41061 Unite AR22 HI-RES WEB-READY - Flipbook - Page 174
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THE UNITE GROUP PLC | Annual Report and Financial Statements 2022
INDEPENDENT AUDITOR’S REPORT continued
To the members of Unite Group PLC
5.1. Investment property and investment property under development valuations continued
• Reconciled the external valuation reports to underlying financial records to test for completeness and
accuracy within the Group’s financial statements.
• Compared the property specific assumptions to assess whether there is consistency within the portfolio
as well as consistency with related assumptions used in other estimates.
Disclosures
• Assessed the appropriateness of the Group’s valuation disclosures, including the related sensitivities.
Key
observations
We are satisfied with the approach and methodology adopted in valuing the property portfolio and
consider the investment property and development property valuations to be suitable for inclusion in the
financial statements at 31 December 2022.
5.2. Accounting for Joint ventures
Key audit
matter
description
A significant proportion of the Group’s assets is held within USAF and LSAV, jointly owned entities that are
accounted for under the equity method as joint ventures (2022: £1,226.6m; 2021: £1,044.1m), on the basis
that Unite does not control the entities. At 31 December 2022 Unite had a 28% (2021: 22%) ownership of
USAF and 50% (2021: 50%) ownership of LSAV, and acts as manager of both joint venture vehicles.
Due to the complexity of the contractual arrangements, and the Group’s role as manager of the joint
venture vehicles, the assessment of control involves judgements around a number of significant factors,
particularly with regard to USAF. USAF is a multi-investor fund with an Advisory Committee and the Group’s
ownership stake is subject to change.
In accordance with the requirements of IFRS 10 Consolidated Financial Statements, there is a need to assess
control with regards to the ability to direct relevant activities, to have exposure to variable returns and the
ability to use power to affect returns at each reporting period. Management has assessed (in line with the
prior year) that the Group does not have control over USAF and LSAV, but has joint control. Consequently
management has accounted for the joint ventures under the equity method rather than consolidating them
within the Group’s financial statements.
Refer to page 119 (Audit & Risk Committee Statement) and section 3.4: Investments in joint ventures.
The critical accounting judgement disclosure relating to accounting for joint ventures is set out in Section 1.
How the scope
of our audit
responded to
the key audit
matter
Our audit procedures focused on assessing the activities of the businesses, understanding the contractual
agreements in place and identifying the methodology applied by management in reaching their business
decisions. This was done in order to consider the appropriateness of the classification of these
arrangements as joint ventures in accordance with the requirements of IFRS.
With regards to both USAF and LSAV (the funds), we have:
• Obtained an understanding of the relevant controls over the accounting for joint ventures;
• Assessed how the key activities of the fund impact returns to the Group and challenged management’s
own consideration of these vwfactors in their application of IFRS, including whether there was evidence
of contradictory evidence;
• Assessed the three key factors relating to control in accordance with the judgement required under IFRS
10. This included whether Unite had exercised control over the funds; and
• Reviewed the fund agreements in the year to confirm that there have been no changes to the USAF fund
agreement and to assess the changes to the LSAV fund agreement following the extension of the fund in
the year. For the changes to the LSAV fund agreement we considered whether these changes impacted
the key factors to assess control.
Given the particular focus on USAF, we have:
• Assessed the role of the USAF Advisory Committee including activities which it is responsible for as set
out by the fund agreement;
• Assessed whether the Group has the sole power to direct the activities that are likely to most significantly
affect the returns of USAF in the future, and therefore whether Unite does have control of USAF; and
• Evaluated the impact of changes to the percentage ownership of the fund and whether this impacts
Unite’s power and control.
Key
observations
We are satisfied with management’s conclusion that there have been no changes to the role played by the
Group as investor and asset/development manager, or to the USAF fund agreement and that the increase in
ownership does not impact control.
We are satisfied with management’s conclusion that the Group does not have control of the Joint Ventures.
Therefore, treatment as joint ventures is considered to be appropriate.
