowances. b. Report gases included in the calculation, if available. c. Report the chosen base year, the rationale for choosing the base year, emissions in the base year, and the context for any significant changes in emissions that triggered recalculations of base year emissions. d. Report standards, methodologies, and assumptions used. e. Report the source of the emission factors used and the global warming potential (GWP) rates used or a reference to the GWP source, if available. f. Report the chosen consolidation approach for emissions (equity share, financial control, operational control).
G4-EN17
OTHER INDIRECT GREENHOUSE GAS (GHG) EMISSIONS (SCOPE 3)
a. Report gross other indirect (Scope 3) GHG emissions in metric tons of CO2 equivalent, excluding 53 indirect emissions from the generation of purchased or acquired electricity, heating, cooling, and steam consumed by the organisation (these indirect emissions are reported in Indicator G4-EN16). Exclude any GHG trades, such as purchases, sales, or transfers of offsets or allowances. b. Report gases included in the calculation, if available. c. Report biogenic CO2 emissions in metric tons of CO2 equivalent separately from the gross other indirect (Scope 3) GHG emissions. d. Report other indirect (Scope 3) emissions categories and activities included in the calculation. e. Report the chosen base year, the rationale for choosing the base year, emissions in the base year, and the context for any significant changes in emissions that triggered recalculations of base year emissions. f. Report standards, methodologies, and assumptions used. g. Report the source of the emission factors used and the global warming potential (GWP) rates used or a reference to the GWP source, if available.
G4-EN18
GREENHOUSE GAS (GHG) EMISSIONS INTENSITY
h. Report the GHG emissions intensity ratio. i. Report the organisation-specific metric (the ratio denominator) chosen to calculate the ratio. j. Report the types of GHG emissions included in the intensity ratio: direct (Scope 1), energy indirect (Scope 2), other indirect (Scope 3). k. Report gases included in the calculation
G4-EN19
REDUCTION OF GREENHOUSE GAS (GHG) EMISSIONS
a. Report the amount of GHG emissions reductions achieved as a direct result of initiatives to reduce emissions, in metric tons of CO2 equivalent. b. Report gases included in the calculation (whether CO2 , CH4, N2O, HFCs, PFCs, SF6, NF3, or all). c. Report the chosen base year or baseline and the rationale for choosing it. d. Report standards, methodologies, and assumptions used. e. Report whether the reductions in GHG emissions occurred in direct (Scope 1), energy indirect (Scope 2), other indirect (Scope 3) emissions.
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Not applicable
53
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Further explanation
G4-EN20
EMISSIONS OF OZONE-DEPLETING SUBSTANCES (ODS)
a. Report production, imports, and exports of ODS in metric tons of CFC-11 equivalent. b. Report substances included in the calculation. c. Report standards, methodologies, and assumptions used. d. Report the source of the emission factors used.
Not applicable
G4-EN21
NOX, SOX, AND OTHER SIGNIFICANT AIR EMISSIONS
a. Report the amount of significant air emissions, in kilograms or multiples for each of the following: --NOX --SOX --Persistent organic pollutants (POP) --Volatile organic compounds (VOC) -- Hazardous air pollutants (HAP) --Particulate matter (PM) --Other standard categories of air emissions identified in relevant regulations b. Report standards, methodologies, and assumptions used. c. Report the source of the emission factors used.
Not applicable
G4-EN22
TOTAL WATER DISCHARGE BY QUALITY AND DESTINATION
a. Report the total volume of planned and unplanned water discharges by: --Destination --Quality of the water including treatment method --Whether it was reused by another organisation b. Report standards, methodologies, and assumptions used.
Not applicable
G4-EN23
TOTAL WEIGHT OF WASTE BY TYPE AND DISPOSAL METHOD
a. Report the total weight of hazardous and non-hazardous waste, by the following disposal methods: --Reuse --Recycling --Composting --Recovery, including energy recovery --Incineration (mass burn) --Deep well injection --Landfill --On-site storage --Other (to be specified by the organisation) b. Report how the waste disposal method has been determined: --Disposed of directly by the organisation or otherwise directly confirmed --Information provided by the waste disposal contractor --Organisational defaults of the waste disposal contractor
Not reported by type as this is considered to be not material for further disclosure
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GRI Disclosure table G4-EN24
Disclosure
Further explanation
Page
TOTAL NUMBER AND VOLUME OF SIGNIFICANT SPILLS
c. Report the total number and total volume of recorded significant spills. d. For spills that were reported in the organisation’s financial statements, report the additional following e. information for each such spill: --Location of spill - Volume of spill --Material of spill, categorised by: -- Oil spills (soil or water surfaces) --Fuel spills (soil or water surfaces) -- Spills of wastes (soil or water surfaces) -- Spills of chemicals (mostly soil or water surfaces) -- Other (to be specified by the organisation) f. Report the impacts of significant spills.
Reference Not applicable
Effluents and Waste G4-EN25
WEIGHT OF TRANSPORTED, IMPORTED, EXPORTED, OR TREATED WASTE DEEMED HAZARDOUS UNDER THE TERMS OF THE BASEL CONVENTION2 ANNEX I, II, III, AND VIII, AND PERCENTAGE OF TRANSPORTED WASTE SHIPPED INTERNATIONALLY
a. Report the total weight for each of the following: --Hazardous waste transported --Hazardous waste imported - Hazardous waste exported --Hazardous waste treated b. Report the percentage of hazardous waste shipped internationally.
Not applicable to our professional service firm
G4-EN26
IDENTITY, SIZE, PROTECTED STATUS, AND BIODIVERSITY VALUE OF WATER BODIES AND RELATED HABITATS SIGNIFICANTLY AFFECTED BY THE ORGANISATION’S DISCHARGES OF WATER AND RUNOFF
Report water bodies and related habitats that are significantly affected by water discharges based on the criteria described in the Compilation section below, adding information on: - Size of water body and related habitat - Whether the water body and related habitat is designated as a protected area (nationally or internationally) - Biodiversity value (such as total number of protected species)
Not applicable
Products and Services G4-EN27
171
EXTENT OF IMPACT MITIGATION OF ENVIRONMENTAL IMPACTS OF PRODUCTS AND SERVICES
a. Report quantitatively the extent to which environmental impacts of products and services have been mitigated during the reporting period. b. If use-oriented figures are employed, report the underlying assumptions regarding consumption patterns or normalization factors.
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Not applicable
Financial Statements 12
GRI Disclosure table G4-EN28
Disclosure
Further explanation
Page
PERCENTAGE OF PRODUCTS SOLD AND THEIR PACKAGING MATERIALS THAT ARE RECLAIMED BY CATEGORY
Report the percentage of reclaimed products and their packaging materials for each product category. b. Report how the data for this Indicator has been collected.
Reference Not applicable
Compliance G4-EN29
MONETARY VALUE OF SIGNIFICANT FINES AND TOTAL NUMBER OF NON-MONETARY SANCTIONS FOR NON-COMPLIANCE WITH ENVIRONMENTAL LAWS AND REGULATIONS
a. Report significant fines and non-monetary sanctions in terms of: --Total monetary value of significant fines --Total number of non-monetary sanctions --Cases brought through dispute resolution mechanisms b. Where organisations have not identified any non-compliance with laws or regulations, a brief statement of this fact is sufficient.
No material fines
Transport G4-EN30
SIGNIFICANT ENVIRONMENTAL IMPACTS OF TRANSPORTING PRODUCTS AND OTHER GOODS AND MATERIALS FOR THE ORGANISATION’S OPERATIONS, AND TRANSPORTING MEMBERS OF THE WORKFORCE
a. Report the significant environmental impacts of transporting products and other goods and materials for the organisation’s operations, and transporting members of the workforce. Where quantitative data is not provided, report the reason. b. Report how the environmental impacts of transporting products, members of the organisation’s workforce, and other goods and materials are mitigated. c. Report the criteria and methodology used to determine which environmental impacts are significant.
Not applicable
Overall G4-EN31
TOTAL ENVIRONMENTAL PROTECTION EXPENDITURES AND INVESTMENTS BY TYPE
d. Report total environmental protection expenditures by: --Waste disposal, emissions treatment, and remediation costs --Prevention and environmental management costs
Not applicable
Environmental Grievance Mechanisms G4-EN34
172
NUMBER OF GRIEVANCES ABOUT ENVIRONMENTAL IMPACTS FILED, ADDRESSED, AND RESOLVED THROUGH FORMAL GRIEVANCE MECHANISMS
a. Report the total number of grievances about environmental impacts filed through formal grievance mechanisms during the reporting period. b. Of the identified grievances, report how many were: --Addressed during the reporting period --Resolved during the reporting period c. Report the total number of grievances about environmental impacts filed prior to the reporting period that were resolved during the reporting period.
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Not applicable
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Category Social Labor Pratices and Decent Work Employment G4-LA1
TOTAL NUMBER AND RATES OF NEW EMPLOYEE HIRES AND EMPLOYEE TURNOVER BY AGE GROUP, GENDER AND REGION
a. Report the total number and rate of new employee hires during the reporting period, by age group, gender and region. b. Report the total number and rate of employee turnover during the reporting period, by age group, gender and region.
G4-LA2
BENEFITS PROVIDED TO FULLTIME EMPLOYEES THAT ARE NOT PROVIDED TO TEMPORARY OR PARTTIME EMPLOYEES, BY SIGNIFICANT LOCATIONS OF OPERATION
a. Report the benefits which are standard for full-time employees of the organisation but are not provided to temporary or part-time employees, by significant locations of operation. These include, as a minimum: --Life insurance --Health care --Disability and invalidity coverage --Parental leave --Retirement provision --Stock ownership --Others b. Report the definition used for ‘significant locations of operation’.
0%. Type of benefits are equal to all employees.
G4-LA3
RETURN TO WORK AND RETENTION RATES AFTER PARENTAL LEAVE, BY GENDER
a. Report the total number of employees that were entitled to parental leave, by gender. Report the total number of employees that took parental leave, by gender. b. Report the total number of employees who returned to work after parental leave ended, by gender. c. Report the total number of employees who returned to work after parental leave ended who were still employed twelve months after their return to work, by gender. e. Report the return to work and retention rates of employees who took parental leave, by gender.
Not material
57
Labor/Management Relations G4-LA4
MINIMUM NOTICE PERIODS REGARDING OPERATIONAL CHANGES, INCLUDING WHETHER THESE ARE SPECIFIED IN COLLECTIVE AGREEMENTS
a. Report the minimum number of weeks’ notice typically provided to employees and their elected representatives prior to the implementation of significant operational changes that could substantially affect them. b. For organisations with collective bargaining agreements, report whether the notice period and provisions for consultation and negotiation are specified in collective agreements.
Termination by KPMG: 15 yr: 4 months. Exceptions may apply. Termination by employees: 1-3 months depending on functional level
Training and Education
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G4-LA9
AVERAGE HOURS OF TRAINING PER YEAR PER EMPLOYEE BY GENDER, AND BY EMPLOYEE CATEGORY
Report the average hours of training that the organisation’s employees have undertaken during the reporting period, by: --Gender --Employee category
59
G4-LA10
PROGRAMMES FOR SKILLS MANAGEMENT AND LIFELONG LEARNING THAT SUPPORT THE CONTINUED EMPLOYABILITY OF EMPLOYEES AND ASSIST THEM IN MANAGING CAREER ENDINGS
a. Report on the type and scope of programmes implemented and assistance provided to upgrade employee skills. b. Report on the transition assistance programmes provided to facilitate continued employability and the management of career endings resulting from retirement or termination of employment
94-96
G4-LA11
PERCENTAGE OF EMPLOYEES RECEIVING REGULAR PERFORMANCE AND CAREER DEVELOPMENT REVIEWS, BY GENDER AND BY EMPLOYEE CATEGORY
Report the percentage of total employees by gender and by employee category who received a regular performance and career development review during the reporting period
Reference
100%
Diversity and Equal Opportunity G4-LA12
COMPOSITION OF GOVERNANCE BODIES AND BREAKDOWN OF EMPLOYEES PER EMPLOYEE CATEGORY ACCORDING TO GENDER, AGE GROUP, MINORITY GROUP MEMBERSHIP, AND OTHER INDICATORS OF DIVERSITY
a. Report the percentage of individuals within the organisation’s governance bodies in each of the following diversity categories: --Gender --Age group: under 30 years old, 30-50 years old, over 50 years old --Minority groups --Other indicators of diversity where relevant b. Report the percentage of employees per employee category in each of the following diversity categories: --Gender --Age group: under 30 years old, 30-50 years old, over 50 years old --Minority groups --Other indicators of diversity where relevant
Not all aspects reported as these are deemed not material for detailed disclosure.
Equal Remuneration for Women and Men G4-LA13
RATIO OF BASIC SALARY AND REMUNERATION OF WOMEN TO MEN BY EMPLOYEE CATEGORY, BY SIGNIFICANT LOCATIONS OF OPERATION
a. Report the ratio of the basic salary and remuneration of women to men for each employee category, by significant locations of operation. b. Report the definition used for ‘significant locations of operation’.
60
Labor Pactices Grievance Mechanisms
174
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Financial Statements 12
GRI Disclosure table G4-LA16
Disclosure
Further explanation
Page
NUMBER OF GRIEVANCES ABOUT LABOR PRACTICES FILED, ADDRESSED, AND RESOLVED THROUGH FORMAL GRIEVANCE MECHANISMS
a. Report the total number of grievances about labor practices filed through formal grievance mechanisms during the reporting period. b. Of the identified grievances, report how many were: --Addressed during the reporting period --Resolved during the reporting period c. Report the total number of grievances about labor practices filed prior to the reporting period that were resolved during the reporting period.
Reference Not applicable
Society Local Communities G4-SO1
PERCENTAGE OF OPERATIONS WITH IMPLEMENTED LOCAL COMMUNITY ENGAGEMENT, IMPACT ASSESSMENTS, AND DEVELOPMENT PROGRAMMES
Report the percentage of operations with implemented local community engagement, impact assessments, and development programmes, including the use of: --Social impact assessments, including gender impact assessments, based on participatory processes --Environmental impact assessments and ongoing monitoring --Public disclosure of results of environmental and social impact assessments --Local community development programmes based on local communities’ needs
Not applicable
--Stakeholder engagement plans based on stakeholder mapping --Broad based local community consultation committees and processes that include vulnerable groups --Works councils, occupational health and safety committees and other employee representation bodies to deal with impacts --Formal local community grievance processes G4-SO2
OPERATIONS WITH SIGNIFICANT ACTUAL AND POTENTIAL NEGATIVE IMPACTS ON LOCAL COMMUNITIES
Report operations with significant actual and potential negative impacts on local communities, including: --The location of the operations --The significant actual and potential negative impacts of operations
5-12
Anti-Corruption G4-SO3
175
TOTAL NUMBER AND PERCENTAGE OF OPERATIONS ASSESSED FOR RISKS RELATED TO CORRUPTION AND THE SIGNIFICANT RISKS IDENTIFIED
d. Report the total number and percentage of operations assessed for risks related to corruption. e. Report the significant risks related to corruption identified through the risk assessment.
Integrated Report 2014-2015 © 2015 KPMG N.V. All rights reserved.
100%
Financial Statements 12
GRI Disclosure table Disclosure
Further explanation
Page
Reference
G4-SO4
COMMUNICATION AND TRAINING ON ANTI-CORRUPTION POLICIES AND PROCEDURES
a. Report the total number and percentage of governance body members that the organisation’s anticorruption policies and procedures have been communicated to, broken down by region. b. Report the total number and percentage of employees that the organisation’s anti-corruption policies and procedures have been communicated to, broken down by employee category and region. c. Report the total number and percentage of business partners that the organisation’s anti-corruption policies and procedures have been communicated to, broken down by type of business partner and region. d. Report the total number and percentage of governance body members that have received training on anti- corruption, broken down by region. e. Report the total number and percentage of employees that have received training on anti-corruption, broken down by employee category and region.
100%
G4-SO5
CONFIRMED INCIDENTS OF CORRUPTION AND ACTIONS TAKEN
a. Report the total number and nature of confirmed incidents of corruption. b. Report the total number of confirmed incidents in which employees were dismissed or disciplined for corruption. c. Report the total number of confirmed incidents when contracts with business partners were terminated or not renewed due to violations related to corruption. d. Report public legal cases regarding corruption brought against the organisation or its employees during the reporting period and the outcomes of such cases
Not disclosed
Public Policy G4-SO6
TOTAL VALUE OF POLITICAL CONTRIBUTIONS BY COUNTRY AND RECIPIENT/BENEFICIARY
a. Report the total monetary value of financial and in-kind political contributions made directly and indirectly by the organisation by country and recipient/beneficiary. b. Report how the monetary value of in-kind contributions was estimated, if applicable.
None made
Anti-competitive Behaviour G4-SO7
TOTAL NUMBER OF LEGAL ACTIONS FOR ANTI-COMPETITIVE BEHAVIOR, ANTI-TRUST, AND MONOPOLY PRACTICES AND THEIR OUTCOMES
a. Report the total number of legal actions pending or completed during the reporting period regarding anti- competitive behavior and violations of anti-trust and monopoly legislation in which the organisation has been identified as a participant. b. Report the main outcomes of completed legal actions, including any decisions or judgments.
None
Compliance
176
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Financial Statements 12
GRI Disclosure table G4-SO8
Disclosure
Further explanation
Page
MONETARY VALUE OF SIGNIFICANT FINES AND TOTAL NUMBER OF NON-MONETARY SANCTIONS FOR NON-COMPLIANCE WITH LAWS AND REGULATIONS
c. Report significant fines and non-monetary sanctions in terms of: --Total monetary value of significant fines --Total number of non-monetary sanctions --Cases brought through dispute resolution mechanisms d. If the organisation has not identified any non-compliance with laws or regulations, a brief statement of this fact is sufficient. e. Report the context against which significant fines and non-monetary sanctions were incurred.
50
Reference
Grievance Mechanisms for Impacts on Society G4-S11
NUMBER OF GRIEVANCES ABOUT IMPACTS ON SOCIETY FILED, ADDRESSED, AND RESOLVED THROUGH FORMAL GRIEVANCE MECHANISMS
a. Report the total number of grievances about impacts on society filed through formal grievance mechanisms during the reporting period. b. Of the identified grievances, report how many were: --Addressed during the reporting period --Resolved during the reporting period c. Report the total number of grievances about impacts on society filed prior to the reporting period that were resolved during the reporting period.
50
Product Responsibility Customer Health and Safety G4-PR1
PERCENTAGE OF SIGNIFICANT PRODUCT AND SERVICE CATEGORIES FOR WHICH HEALTH AND SAFETY IMPACTS ARE ASSESSED FOR IMPROVEMENT
Report the percentage of significant product and service categories for which health and safety impacts are assessed for improvement.
G4-PR2
TOTAL NUMBER OF INCIDENTS OF NON-COMPLIANCE WITH REGULATIONS AND VOLUNTARY CODES CONCERNING THE HEALTH AND SAFETY IMPACTS OF PRODUCTS AND SERVICES DURING THEIR LIFE CYCLE, BY TYPE OF OUTCOMES
a. Report the total number of incidents of non-compliance with regulations and voluntary codes concerning the health and safety impacts of products and services within the reporting period, by: --Incidents of non-compliance with regulations resulting in a fine or penalty --Incidents of non-compliance with regulations resulting in a warning --Incidents of non-compliance with voluntary codes b. If the organisation has not identified any non-compliance with regulations and voluntary codes, a brief statement of this fact is sufficient.
177
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Not applicable
50
Financial Statements 12
GRI Disclosure table Disclosure
Further explanation
Page
Reference
Product and Service Labeling G4-PR3
TYPE OF PRODUCT AND SERVICE INFORMATION REQUIRED BY THE ORGANISATION’S PROCEDURES FOR PRODUCT AND SERVICE INFORMATION AND LABELING, AND PERCENTAGE OF SIGNIFICANT PRODUCT AND SERVICE CATEGORIES SUBJECT TO SUCH INFORMATION REQUIREMENTS
a. Report whether the following product and service information is required by the organisation’s procedures for product and service information and labeling: --The sourcing of components of the product or service --Content, particularly with regard to substances that might produce an environmental or social impact --Safe use of the product or service --Disposal of the product and environmental/social impacts --Other (explain) b. Report the percentage of significant product or service categories covered by and assessed for compliance with such procedures.
42
G4-PR4
TOTAL NUMBER OF INCIDENTS OF NON-COMPLIANCE WITH REGULATIONS AND VOLUNTARY CODES CONCERNING PRODUCT AND SERVICE INFORMATION AND LABELING, BY TYPE OF OUTCOMES
a. Report the total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labeling, by: --Incidents of non-compliance with regulations resulting in a fine or penalty --Incidents of non-compliance with regulations resulting in a warning --Incidents of non-compliance with voluntary codes b. If the organisation has not identified any non-compliance with regulations and voluntary codes, a brief statement of this fact is sufficient.
42, 50, 99
G4-PR5
RESULTS OF SURVEYS MEASURING CUSTOMER SATISFACTION
Report the results or key conclusions of customer satisfaction surveys (based on statistically relevant sample sizes) conducted in the reporting period relating to information about: --The organisation as a whole --A major product or service category --Significant locations of operation
69-70
Marketing Communications G4-PR6
SALE OF BANNED OR DISPUTED PRODUCTS
c. Report whether the organisation sells products that are: --Banned in certain markets -- The subject of stakeholder questions or public debate d. Report how the organisation has responded to questions or concerns regarding these products.
G4-PR7
TOTAL NUMBER OF INCIDENTS OF NON-COMPLIANCE WITH REGULATIONS AND VOLUNTARY CODES CONCERNING MARKETING COMMUNICATIONS, INCLUDING ADVERTISING, PROMOTION, AND SPONSORSHIP, BY TYPE OF OUTCOMES
a. Report the total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship, by: --Incidents of non-compliance with regulations resulting in a fine or penalty --Incidents of non-compliance with regulations resulting in a warning --Incidents of non-compliance with voluntary codes b. If the organisation has not identified any non-compliance with regulations and voluntary codes, a brief statement of this fact is sufficient.
178
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Not applicable
99
AFC 3.2
Financial Statements 12
GRI Disclosure table Disclosure
Further explanation
Page
Reference
Customer Privacy G4-PR8
TOTAL NUMBER OF SUBSTANTIATED COMPLAINTS REGARDING BREACHES OF CUSTOMER PRIVACY AND LOSSES OF CUSTOMER DATA
a. Report the total number of substantiated complaints received concerning breaches of customer privacy, categorised by: --Complaints received from outside parties and substantiated by the organisation --Complaints from regulatory bodies b. Report the total number of identified leaks, thefts, or losses of customer data. c. If the organisation has not identified any substantiated complaints, a brief statement of this fact is sufficient.
99
Compliance G4-PR9
179
MONETARY VALUE OF SIGNIFICANT FINES FOR NON-COMPLIANCE WITH LAWS AND REGULATIONS CONCERNING THE PROVISION AND USE OF PRODUCTS AND SERVICES
a. Report the total monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services. b. If the organisation has not identified any non-compliance with laws or regulations, a brief statement of this fact is sufficient.
Integrated Report 2014-2015 © 2015 KPMG N.V. All rights reserved.
99
Financial Statements 12
Glossary In the course of this report several abbreviations were introduced and used. The following table provides an overview of these abbreviations together with their full description or explanation. Abbreviation Explanation
Abbreviation Explanation
Abbreviation Explanation
AFM
Autoriteit Financiële Markten
GSI
Global Service Centre
PIE/OOB
Bta
Besluit toezicht accountantsorganisaties or the Degree to the Dutch Supervision Act on Audit Firms
HR
Human Resources
Public Interest Entities/Organisaties van Openbaar Belang
IAB
International Accounting Bulletin
PIN
Performance Improvement Necessary
ICF
Issue Communication Form
RCA
Root Cause Analysis
IESBA
International Ethics Standards Board for Accountants
QPR
IFAC
International Federation of Accountants
Quality Performance Reviews or the internal inspections of engagements to assess compliance with professional standards, including quality
IFRS
International Financial Reporting Standards
QRMG
Quality & Risk Management Group
IIRC
International Integrated Reporting Council
RCP
ISA
International Standards on Auditing
ISG
International Standards Group
Risk Compliance Programme or the internal inspections on compliance with the Firm’s risk management and independence procedures
ISO
International Organisation for Standardisation
SEC
Securities and Exchange Commission
KAM
KPMG Audit Manual
VEB
KICS
KPMG Independence Compliance System
Vereniging voor Effectenbezitters or Dutch Association of Shareholders
MDG
Millennium Development Goals
WAO
MVP
Millennium Villages Project
Wet op de Arbeidsongeschikt heidsverzekering or Occupational Disability Insurance Act
NBA
Netherlands Professional Association of Accountants
WEP
Women’s Empowerment Principles
NGO
Non-governmental organisation
Wta
NITSO
National IT Security Office
Wet toezicht accountantsorganisaties or the Dutch Supervision Act on Audit Firms
PCAOB
Public Company Accounting Oversight Board
PHAC
Publicly Held Audit Clients
CEAC CERN
Client and Engagement Acceptance and Continuation Conseil Européen pour la Recherche Nucléaire or European Organisation for Nuclear Research
CO
Compliance Officer
CSM
Corporate Security Manager
CSR
Corporate Social Responsibility
CY
Calendar Year
DEFRA
Department of Environment, Food and Rural Affairs
ELLP
Europe Limited Liability Partnership
EQCR
Engagement Quality Control Review
EQCRP
Engagement Quality Control Review Partner
EQC(R)
Engagement Quality Control (Review)
FTE
Full time equivalent
FY
Financial year
GCR
Global Compliance Review
GDI
Global Development Initiative
GRI
Global Reporting Initiative
180
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Financial Statements 12
Contact
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2015 KPMG N.V., registered with the trade register in the Netherlands under number 34153857, is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the Netherlands. The KPMG name and logo are registered trademarks of KPMG International.
