148 ITV plc Annual Report and Accounts 2023 ITV plc Annual Report and Accounts 2023 149 F I FINANCIAL STATEMENTS INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ITV PLC NAN C I AL In this The financial statements have been presented in a style that attempts to make them less complex and REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS S T section more relevant to shareholders and other stakeholders. We have grouped the note disclosures into five A T sections: ‘Basis of Preparation’, ‘Results for the Year’, ‘Operating Assets and Liabilities’, ‘Capital Structure Opinion E In our opinion: M and Financing Costs’ and ‘Other Notes’. Each section sets out the accounting policies applied in producing E • ITV plc’s Group financial statements and Company financial statements (the ‘financial statements’) give a true and fair view of the state N the relevant notes, along with details of any key judgements and estimates used. The purpose of this T format is to provide readers with a clearer understanding of what drives financial performance of the Group. of the Group’s and of the Company’s affairs as at 31 December 2023 and of the Group’s profit and the Group’s cash flows for the year S The aim of the text in boxes is to provide commentary on each section or note, in plain English. then ended • the Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards as applied in accordance with the provisions of the Companies Act 2006 Keeping Notes to the financial statements provide information required by statute, accounting standards or Listing • the Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting it simple Rules to explain a particular feature of the financial statements. The notes are a part of the financial statements and will also provide explanations and additional disclosure to assist readers’ understanding Practice (United Kingdom Accounting Standards, including FRS 101 ″Reduced Disclosure Framework″, and applicable law) and interpretation of the Annual Report and the financial statements. • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 We have audited the financial statements, included within the Annual Report and Accounts 2023 (the ″Annual Report″), which comprise: the Contents Consolidated and Company Statements of Financial Position as at 31 December 2023; the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated and Company Statements of Changes in Equity; and the Independent Auditors’ Report to the members of ITV plc 149 Consolidated Statement of Cash Flows for the year then ended; and the notes to the financial statements, comprising material accounting Primary Statements 156 policy information and other explanatory information. Consolidated Income Statement 156 Consolidated Statement of Comprehensive Income 157 Our opinion is consistent with our reporting to the Audit and Risk Committee. Consolidated Statement of Financial Position 158 Consolidated Statement of Changes in Equity 159 Basis for opinion Consolidated Statement of Cash Flows 161 We conducted our audit in accordance with International Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law. Our responsibilities Section 1: Basis of Preparation 162 under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Section 2: Results for the Year 166 2.1 Profit before tax 166 Independence 2.2 Exceptional items 172 We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial 2.3 Taxation 174 statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our 2.4 Earnings per share 178 other ethical responsibilities in accordance with these requirements. Section 3: Operating Assets and Liabilities 180 To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided. 3.1 Working capital 180 3.2 Property, plant and equipment 185 Other than those disclosed in Note 2.1 ‘Profit Before Tax’, we have provided no non-audit services to the Company or its controlled 3.3 Intangible assets 187 undertakings in the period under audit. 3.4 Assets classified as held for sale 192 3.5 Investments 193 Our audit approach 3.6 Provisions 194 Overview 3.7 Pensions 196 Audit scope Section 4: Capital Structure and Financing Costs 205 • We performed full scope audit procedures over eight components, covering components in the UK, the USA and the Netherlands 4.1 Net debt 205 • Additionally, we performed a financial statement line item audit over six large balances across four components 4.2 Borrowings 207 • Taken together, the entities over which audit work was performed accounted for 79% of the Group’s external revenue and 78% of the 4.3 Managing market risks: derivative financial instruments 209 Group’s absolute profit before tax and operating exceptional items 4.4 Net financing costs 218 Key audit matters 4.5 Fair value hierarchy 219 • Valuation of gross defined benefit pension scheme obligations (Group) 4.6 Lease liabilities 221 • Valuation of complex pension scheme assets (Group) 4.7 Equity 222 • Presentation of exceptional items, including valuation of the Box Clever provision (Group) 4.8 Share-based compensation 223 • Recoverability of investments (Company) Section 5: Other Notes 225 5.1 Related party transactions 225 Materiality 5.2 Contingent assets and liabilities 226 • Overall Group materiality: £23.5 million (2022: £28.2 million) based on 5% of the three-year average Group profit before tax adjusted to 5.3 Subsequent events 226 exclude operating exceptional items 5.4 Subsidiaries exempt from audit 227 • Overall Company materiality: £71.0 million (2022: £ 64.9 million) based on 1% of the Company’s total assets • Performance materiality: £17.5 million (2022: £ 21.1 million) (Group) and £53.3 million (2022: £48.6 million) (Company) ITV plc Company Financial Statements 229 Notes to the ITV plc Company Financial Statements 231 The scope of our audit nancial statements. As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the fi