The following are the critical judgments that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the Accounts.

Rebates payable and receivable

Supplier rebate income is significant to the Group's result, with a substantial proportion of purchases covered by rebate agreements. Supplier rebate income affects the recorded value of cost of sales, trade payables and inventories. Customer rebates affect the recorded value of revenue and trade receivables. The amounts payable and receivable under rebate agreements are often subject to negotiation after the balance sheet date. A number of agreements are non-coterminous with the Group's financial year, requiring judgment over the level of future purchases and sales. At the balance sheet date the Directors make judgments on the amount of rebate that will become both payable by and due to the Group under these agreements based upon prices, volumes and product mix.

Impairment of non-current assets

The Group tests goodwill, intangible assets and property, plant and equipment annually for impairment, or more frequently if there are indications that an impairment may be required.

The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for these calculations are those regarding discount rates, sales growth rates and expected changes to selling prices and direct costs to reflect the operational gearing of the business. The Directors estimate discount rates using pre-tax rates that reflect current market assessments of the time value of money for the Group. For those businesses not based in the UK or Western Europe, the cash flows are further risk adjusted to reflect the risks specific to the individual CGU.

For the majority of CGUs, the Group performs goodwill impairment reviews by forecasting cash flows based upon the following year's budget and a projection of cash flows based upon industry growth expectations (0%-3%) over a further period of four years. Where detailed five year forecasts for a CGU have been prepared and approved by the Board, which can include higher growth rates or varied results reflecting specific economic factors, these are used in preparing cash flow forecasts for impairment review purposes. After this period, the sales growth rates applied to the cash flow forecasts are no more than 1% and operating profit growth no more than 3% in perpetuity. The discount rates applied to all impairment reviews represent pre-tax rates and range between 9% and 11%.

Assumptions regarding sales and operating profit growth are considered to be the key area of judgment in the impairment review process, and appropriate sensitivities have been performed and disclosed in Note 12. Impairments are allocated initially against the value of any goodwill and intangible assets held within a CGU, with any remaining impairment applied to property, plant and equipment on a pro-rata basis. The carrying amount of relevant non-current assets at 31 December 2014 is £596.0m (2013: £602.5m). Impairment reviews performed during the year indicated that the carrying value of all of the remaining CGUs of the Group at 31 December 2014 were considered supportable.

Provisions against RECEIVABLES

Using information available at the balance sheet date, the Directors make judgments based on experience regarding the level of provision required to account for potentially uncollectible receivables.

Post-employment benefits

The Group operates five defined benefit pension schemes. All post-employment benefits associated with these schemes have been accounted for in accordance with IAS 19 "Employee Benefits". As detailed within the Statement of Significant Accounting Polices, in accordance with IAS 19, all actuarial gains and losses have been recognised immediately through the Consolidated Statement of Comprehensive Income.

For all defined benefit pension schemes, pension valuations have been performed using specialist advice obtained from independent qualified actuaries. In performing these valuations, judgments, assumptions and estimates have been made. These assumptions have been disclosed within Note 29c.


Accruals for corporation tax contingencies require the Directors to make judgments and estimates as to the level of corporation tax that will be payable based upon the interpretation of applicable tax legislation on a country-by-country basis and an assessment of the likely outcome of any open tax computations. All such accruals are included within current liabilities.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Therefore, judgments are required to establish whether deferred tax balances should be recognised, in particular in respect of non-trading losses.