KPMG N.V.
Integrated
Report
Including the KPMG Accountants N.V.
Transparency Report
Re Gain
2013 2014
INTEGRATED REPORT 2013/2014
Contents
Report of the Board of Management
01
To our stakeholders
4
When I look back
5
Radically different context
6
Change from within via true blue
7
Stage 1: creating a strong foundation
7
Stakeholder Dialogue 22
Who our stakeholders are
23
Stakeholder expectations
25
Material issues: linking 27
expectations with our strategic
objectives
04
The Public Trusts Us
Dependable consistent high 32
levels of quality
31
Building trust
10
Robust Risk Management
Stages 2 and 3: maintaining the12
momentum of change
We demonstrate social
44
responsibility About this report
13
Innovation and thought leadership 45
Contents guide
13
Board of management
14
02
05
Vision & Strategy
15
Inspire Confidence. Empower Change
16
The vision of true blue
17
Realising our vision: true action
19
Value creation
21
2
40
Our People are
Extraordinary
46
Our partners lead by example 47
Consistent high levels of 48
engagement and performance
Diversity in our workforce
© 2014 KPMG N.V. All rights reserved.
03
50
INTEGRATED REPORT 2013/2014
06
07
08
09
Report from the
Supervisory Board
Top brands want to work with KPMG ‘for life’
52
Governance80
Clients are promoting KPMG, its people and its solutions
53
Operational Excellence
54
Sustainable Profit55
Partner remuneration
58
Follow up on quality performance
60
Sustainability performance
61
Statement on effectiveness of
quality controls and
independence
64
Governance & Risk Management
66
Who we are67
Governance68
Risk management
© 2014 KPMG N.V. All rights reserved.
10
Our Clients See the 51
Difference in Us
74
3
Other activities of the Board
79
81
Financial statements and discharge 81
11
To conclude
82
Appendices
83
Public Interest Entities 84
(‘organisaties van openbaar belang’)
Summary of our system of quality controls
12
87
Financial Statements 100
GRI Disclosure table 147
Glossary
168
INTEGRATED REPORT 2013/2014
01
© 2014 KPMG N.V. All rights reserved.
To our
stakeholders
4
INTEGRATED REPORT 2013/2014
When I look back
When I look back at the 2013/14 financial year, which ended on
30 September 2014, I see a mixed picture. On the one hand, it was one
of the most difficult years in KPMG’s almost 100-year existence.
There were simply too many incidents. On top of
that came the negative AFM report on the quality
of audits by the four big accounting firms which
resulted in additional adverse publicity. We must
conclude and realise that we have lost a good
deal of our public credit.
On the other hand, I see a tremendous
willingness amongst our people at all layers in
the organisation to work towards regaining that
lost trust. Our partners and employees recognise
that it is imperative to do things differently. We
understand that how we are being perceived is
dominated by the mistakes we and our
profession have made in the past.
In their private circles, our people are being
increasingly confronted with questions about the
current upheaval in our sector.
© 2014 KPMG N.V. All rights reserved.
Unfortunately, the good work that our more than
3,000 employees do every day is being pushed
into the background. This is why I would like to
take this opportunity to express my sincere
appreciation for the contributions of all our
people. Their perseverance and their huge efforts
are helping to put KPMG back in front. Thereby I
certainly do not wish to trivialise the other
matters.
Regardless of the positive results achieved in this
financial year, the quality of our work and our
professional conduct will determine the degree
of our success in the future. All of us at KPMG
are fully aware of that and also that a lot of work
still has to be done on that front. In May 2014,
Jurgen van Breukelen resigned as chairman of
the Board.
5
Originally, it was intended that I would, on one
day a month basis, advise KPMG on governance
matters. It was soon evident that more was
needed and the one day advisory role became a
full time position as chairman of the Board. We
appointed an almost entirely new Board of
Management that now for the first time in
KPMG’s history includes people from outside the
sector. This is a crucial development in terms of
the future of our profession since our profession
will change fairly radically, particularly in Audit, in
the year ahead. Society demands it. Our clients
ask for it. And our partners and staff want it. At
KPMG we want to take the lead in introducing
essential reforms in our sector and by doing so to
set the standard.
INTEGRATED REPORT 2013/2014
Radically different context
The context in which we operate has changed
quite dramatically in the past financial year. We
have lost a good deal of the trust society used to
place in us. Serious incidents and a critical report
from the regulator on the quality of our statutory
legal audits have hurt us. Increased regulations
and legislation, mandatory firm rotation and the
ban on consultancy activities for public interest
(“OOB”) audit clients have also had a major
impact on our firm. The message from parliament
is clear: clean up your act or we will do it for you.
That message was also a consequence of the
report published in September by the regulator,
AFM, on the engagement reviews conducted by
it. KPMG scored poorly in this review into the
performance of statutory legal audits in the year
2012 and associated system of quality controls at
the Big 4 audit firms. The AFM concluded that
seven out of ten engagements investigated were
© 2014 KPMG N.V. All rights reserved.
inadequate in the sense that they lacked
sufficient and suitable audit evidence. A score of
seven fails out of ten is simply not worthy of
KPMG. We have followed up on all of the AFM’s
findings and made corrections although we also
concluded that there was no need to change the
previously issued audit reports on the financial
statements in question. We acknowledge and
fully support the findings of the AFM and we
have analyzed them to find any fundamental
causes. In response to this, we have drawn up a
far-reaching and fundamental plan of action which
makes quality improvement our absolute priority.
Section 4 of this report discusses this subject in
greater detail.
At the end of the summer of 2014, the sector
published its joint views on the future of our
profession in the Netherlands. During the public
6
debate that preceded that publication, we offered
our apologies to all our stakeholders. It befits us
to reiterate that apology here. We regret the
impact that our performance has had on the
relationship with our clients, on our employees,
on the sector and on society as a whole. We are
doing all that is necessary to ensure that this
does not happen again. Like the findings in the
AFM report, the conclusions in the report
published by Dutch Institute NBA - ‘In the public
interest’ – in which we played an extremely active
role, were quite clear: a culture change is needed
to restore trust in the sector. The public interest
must once again be the sector’s top priority, and
our position of trust and the quality of our work
must be what drive us.
INTEGRATED REPORT 2013/2014
Change from within
via true blue
Stage 1:
creating a strong foundation
In anticipation of the NBA report and based on our internal analysis, the
Board of Management launched the change programme ‘true blue’ in May
2014 as the accelerator for the changes we as a firm believe are necessary.
The fundamental requirement in this is that, after the various incidents and
the findings of both the AFM and the NBA, we need to return to the basics
of the founders of KPMG, Piet Klynveld, and Jacob Kraayenhof, the K’s in
KPMG. It seems that the ‘K’, for kwaliteit (quality) they stood for in 1917 had
faded into the background. KPMG had become too inward looking and was
paying far too little attention to what was happening in the outside world.
Too little focus on the market and on clients; too much focus on itself.
We thought it best to quickly launch a thorough investigation into the
reasons why quality deficiencies were occuring and then quickly address
these. To this end, we conducted a deep dive analysis and drew up a plan
of action. The analysis revealed six key findings. Three of these were
largely internally driven, while the other three were mostly externally
driven. Based on those findings, we defined seven workflows that would
allow us to quickly implement improvements in the fields of governance,
partner remuneration, cooperation, audit quality, the business model,
public trust, and manner of communication.
It was clear that there was an enormous willingness among all our
employees to be part of theses changes. More than 200 colleagues
volunteered immediately to participate in one of the seven workflows.
And more than 2,300 employees took part in the dialogue sessions
that we organised from the summer through September at all levels
and right across the entire organisation. In very open and lively
discussions, the Board of Management, partners and employees
discussed the future conduct expected of the firm and the changes
this will necessitate. This input combined with the thorough analysis
formed the basis of the change programme and the business plan for
financial year 2014/2015.
The goal of true blue is clear: initiating the changes needed to achieve our
ambition to make KPMG once again the standard for the rest of the sector.
And that with quality and integrity as our absolute priorities. This is based
on a clear purpose: Inspire Confidence. Empower Change. In the recent
past, we have demonstrated that we are extremely serious about making
major changes in various areas. We have shown that not only do we want to
take the lead, but that we also want go beyond what is strictly necessary.
That is in line with our ambition to set the tone for the rest of the sector.
The approach that we as the Board of Management have elected is has
three phases: stabilise, strengthen and grow.
© 2014 KPMG N.V. All rights reserved.
7
INTEGRATED REPORT 2013/2014
Adaptation of the governance
structure
Improvements to cooperation
and alignment
The first observation focused on the governance
and the inward looking nature of our organisation.
There was also a lack of engagement among
employees. The Governance workflow was given
the task of designing and implementing a new
governance structure. In June, the new Board of
Management was appointed and started working
ad interim until the new governance model came
into force on 1 October. In the new structure for
the Board of Management, the posts of Chairman
(CEO), Chief Financial Officer and Chief Human
Resources Officer have all been filled by people
recruited from outside the sector. These members
of the board are available full-time for their
executive tasks. Their appointments and a future
Supervisory Board comprised solely of external
members means we have taken far-reaching steps
to further professionalise the governance structure
from an outside-in approach to better safeguard
the quality of our work.
The second issue we noted was the lack of
shared interest among the partners. Our partners
need to once again assume the intellectual and
emotional ownership of the firm. In addition,
there was too much distance between the
partners and the employees. We have tackled
this issue in our new KPI framework that applies
to every partner and all employees so that
everyone is aware of the interests at stake.
And therein quality rather than profit has become
the main guiding principle. Topics such as setting
the right example, people engagement and open
feedback have been embedded explicitly in this
framework.
© 2014 KPMG N.V. All rights reserved.
We will also continue our dialogue sessions and
partners will actively request feedback from their
staff, include identified areas of improvement in
their year plan and also report back to their staff
thereon progress achieved.
8
Communication is a crucial issue when it
comes to alignment and we have taken major
steps in this area, too. Our communications are
now more personal, more frequent and more
transparent.
And this applies to both external communications
and communication with our own employees.
We now have shorter lines of communication
between the Board of Management and the
organisation, and we now work as a team on the
basis of the open office principle. This ensures
that we are even closer to our employees and can
hear and listen to what is happening within the
organisation on a daily basis. We also visit one of
our regional offices at least once a month to
maintain a dialogue with employees and clients.
At the same time, the Markets & Clients
department is developing various initiatives to
maintain an even more intensive dialogue with
our stakeholders, as we are already doing
through our programme for Supervisory Board
members.
INTEGRATED REPORT 2013/2014
Introduction new partner
remuneration
Start large-scale quality
programme Activ8 Your Audit
Quality
Audit and Advisory
joining forces
We also discussed the fairness of the partner
remuneration system extensively among
ourselves. This was driven too little by the
interests of the firm as a whole and the
evaluation was all too frequently subjective.
The remuneration workflow drew up a new
proposal for partner remuneration that addresses
both of these issues. Commencing fiscal year
2014/2015, the performance of partners and
senior staff will be subject to an objective
evaluation based on eleven clear, objective Key
Performance Indicators (KPIs). These are grouped
under the four focal points for the years ahead:
people, clients, public trust and operational
performance. What this means is that quality is
once again our main priority, performance is
assessed objectively and everyone across the
organisation is working towards the same
shared goals. The KPIs are discussed further
in section 2.
The improvement of the quality of our audits is a
crucial part of the change programme we have
launched. Everyone at KPMG has to realise that
quality and integrity form the basis of our licence
to operate. This is why from now on we will have
only one single standard when it comes to our
quality: zero issues. Nobody, be it client or
regulator, should be able to find fault with the
quality of our work, our actions and behaviours.
This is something we are working very hard on.
We are hiring around 100 extra employees and
developing new quality processes. Over the
next three years, we plan to invest approximately
EUR 8 million annually to make substantial
improvements to our audit quality. The approach
we are taking to achieve that goal is greatly
appreciated, both internally and by external
stakeholders. Section 4 includes an overview of
our quality programme. We will of course keep
you informed on a regular basis of our progress
in the period ahead.
There were many doubts expressed about the
added value of the combination of Audit and
Advisory. We are no longer allowed to combine
advisory tasks with audit activities at OOB audit
clients. High quality audit work increasingly
necessitates the use of the specialist know-how
of our consultancy business. And this is certainly
true in specialist fields such as Risk Analysis,
IT, Pensions and Derivatives. The Board of
Management believes strongly in the One Firm
concept. We can only provide our clients with
higher quality services by having both these
activities in-house. The combination of specialist
know-how at Advisory and the quality of Audit
provides enormous insight in our client’s
business. This means we are in an even better
position to point out risks in a range of areas.
In the coming period, we will continue to do our
utmost to provide our clients with even greater
benefits from this combination through services
that obviously meet the highest possible quality
standards.
© 2014 KPMG N.V. All rights reserved.
9
INTEGRATED REPORT 2013/2014
Building trust
The key priority in this change is that
we join forces to restore the trust
that was lost. First and foremost,
by performing work at the highest
quality. We want no issues and no
incidents. And if there is an issue,
we have to be open and honest
about it. There can be no cover-ups.
This is why our communications are
now more transparent and more
frequent.
An update on our significant events
In terms of transparency, I would like to take this opportunity to update you on a number of
the major events we faced in the past financial year. We are in open and constructive
dialogue with the AFM on all our events and incidents, including their monitoring of our
response to those events and incidents. During the year under review, we filed 11 formal
incident notifications with the AFM (FY 12/13: 9).
Ballast Nedam
In December 2013, we reached a settlement
with the Public Prosecutor’s Office in a case
related to our conduct as auditors of Ballast
Nedam in respect of payments the company
had made to foreign agents in connection with
its projects. Ballast Nedam had itself reached
a settlement with the PPO in respect of
those payments approximately a year earlier.
Our EUR 7 million-settlement had a major
impact on our financial result.
The impact of this incident on our reputation
was even greater, both at an organisational
level and at a personal level for some of our
partners. As an integral part of the settlement,
we designed and implemented a range of
additional compliance procedures which are
intended to help put an end to such incidents
once and for all.
© 2014 KPMG N.V. All rights reserved.
10
This package of measures is extensive and
involves adjustments to our governance and
our quality control system, the installation of
an external committee to safeguard public
interest, a reassessment of our risk profile,
greater emphasis on education and training,
continued standardisation of our audit
methods, and a large-scale culture programme
to once again make ethics, integrity and
quality our highest priorities. By the end of the
2013/2014 financial year, we had implemented
a third of these measures. Matters such as a
change in culture clearly cannot be put into
place overnight. However all of these issues are
now part of the True Blue programme of change
and of the business plan for the coming year, so
that we can together ensure that they are firmly
embedded in the organisation and can closely
monitor the progress made on this front.
INTEGRATED REPORT 2013/2014
Imtech
FAS Veen
KPMG head office Amstelveen
As reported last year, we reported a case of
fraud at Imtech to the Supervisory Board.
We recently reached agreement with Imtech
N.V. and the Dutch Shareholders Association
VEB on the participation in a compensation
fund for shareholders who suffered losses as
a result of the fraud at Imtech. We are taking
part in this not because we failed as auditors
but to prevent potentially lengthy and costly
legal procedures, which would not be in the
best interests of the shareholders, Imtech or
KPMG.
The investment initiative FAS Veen dating
back to 2007, involving 23 people, 13 of whom
still remain in our employ, is a matter that
affects KPMG directly. After a number of small
real estate investments, in 2007 FAS Veen
acquired the old town hall in Blaricum in a
50/50 partnership with a project developer.
The subsequent dispute regarding the contract
was settled in 2012. An external law firm
conducted an investigation into, among other
things, compliance by the participating partners
with the then prevailing applicable laws,
regulations and KPMG policy. No relevant
evidence was found that raised significant
concerns for the Board in this respect. KPMG
policy had already been changed in 2012 to
prohibit investment initiatives like FAS Veen.
Another incident relates to the development
of the KPMG head office in Amstelveen.
The Dutch Tax Authorities have taken the
position that the subsidiary that was
incorporated for this project filed an incorrect
corporate tax return in 2010.
Following this case the Board of Management
decided to investigate the possibility of a
collective pension scheme for equity partners,
which safeguards both the interests of
the equity partners and independence
requirements.
© 2014 KPMG N.V. All rights reserved.
11
The tax office has also reported the matter
to the Public Prosecutor’s Office, which is
currently investigating the matter. KPMG
is cooperating fully with both parties.
The investigation does not relate to any clients
of KPMG. Since the investigation is still
ongoing, we are currently not in a position to
provide any further information on the matter.
INTEGRATED REPORT 2013/2014
Stages 2 and 3: maintaining the momentum of change
Over the past year, it has become clear that we as an organisation had
drifted too far from our original DNA. Quality and integrity are now again
at the heart of everything we do. Thereby we have returned to the core
of our profession: being the trusted advisor of our clients and the trusted
guardian of society as a whole. This should be the highest priority in
everything we do, even if it means a potential loss of turnover.
What I see and hear throughout the organisation is
an enormous willingness to do this together. As an
organisation, we have the momentum for change.
I am proud of the passion and the willingness to
change among our people. We have to maintain
that momentum because there is still a lot of
work to be done. Now that the situation is stable,
we must continue to further strengthen our
foundations before we can get back on the path to
growth. These will be phases 2 and 3 of our
approach. We will work on those foundations in
financial year 2014/2015 on the basis of a solid
business plan that we have drawn up together with
the organisation. All the input from the dialogue
sessions, with well over 2,000 colleagues, the
Global People Survey among KPMG employees
and the true blue programme have been
incorporated in this plan. We are however aware
that no matter how good our plans are, it is the
© 2014 KPMG N.V. All rights reserved.
execution that really matters if we are to once again
exceed the expectations of our clients. This is why
we are making a huge effort to improve the quality
of our work and why we plan to make targeted
investments of approximately EUR 8 million per
year over the next three years. It is also why we
have introduced a KPI framework with a healthy
balance between a focus on employee
engagement, customer satisfaction, quality,
diversity, reputation and financial results. And it is
why we will train our staff even better and on a
more structural basis and why we will maintain a
dialogue with our internal and external
stakeholders. This is how we plan to be the
standard for the rest of the sector.
Since my arrival at KPMG, I have spent a great deal
of time talking to clients, employees and other
stakeholders. They appreciate the approach we
12
have initiated. They also appreciate the fact that
we are not hiding and that we are open about
matters that have gone wrong. They appreciate
most of all the fact that we are taking action and
looking forward. And we will continue to do so in
the year ahead. In the current round of audit
engagement rotations, many clients have opted
to engage KPMG as external auditors and our
advisory division also continues to grow.
This shows that our clients place enormous
trust in us. And KPMG International has expressed
its full backing for our plans. We are making every
possible effort to prove ourselves worthy of that
trust and regain the trust we have lost. In this
area, too, the organisation is clearly demonstrating
that it is not only about talking about making
improvements but pulling up the shirtsleeves and
taking action. For instance, our auditors and
consultants active in serving the financial sector
are now organised in a single department.
The responsibilities entrusted to this team over
the past year included servicing and supporting
92% of the assests value of the stress tests at
the Dutch banks. This team deserves a major
compliment. And we are currently seeing a similar
shift in our other sectors, where we are also now
working on the basis of client centricity and quality
rather than our own organisation.
INTEGRATED REPORT 2013/2014
About this report
Contents guide
We support integrated reporting. Consequently
this report contains not only our financial results
but also the reporting on our quality control
system, our ethical and independence policies
and procedures, and the description of our legal
and organisational governance. This is an
integrated report, in which we account for an
extraordinary and difficult year. Therein we outline
the perspective for a sustainable future for
KPMG. On behalf of my colleagues in the Board
of Management and all KPMG colleagues and
myself, I can assure you that we will do our
utmost to regain the trust of our stakeholders,
and that also means your trust.
In section 2, you can read more about what we
as an organisation believe in and represent.
Section 3 provides an overview of the most
significant topics based on various findings and
the intensive dialogue we maintain with our
stakeholders.
Chapters 4-7 disclose the results for the past
year. We have classified these results into our
four strategic pillars: (i) the public trusts us, (ii) our
clients see the difference in us, (iii) our people are
extraordinary and (iv) operational excellence.
Finally, the addenda provides information on our
OOB audit clients, a glossary of terms and the
Global Reporting Initiative (GRI) table since this
report was drawn up on the basis of the G4
guidelines for sustainable reporting.
On behalf of the Board of Management,
Jan Hommen
© 2014 KPMG N.V. All rights reserved.
13
INTEGRATED REPORT 2013/2014
Board of
Management
Han van Delden (1965, Male, Dutch national)
Han van Delden is the Head of Markets & Clients in the Board of KPMG NL.
Mr. van Delden serves a broad client base, particularly internationally oriented
clients, both listed and non-listed entities. Commencing 2013 Mr. 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,
Han was seconded to KPMG US in New York to serve the US based units of
Dutch and other European clients.
Bert Ferwerda (1960, Male, Dutch national)
Jan Hommen is Senior Partner of KPMG NL and Chairman of the Board.
Mr. Hommen’s experience spans over 40 years in the top segment of the US
and Dutch corporate environment. He is the former CEO of ING Group, CFO en
vice-chairman of Royal Philips and CFO of US-based Alcoa. Mr. Hommen was
elevated to the status of Commander in the Order of Orange-Nassau in 2013.
Bert Ferwerda is Chief Human Resource Officer in the Board commencing
1 November 2014. Mr. 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. Mr. Ferwerda holds a master’s
degree in Business Management.
Barbara Lamberts (1967, Female, Dutch national)
Rob Fijneman (1964, Male, Dutch national)
Barbara Lamberts is the Chief Financial Officer in the Board effective 1 November
2014. Ms. 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 Fijneman is Head of Advisory in the Board of KPMG NL. 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 IT auditing. Commencing 2004 Mr.
Fijneman is professor of IT auditing at Tilburg University and Tias Business School.
Jan Hommen (1943, Male, Dutch national)
Andrew Cranston (1965, Male, British national)
Marc Hogeboom (1967, Male, Dutch national)
Andrew Cranston is Chief Operating Officer in the Board of KPMG NL and
was COO at KPMG International (until 1 August 2014) . Prior to his Global COO
responsibilities, Mr. Cranston was Managing Partner of KPMG in Russia and CIS
(Commonwealth of Independent States). In that capacity, he was also a member
of the KPMG ELLP, EMA and Global Boards. He also served as Head of Audit in
Russia and CIS for 8 years. Before moving to Moscow, Mr. Craston worked for
KPMG in the UK and Hungary and for investment bank Merrill Lynch in Germany.
© 2014 KPMG N.V. All rights reserved.
Mr. Hogeboom is the Head of Audit in the Board. Marc Hogeboom joined KPMG in
1990 and became partner in 2001. Mr. Hogeboom has served main financial services
clients both in an Audit and in an Advisory capacity. Commencing 2011 he was the
chair of Financial Services Audit. Mr. Hogeboom’s commitment to community
service made him lecturer at Vrije Universiteit for financial accounting from 2004
to 2008 and chairman of the Supervisory Board of Omega - MCG child day care.
14
INTEGRATED REPORT 2013/2014
02
Vision
& Strategy
© 2014 KPMG N.V. All rights reserved.
15
INTEGRATED REPORT 2013/2014
S
E
PIR
CONFIDE
NC
E
IN
Inspire Confidence. Empower Change
+
E
M
PO
E
+
WER CH
© 2014 KPMG N.V. All rights reserved.
G
N
A
We 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.
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”.
16
We believe there is power in deliberate action
and that everything we do can positively impact
those who come after us. That’s 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.
We believe in individual responsibility, personal
growth and dedicated teamwork. We serve the
general public and clients with outstanding
professionals that are alert, sharp observers
with a hands-on attitude. We thrive in team
collaboration and spirit building on mutual respect
and fun. We believe in hard work and stretching
ourselves to become more every day.
INTEGRATED REPORT 2013/2014
The vision of true blue
As a result of the issues we faced in the year under review, we face
the challenge to regain trust from our stakeholders. We are committed
to again conforming to our founding father’s principles of consistent
delivery of high quality service by highly qualified professionals, making
quality and integrity our absolute priorities.
Our performance targets in this area are:
• Strong external perception of our reputation
• Dependable consistent high levels of quality
• Robust Risk Management
• We demonstrate social responsibility
Our People are Extraordinary
In May 2014 the Board initiated its true blue
turnaround programme with 1 single objective:
to again become the industry standard.
We live up to our legacy and not only do the talk,
but prove our relevance and contribution to
society.
True blue is being realised in three phases:
• Create stability in and around the firm,
•Strengthen our organisation and its output, and
• Become the standard in the sector and grow
our business.
True blue is based on four pillars, underpinned
by a culture geared towards quality (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
© 2014 KPMG N.V. All rights reserved.
demonstrating the skills and behaviour our
clients and stakeholders expect.
The Public Trusts Us
In our industry, relevance is closely tied to high
quality services. And this is also the area in 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 critical success factors in this area
therefore are:
• 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
17
The necessity of having the public’s trust is
closely followed by having extraordinary people.
KPMG has always been at the forefront of
employee engagement and development with
leading HR practices. We do have to strike a
proper balance between nature and nurture as
we do not believe in lifetime employment.
What we do believe in, is helping employees
to maximise their capabilities in reaching their
next level and develop themselves to their
full capacity.
People are what makes us KPMG. We need to
reconnect with our cultural heritage of high
quality service delivered by highly qualified
professionals.
INTEGRATED REPORT 2013/2014
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
Our performance targets in this area are:
• Our partners lead by example
• Consistent high levels of engagement and
performance
• Diversity in our workforce
Our performance targets in this area are:
Our Clients see the
Difference in Us
We want to bring our collective Audit, Tax and
Advisory knowledge to the market and thus
contribute in finding solutions to complex
problems our clients face. We believe that the
combination of Audit and Advisory services
benefits clients and stakeholders more than Audit
only services. Specialist knowledge, such as IT
Advisory, Corporate Finance (valuation) or
Forensic & Integrity significantly add to the
quality of the audit. Our clients also expect us to
deliver Advisory services to assist them in
resolving their issues and challenges. But we are
strict in our compliance with independence
standards: we do not offer all services to all
clients.
Our critical success factors in this area are:
• We deliver quality that is unparalleled
• We build enduring relationships
• We bring leading insight and innovative
solutions
© 2014 KPMG N.V. All rights reserved.
18
• Top companies want to work with
KPMG for ‘life’
• Leading multidisciplinary solutions that
address our clients’ issues
• Clients are positive about KPMG, its people
and its solutions
Operational Excellence
We need to remain vigilant in the efficiency and
effectiveness of our processes and procedures.
Focus on keeping our own house in order is a
responsibility, as this enables sustainable
growth, minimises our ecological footprint and
maximises our ability for value creation to
stakeholders.
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
INTEGRATED REPORT 2013/2014
Realising our vision: values and true action
Our purpose is part of our people change agenda.
The Board took the lead in openly sharing their
personal goals, ambitions and motivations and
thereby inspiring our people. 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.
We
lead by example at all levels in a way
that exemplifies what we expect of each other and
our clients.
We
corporate citizens by broadening our skills,
work together to bring out the best in
experience our communities and perspectives
through work in our communities.
each other and create strong and successful working
Integrity is a critical characteristic that stakeholders
relationships.
We
respect the individual for
who they are and for their knowledge, skills and
experience as individuals and team members.
seek the facts and provide
insight by challenging assumptions and pursuing
We
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.
We debated these values as part of
true blue
facts to we strengthen our reputation provide insight
and took specific notion of improvements needed in
as trusted and objective business advisers.
living our values. This is followed up as part of true
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.
© 2014 KPMG N.V. All rights reserved.
committed to our
communities to act as responsible
We are
19
action.
INTEGRATED REPORT 2013/2014
Why are we here?
This is answered by our Purpose, which is to Inspire
Confidence and Empower Change.
Purpose
Vision
People
1
2
3
Public
Trust
Clients
4
5
6
Operational
Performance
7
8
9
KPIs
10
Why
What
11
What do we aspire to be?
This is answered by our Vision. Globally, we have set
our Vision to be the Clear Choice. In Netherlands we
are very explicit about what this means; to be the
Audit and Advisory Firm that every other Audit and
Advisory firm models itself on. In these challenging
times, it is our role to set the New Standard. Our
Vision has been translated into 4 keys areas: People,
Clients, Public Trust, and Operational Performance.
Concrete and measurable KPI’s have been set up for
each of these areas.
How do we achieve our Vision?
BP
Businessplan
BP
Values
BP
BP
BP
1 team
This is answered by our Business Plan and our
Values. Our Business plan sets out the actions that
are required to realize our Vision and embeds our
Values - which are our compass to the behaviours
that define our culture.
The True Blue program
The True Blue program has been an important
accelerator to drive change. The key actions arising
from the 7 work streams are now embedded in
the Business Plan. Over time, the activities of the
work streams will be transitioned to the standing
organization.
Figure 1 / Connecting purpose, vision and action
© 2014 KPMG N.V. All rights reserved.
How
20
INTEGRATED REPORT 2013/2014
Value creation
The concept of Integrated Reporting is
particularly applicable to a professional service
firm such as KPMG, because the value we
create is not necessary fully captured by our
financial performance or reported in our financial
statements. As such, our performance should
be judged against a broader spectrum as well.
The IIRC framework for Integrated Reporting
identifies 6 capitals that organisations use in
their value creation: human, intellectual,
manufactured, social, financial and natural capital.
We refer to the IIRC Framework for further details
about these capitals and the framework itself.
The most significant capitals we use in creating
value are human capital and intellectual capital as
well as our social capital. We are a people
business and without our people our service
delivery would be non-existent. They are the
vehicle for delivering quality and delivering our
vision of being the standard in our sector,
together with our collective knowledge, which is
captured in our intellectual capital. Here we place
© 2014 KPMG N.V. All rights reserved.
our methodology and our unique way of working.
Social capital pertains to the shared values we
have and the contribution to our communities.
The other capitals are supportive to the main
capitals, being manufactured capital, natural
capital and financial capital. We identify our
office buildings, IT systems and car fleet we
use as manufactured capital, whereas natural
capital consists of the natural resources we
consume (i.e. our ecological footprint). Financial
or monetary capital is necessary to purchase,
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.
21
INTEGRATED REPORT 2013/2014
03
© 2014 KPMG N.V. All rights reserved.
Stakeholder
Dialogue
22
INTEGRATED REPORT 2013/2014
Who our stakeholders are
KPMG NL actively seeks dialogue
with its stakeholders about its
contributions and performance. Table
1 lists the key stakeholder groups we
distinguish and our ways of engaging
with these stakeholders. These
groups were identified on the basis
of the parties that we impact with our
service delivery.
Stakeholder group
Our way of engaging
Clients, including those
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). The Board has expressed its commitment to personally visit top
tier clients.
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 addition, all
of our PIE/OOB audit clients have an independence clearance process prior to us
evaluating and accepting the engagement.
In more general terms we communicate with supervisory board members through
our Audit Committee Institute.
We engage with our professionals on a daily (continuous) basis through internal
communication channels, employee events, training on the job and through our
performance management process and people survey. Board members regularly
meet employees in local offices to discuss all aspects of true blue (this is also part
of true action).
Employees and partners
of KPMG
As we are a private partnership, shareholder information is also part of our
engagement with our partners.
Provided we can maintain our independence and ethical business conduct, we
engage 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.
Citizens, government
and politicians
As leading firm in the area of sustainability we have regular contact with NGOs,
experts in the industry, opinion leaders and media to gain and provide insights
and improve our own initiatives to help organisations in their journey in
sustainable growth.
Table 1 / Stakeholder groups and engagement
© 2014 KPMG N.V. All rights reserved.
23
INTEGRATED REPORT 2013/2014
Stakeholder group
Our way of engaging
Regulators
We are under supervision of the AFM and PCAOB regarding statutory audit
engagements and from governmental inspection agencies for specific types of
audit and assurance engagements. In addition, KPMG is in contact with the KPMG
College of Regulators.
We have periodic dialogue with the domestic regulator AFM on quality related
issues and our response. We view upfront communication with the AFM as a way
to improving audit quality in general.
Communications with the actual users of financial statements is the most
challenging part, due to these stakeholders being mostly anonymous and usually
not formally organised with the exception of parties such as VEB and Eumedion.
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 auditor’s reports. For owner managed businesses our
communication is of course directly with owners.
We provide training to journalists to assist them in understanding and interpreting
financial statements.
We have a Director of Corporate Communications to further establish dialogue
with media and other interested parties. 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.
We participate in a number of working groups of our professional bodies to
contribute towards building and maintaining high quality services. We participate
in various universities as we deploy professors (full, associate and assistant) and
lecturers to teach future generations of professionals and also to conduct more
fundamental research to advance our understanding in the auditing, tax and
advisory domain.
Professional audit bodies
and academia
Table 1 / Stakeholder groups and engagement
© 2014 KPMG N.V. All rights reserved.
24
INTEGRATED REPORT 2013/2014
Stakeholder expectations
The stakeholder expectation map represents
the summary of the topics stakeholders
brought forward during interactions with the
Board, our (lead) engagement partners and
other professionals. The map is was first
drafted in 2012 and validated in 2013 and 2014.
It is an ‘as is-where is’ representation and
therefore contains justified and unjustified
expectations and thereby alludes to the so-called
expectation gap that has been around for
decades and that has resurfaced in the aftermath
of the financial crisis and economic recession.
Both Audit and Advisory expectations were
expressed, but stakeholders did concentrate
their attention towards the Audit function of
our Firm. Advisory has attuned its portfolio
with the (upcoming) expectations of clients and
has geared itself towards solutions for
Transformations, Cyber Security, Deal Services,
Regulatory Compliance and Data & Analytics.
We continue to further enhance our stakeholder
dialogue for financial and non-financial reporting
so that we provide relevant information that adds
value to our stakeholders.
Stakeholder expectation
How it affects KPMG and our response
Conduct high quality
independent audits
This is by definition vital to our quality brand. Without high quality audits we would
lose a significant part of our value creation. And during the fiscal year under review
we have been challenged on this topic.
Independence is a given and the relevant standards were expanded to include a
ban on advisory services for PIE/OOB audit clients.
We invest in the 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, energy and resources) to deliver
high quality audits.
Shareholders want us to inform them more on our audit and key audit matters.
KPMG is at the forefront of long-form reporting. We also increase our efforts to
stand up and be recognised in general meetings of shareholders.
Tell us more
We are also challenged by stakeholders to be more expansive about the context
and circumstances regarding KPMG itself. There are confidentiality constraints
that limits the extent to which we can communicate even if we want to, but we
do aim to be more transparent where we can. And this integrated report is an
example of that transparency.
Clients want our help in improving and growing their business(es) to the next
level, which is in part why we are here. We do so in accordance with rules and
regulations and as such do not provide all services to all clients.
Help grow and improve
We invest in new services that help clients improve in achieving their goals and
additional investments are made to enhance our current portfolio as well. It is all
about relevance.
Table 2 / provides the details of these grouped expectations and how it affects KPMG.
It also includes our response to those expectations.
© 2014 KPMG N.V. All rights reserved.
25
INTEGRATED REPORT 2013/2014
The expectations of stakeholders can be
summarised into the following categories:
• Conduct high quality independent audits;
• Tell us more;
• Help grow and improve;
• Employer of choice;
• Data security and privacy;
• Responsible and sustainable.
Audit File Reviews
FY 12/13
92%
satisfactory
How it affects KPMG and our response
Employer of choice
As we stated earlier, our people and partners are our main vehicle for our service
delivery. The way they evaluate and engage with the organisation is paramount
to our success.
We, therefore, periodically benchmark ourselves against our main competitors
and similar industries as well as other KPMG member firms to assess if we are
on par in terms of HR practices and employment benefits.
Obviously, we do not take pride in making negative headlines – deserved or not
– but we are very proud of the way our professionals adjust and deal with those
realities. Our true blue programme proves that.
Data security and privacy
With the increasing use of IT and the digitalisation of everything, we too are
affected by expectations for data security and privacy. Our NITSO and CSM
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 meets the requirements of
ISO 27001, for which we are certified.
Responsible and
sustainable
As one of the thought leaders in the area of sustainability we are very aware of
the impact of CSR on our business success, irrespective of the materiality of the
actual impact. We face public scrutiny for our perceived conduct regarding the
current head office in Amstelveen, the issues associated with audits performed
by KPMG and private investments by individual KPMG partners.
85%
AFM File Reviews
FY 12/13
30%
Stakeholder expectation
satisfactory
We have taken a number of initiatives to further reduce our ecological footprint,
particularly for lease cars and buildings, which are our main areas that impact the
environment. Our environmental management system is ISO 14001 certified.
Advisory File Reviews
FY 12/13 94%
93%
satisfactory
© 2014 KPMG N.V. All rights reserved.
Table 2 / provides the details of these grouped expectations and how it affects KPMG.
It also includes our response to those expectations.
26
INTEGRATED REPORT 2013/2014
Material reporting topics: linking stakeholder
expectations with our strategic objectives
Materiality assessment
According to the GRI G4 reporting guidelines
materiality is the scale of importance which
warrants that a topic should be reported on.
Material topics, however, are not equally
important and therefore the level of disclosure
may vary. The topics for consideration are
identified using both internal and external factors.
We have used the expectations expressed by our
stakeholders (external) and our strategy (internal)
to arrive at 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 aspects identified in that
framework.Figure 2 depicts the conclusions
drawn from this process.
Category
Explanation
Integrate
Issues within this category are considered to be of such importance that inclusion in
either the core strategy or Board level attention is necessary. These material issues are
reported in the main sections of the Report.
Manage
Issues for this category are important to the value creation of KPMG and should
therefore be closely managed. 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 may be of influence on business performance, but are not
considered to require 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 considered to be directly not applicable to our business or
that are deemed immaterial. These issues are not reported on.
Table 3 / Impact assessment response
Depending on the impact on stakeholder
expectations and business performance, the
particular topic is identified as a reportable
material issue. The Board classified the topics
into four categories:
© 2014 KPMG N.V. All rights reserved.
27
INTEGRATED REPORT 2013/2014
PUB L I C TRUST
ACCEPT
M O N I TO R
L
L
MA N AG E
N
IO
M
E
P
X
E
R
O
R
A
N
C
G
I N T E R AT E
MA N AG E
23
S
S
N
TA
T
U
IO
16
FO
R
P
X
E
G
I N T E R AT E
R
R
E
E
18
M
A
H
E
P
N
E
S
K
S
E
C
17
E
LD
IN
O
12
B
OP
11
ACCEPT
15
9
14
M O N I TO R
21
10
M A N AG E
H
13
G
I N T E R AT E
1
NT DIFFERENC
S
E
M O N I TO R
E
FO
CLIE
R
LD
E
H
P
2
22
24
26
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S
3
K
S
5
4
TA
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ACCEPT
TA
T
IN
27
G
I N T E R6AT E
7
25
C
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T I O N A L E XC E L L E
A
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N
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CE
B
29
28
S
8
E
TA
C
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19
MA N AG E
L
M O N I TO R
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
Figure 2 / Our materiality assessment
ACCEPT
© 2014 KPMG N.V. All rights reserved.
R AO R
Client Difference
9. Personal independence
10. Reputational Issues
11. Compliance & Claims
12. Data Security
13. Client Satisfaction
14. CPE
Extraordinary People
15. Talent Development
16.Diversity
17.Employment
18.Equality
18.Discrimination
19. Occupational Health & Safety
L
20
EXT
Public Trust
1. High Quality
2. Independence
3. Help Grow & Improve
4. Open Communication
5. Reputational Issues
6. Thought Leadership
7. Innovation
8. Regulatory Change
P
D I N A RY P E O
LE
28
INTEGRATED REPORT 2013/2014
Topics included in this Report
Report boundary
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.
This report pertains to KPMG N.V. and its
subsidiaries. KPMG Meijburg & Co is a separate
member firm of KPMG in the Netherlands and
is therefore not included in this report, except
where specifically stated. In addition, the
identified material issues relate to both the
Audit and Advisory functions of KPMG NL.
Material Topic
Strategic alignment
Chapter reference
Client satisfaction
Clients see the Difference in Us
6
Compliance & Claims
The Public Trusts Us
4
Data Security
Clients see the Difference in Us
10
Diversity
Our People Are Extraordinary
5
Employment
Our People Are Extraordinary
5
Firm independence
The Public Trusts Us
4
High Quality
The Public Trusts Us
4
Innovation, thought leadership and
helping grow and improve
The Public Trusts Us
4
Open Communication
The Public Trusts Us
Whole report
Personal independence
Clients see the Difference in Us
4
Remuneration
Operational Excellence
7
Reputational issues
The Public Trusts Us
Introduction
Sustainable profit
Operational Excellence
7
Talent development
Our People Are Extraordinary
5
© 2014 KPMG N.V. All rights reserved.
29
On the subject of supply chain different views
exist on our role within the supply chain.
Yes, we are part of a larger eco-system regarding
financial information and process improvement,
but 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 should
maintain independence and ensure that our
service delivery is not significantly dependent
on particular suppliers or subcontractors,
notwithstanding the fact that we directly impact
clients and other stakeholders due to the very
nature of our services, which is to provide
confidence and support change for enhanced
decision making. As such, this report only
details issues and results that pertain to our
Firm and its group companies.
INTEGRATED REPORT 2013/2014
We are part of other entity’s supply chains
(secondary supply chain) in our capacity as endusers for products and services, such as IT, lease
cars and energy consumption. We exercise our
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 is a member of UN
Global Compact and have committed ourselves
to its 10 principles. We also implemented a
Supplier Code of Conduct.
Comparability of information
Only in a limited number of cases have we
restated indicators to ensure comparability with
the indicators for FY 13/14. We consider the
adjustments to be immaterial in nature as they
are mostly the result of either enhanced
information or differences in presentation.
© 2014 KPMG N.V. All rights reserved.
External assurance
We believe external assurance to both financial
and non-financial information adds value to us
and our stakeholders by attesting the disclosures
as well as the underlying processes. Last year we
indicated that we would seek external assurance
on our major KPIs. Given the efforts initiated as a
response to the circumstances and events of the
year under review we have had to postpone
that decision.
Knowing that assurance on non-financial
information is a journey, we still wanted to make
a start. We have therefore decided to ask our
auditors Grant Thornton to provide limited
assurance key indicators in each of our strategic
pillars, namely: Quality Performance Reviews;
Client Satisfaction and Net Promoter Score
Employee Engagement and CO2 emissions.
Our ambition is to extend the external assurance
next year to cover all key indicators that we use
for bringing our firm to the top.
30
INTEGRATED REPORT 2013/2014
04
The Public
Trusts Us
© 2014 KPMG N.V. All rights reserved.
31
INTEGRATED REPORT 2013/2014
Dependable consistent high levels of quality
Audit
Internal inspection programme
During the fiscal year 57 Audit partners
and 54 Advisory partners/directors
were subject to internal reviews
equalling 40% (40% in FY 12/13)
and 33% (47% in FY 12/13) of the
respective total population of partners
eligible for selection.
Advisory
2013/2014
2012/2013
2013/2014
2012/2013
Number of engagements reviewed
62
72
55
76
Number of partners reviewed
57
60
54
74
Table 4 / Number of partners reviewed
Audit
The details in figure 3 display an increase in the
category ‘Satisfactory’ against a decrease in the
category ‘Performance Improvement Necessary’
(PIN). The number of engagements graded
‘unsatisfactory’ also decreased compared to
previous fiscal year. The scores of our internal
reviews have been appraised by a non-local lead
reviewer from KPMG International, consistent
with prior years. Our international rating is equal
to the previous fiscal year.
Table 5 reports the findings per engagement file.
Although these have decreased from 117 in FY
12/13 to 97 in FY 13/14 and the average number of
findings per file equalled at 1.6 per file, we are not
satisfied with the overall findings (we refer to
our root cause analysis regarding these findings).
These efforts include investments in further
standardisation of basic audit procedures and
increased training hours for client facing audit
professionals.
ICFs reported
2013/2014
2012/20131
ICFs for Satisfactory engagements
82 (1.4)
70 (1.1)
ICFs for Performance Improvement engagements
12 (3.0)
29 (3.6)
3 (3.0)
18 (6.0)
97 (1.6)
117 (1.6)
ICFs for Unsatisfactory engagements
Total ICFs for all reviewed engagements
Table 5 / Number of ICFs in total and average per Audit engagement
1
© 2014 KPMG N.V. All rights reserved.
The amounts for FY12/13 have been readjusted for information purposes as a pending file review from FY12/13 was finalised, resulting in a
slight increase in the number of ICFs from 109 to 117 in total, while the average per engagement file decreased from 1.7 to 1.6.
32
INTEGRATED REPORT 2013/2014
Following mitigating actions by audit teams
in response to the individual ICFs none of the
PIN or U rated engagement scores warranted
adjustments to the previously issued audit
opinion. The main drivers for less than
satisfactory grading were as follows:
• Lack of audit evidence in relation to the audit
of a subsidiary in combination with limited
partner involvement.
• Insufficient disclosure notes to the financial
statements regarding breaches of loan
covenants.
Less than satisfactory ratings
Engagements rated as Less Than Satisfactory
(LTS) included the following specific issues:
AUDIT QPR
• Incorrect opinion issued for so-called “403”
financial statements. The engagement team
used our semi-automated toolkit, but failed
to appraise the selected opinion against the
engagement specific context. Not to the
extent that stakeholder decision making has
been impaired in any material respect.
• No documentation found with respect to the
impact of ineffective IT General Controls on
automated components of manual controls
pertaining to completeness of reported
revenues.
2013/2014
2012/2013
4%
6% 2%
11%
4%
11%
11%
11%
4%
4%
85%
85%
85%
Satisfactory
Satisfactory
Performance
Improvement
Necessary
Performance
Improvement
Necessary
Unsatisfactory
Unsatisfactory
85%
Satisfactory
Performance Improvement Necessary
92%
Unsatisfactory
Satisfactory
Satisfactory
Performance
Improvement Necessary
Performance
Improvement Necessary
Unsatisfactory
Unsatisfactory
Figure 3 / Audit QPR results FY 13/14 and FY 12/13
© 2014 KPMG N.V. All rights reserved.
33
Advisory
Advisory changed its scoring grades during
FY13/14 (figure 4) and now awards engagements
specific scores for setup and execution, without
an overall grading. Furthermore, in 2014 yellow
scores, although exceptions noted, are
considered ‘satisfactory’, whereas in previous
years these yellow scores were regarded less
than satisfactory. Red scores, with major
exceptions noted that present a risk to KPMG,
like previous years are considered unsatisfactory.
Due to this change, results from this year are
not like for like comparable to last year’s QPR.
Drivers for the less than satisfactory grades
for the set up phase of Advisory engagements
mostly relate to untimely completion of
engagement acceptance procedures or
non-compliance with certain aspects of those
acceptance procedures (all non-independence
related). In addition, changes in the engagement
scope (e.g. a seconded staff engagement
evolves into an advisory engagement or vice
versa) are not properly reflected in the risk
management documentation.
INTEGRATED REPORT 2013/2014
External inspections
(Audit)
The findings for the execution phase of the
engagement mostly relate to limited proof of
sufficient and timely partner involvement or
non-compliance with Advisory documentation
standards / requirements.
ADVISORY QPR
2013/2014
2012/2013
5% 1%
0% 7%
4%
11%
11%
4%
4%
11%
11%
4%
85%
85%
Satisfactory
Performance Improvement Necessary
93%
Unsatisfactory
85%
Satisfactory
Performance Improvement Necessary
94%
Unsatisfactory
85%
Satisfactory
Satisfactory
Satisfactory
Satisfactory
Performance
Performance
Improvement
Necessary
Improvement Necessary
Performance
Performance
ImprovementNecessary
Necessary
Improvement
Unsatisfactory
Unsatisfactory
Unsatisfactory
Unsatisfactory
Figure 4 / Advisory QPR results FY 13/14 and FY 12/13
© 2014 KPMG N.V. All rights reserved.
AFM
In September 2014 the AFM presented its
findings of selected engagement file inspections
at Big 4 audit firms. Their inspection pertained to
the audits for fiscal year 2012. For KPMG 7 out
of 10 engagements were rated unsatisfactory
by the AFM. We have followed up on all findings
at individual engagement level. We have made
any necessary corrections in accordance with
auditing standards. After receiving sufficient and
relevant audit information, we have concluded
that the previously issued audit opinions do not
require any amendment.
PCAOB
The PCAOB performed an inspection on
PCAOB audit engagements during FY12/13.
During the year under review no additional
inspections took place. The findings on our
quality control system, besides those in
connection with engagement specific findings,
pertained to improvement opportunities in the
way we perform and document journal entry
testing as well as the way in which we document
independence checks at engagement level when
engaging technical specialists, such as tax or
valuation experts. In conformity with PCAOB
policies and procedures we finalised our action
plans prior to the deadline (i.e. August 2014).
34
NBA
In the non-statutory audit domain we were
reviewed by the NBA in September 2013. We
received their final report in December 2013.
The review team reviewed 40 engagements
(50% voluntary statutory audits, 50% review
engagements and other assurance).
The team concluded that the vast majority
of engagements (95%) were performed in
accordance with auditing standards. The NBA
team also assessed our quality control system,
particularly around continuous education, and
found the system to be satisfactory with no
observations for further improvement.
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 ISO audit teams provided us with further
improvement observations that have been
translated into actions plans for implementation.
Engagement reviews by the Dutch Ministry of
Education resulted in satisfactory findings as well.
INTEGRATED REPORT 2013/2014
Root Cause Analysis (RCA)
Following the internal and external inspection results we immediately took
action with an in-depth root cause analysis. RCA was performed on three
levels: engagement level, unit level and function-wide level.
Engagement level
At the engagement level we find evidence
that suggests that some of the engagement
findings appear to be pervasive in nature,
including:
• Large(r) partner portfolios lead to increased
work pressure and thereby less adequate
supervision and review.
• Inadequate supervision and review of audit
documentation obtained due to either time
pressure or prioritised as low by engagement
teams.
• Knowledge of KAM in relation to specific
technical matters (particularly audit of
investments/participations; other areas
were engagement specific).
©
© 2014
2014 KPMG
KPMG N.V.
N.V. All
All rights
rights reserved.
reserved.
• Accurate compliance with ISA 600
requirements applicable to the audit of
consolidated financial statements, such as
documentation of work done on component
audits. Some documentation issues
(erroneously not including all component
reports in the file, not referring to own work
on components in other files, not documenting
changed scoping) seem to evolve from
time pressure.
• Less than expected levels of professional
scepticism.
Unit level
On the basis of the engagement inspections
we identified a number of specific areas to
which most of the ICFs and AFM findings
relate, being:
35
• Financial Statement quality
• Basic Audit Skills
• Senior staff involvement
• (Responding to) Fraud risk
• Training on the Job
• Professional Scepticism
• Rationalising issues
(to be immaterial or non-significant)
We asked each Audit unit (National Practice,
Financial Services and Corporate Clients) to host
a number of workshops in which these areas are
discussed to identify the reason we are unable
to excel (i.e. what drives the inspection findings)
in these areas. We collected and summarised
their results and in aggregate the following root
causes where identified.
Different means to the same end
Although we have one audit manual and one
toolkit we have noted a variety of working
papers and audit strategy decisions. This is
not necessarily a bad thing, as clients and
engagements require fit for purpose audits, but
it does not contribute to a consistent application
of our methodology per se. Standardisation
of routine audit procedures can promote that
consistency as well as quality of documentation,
thereby enabling professionals to better
exercise their professional judgment.
INTEGRATED REPORT 2013/2014
Project Management
From our root cause analysis we derive that we
do not particularly see an audit as a standalone
project, requiring specific project or task
management. Quality project management will
drive a ‘first time right’ approach and ensures that
we tackle issues and challenges more upstream
in the audit process.
Portfolio Management
As with the analysis at engagement level, we
see that in some instances large(r) partner
portfolios lead to increased work pressure and
thereby less adequate supervision and review.
We have implemented Partner Portfolio
Reviews to assess and appraise the size and
manageability of individual portfolios. Where
necessary we perform so-called lifts & shifts in
that we transfer clients and engagements to
other partners, including relocating partners to
other offices if warranted.
Team collaboration
Today’s society has become more and more
automated and auditing is no different in that
respect. It enables us to be more efficient,
increase audit quality through application controls
and decrease traveling time for meetings and file
reviews. The downside of that automation is,
© 2014 KPMG N.V. All rights reserved.
however, that we also tend to favour remote
access and for example postpone file reviews
to other time slots of the day since the ability to
access files 24/7 is literally at our fingertips.
The result is that we spend less time working
as a team on the same location and subsequently
spend less time discussing and debating our
planned audit approach, the observations made
and assessment thereof and our audit
conclusions as part of training on the job, a key
component in the education of any auditor.
Tone at the top and discipline
This root cause is in essence the proverbial
‘walking the talk’ and not just ‘talking the walk’.
We need to increase our discipline and address
substandard performance rather than using
softeners and downplaying non-compliance.
Functional level
Overall, we have concluded that neither our
methodology nor tooling are at the primary root
of the issues. They obviously play a role and
improvement can be made, but they are not
the defining factors. The application of the
methodology and actual usage is where our
challenge begins. As a profession we not only
have to appraise financial statements against
laws and regulations (‘is it compliant?’), but also
36
appraise against societal implications and
conventions (‘does it make sense?’). It comes
down to our mind set: the identity (what an
auditor should be) we hold for ourselves
determines the way we think (mind set) and act
(application) and consequently our audit quality
performance. And, our focus is determined in
part by the way we measure and manage.
Ultimately you trigger behaviour by measuring
what you deem to be important. And our
performance indicators were not necessarily
geared towards quality. We need to activate our
audit quality.
INTEGRATED REPORT 2013/2014
Activ8 Your Audit Quality
We have dubbed our quality improvement
efforts Activ8 Your Audit Quality. This underpins
the essence of the programme: we need to
align organisational and individual levels and
both play an intricate role in the success of the
programme.
Activ8 starts with our people. Continuous
attention to technical training and professional
development is a necessity for our (future) audit
professionals. In addition to having extraordinary
people, we need to be outstanding at performing
the audit basics. We therefore continue our
efforts for standardisation and off shoring and
on shoring of routine audit procedures and
specialised data & analytics processing.
Finally, we need to increase our stage presence.
We wish to increase our presence during annual
general meetings of shareholders. Auditors must
step up to the plate and be recognised for their
work and their findings. From 2015 onwards, we
plan to invest approximately EUR 8 million per year
for the next three years in audit quality, as well as
investing in recruiting more professionals. In all,
Activ8 Your AQ has 5 pillars as shown in figure 5.
AQ quality programme
Innovate
Communicate
Manage Change
Monitor
Quality & Compliance
Data & Analytics
Stage presence
More external auditors
Dedicated OPR teams
Standardisation
Integrated Reporting
Thought Leadership
Lift & Shift
Performance
management
KPMG Bootcamp
Long-form reporting
Stakeholder Dialogue
Improve
Figure 5 / Activ8 Your AQ quality programme
© 2014 KPMG N.V. All rights reserved.
37
Project & Time
Management
Command Central
INTEGRATED REPORT 2013/2014
AQ quality
programme
5 pillars
Improve
We have implemented a number of actions to
immediately increase our quality & compliance,
including a mandatory audit training of 5 days for
each client-facing audit professional, real-time
engagement file coaching and mentoring, and an
individualised learning programme to enable
professionals to increase their audit and soft skills.
As said, we continue our efforts to further drive
standardisation and automation. Ultimately, this will
result in consistency in approach and documentation.
The newly developed Standardised Audit Approach
(SAA) is being promoted by our Service Delivery
Centre for those engagements suitable for
standardisation.
In addition to standardisation we also increase our
continuous training to audit professionals, particularly
in the KPMG Way and the ‘way we do things around
here’, including knowledge of our rich heritage.
© 2014 KPMG N.V. All rights reserved.
Innovate
Manage Change
The efforts within innovate are geared towards
increasing the added value of our audit services.
This includes harnessing the specialised knowledge of
our Advisory services for inclusion in our audits and
increased use of data and analytics to drive audit
quality decisions. We also continue to support the
long-form reporting to shareholders of listed entities,
as we have last year and as we pioneered many years
ago (in 1934 KPMG issued a long-form report to the
Philips’ annual report).
Communicate
If there is one common denominator it is the number
of hours there are in a week, irrespective of your
background, your profession or where you live.
All efforts then for managing change come down to
having time to actually make the change. We introduce
new ways of managing our projects and our time to
ensure we focus on progress instead of movement.
Monitor
We wish to increase our presence in the Annual
General Meeting of Shareholders by presenting our
approach and findings in a manner that makes an
impact. This to ultimately change the perception of the
profession as a whole. We want to radiate the KPMG
difference to all stakeholders. That begins with our
presence in the boardroom and dialogue with executive
and supervisory board members. Our partners
therefore need to be excellent communicators in that
respect. In addition, we want to better serve society
by issuing our collective knowledge through thought
leadership, opining articles and papers.
This also means more discussion and debate with our
stakeholders to ensure that our services will continue
to meet their needs. We also need to strengthen our
links with universities as they provide the theoretical
education to our potential audit professionals as well as
conduct research to increase the quality of audits.
38
This final pillar is geared towards measuring our
progress against our ambitions. We plan to form
dedicated QPR teams to assess the level of
engagement quality on an ongoing basis. This enables
us to actively implement mitigating actions should
issues and findings so warrant rather than after the
engagement completion and on a yearly basis.
We have implemented a system of balancing controls
to manage the performance of our audit professionals.
This means designing KPIs that measure quality
performance and also actually appraises professionals
against benchmarks and targets. Non-compliance is
dealt with where necessary and we do not shun
from taking appropriate sanctions against
professionals that repeatedly do not meet the
KPMG quality requirements.
INTEGRATED REPORT 2013/2014
Consultation with specialists
To assist audit engagement professionals in
addressing difficult or contentious matters, we
have protocols for consultation and
documentation of significant accounting and
auditing matters, including procedures to
facilitate resolution of differences of opinion on
engagement issues. Consultation with a team
member at a higher level of responsibility than
either of the parties with differing opinions
usually resolves such differences. In other
circumstances, the matter could be escalated
through the chain of responsibility for resolution
by technical specialists. In exceptional
circumstances, a matter may be referred to the
Head of Audit, Head of Department of
Professional Practice, Head of Quality & Risk or,
ultimately, the Chairman of the Board of
Management.
© 2014 KPMG N.V. All rights reserved.
2013/ 2014
2012/2013
Accounting
226
218
Auditing
241
261
85
58
124
85
86
76
309
456
1,071
1,154
Fraud
Risk Management
Independence
Legal / Contract Review
Total
Table 6 / Number of consultations (Audit & Advisory)
In absolute terms, consultation has decreased by
7%, mainly due to reducing the topics requiring
mandatory contract unit consultation for the
Advisory services. The increase in independence
and risk management consultation is the
result of mandatory audit firm rotation.
Fraud consultations (previously included in audit
consultations) increased in comparison to the
previous fiscal year, in part due to the increased
awareness and attention for fraud risk in the
financial statements audit.
39
INTEGRATED REPORT 2013/2014
Robust Risk Management
Firm Independence
Table 7 provides the details of the revenue of
the audit organisation for FY 13/14 (table 8
shows FY 12/13) segmented to type of service
delivery. All amounts are shown in EUR millions
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 auditor
reports and assurance (related) reports include
non-statutory legal financial statement audits,
attestation reports, sustainability assurance,
SAS70 attestation, IT audits etcetera. Advisory
engagements consist of all engagements not
bearing an element of attestation or audit (i.e.
consultative engagements).
It should be noted that the revenue details for
FY 12/13 were based on management reporting
Other auditor
reports and
assurance
(related) reports
Other
statutory
audits
Statutory
legal audits
at the time of issuing last year’s report. The Firm
implemented a new central IT system and the
database infrastructure regarding the specific
segmentation presented in table 7 was under
construction at the time.
Advisory engagements for OOB audit clients
are prohibited commencing 1 January 2014.
The figures for FY 13/14 reflect that prohibition
taking into account the contracts that we were
finalised in conformity with the legally set
grace period.
Total
Assuranceservices
Advisory
Total
Statutory legal audits – OOB clients
40.2
77%
6.4
12%
3.5
7%
50.2
95%
2.4
5%
52.5
Statutory legal audits – other clients
85.5
62%
21.1
15%
11.4
8%
118.0
86%
19.1
14%
137.2
51.8
69%
10.1
14%
61.9
83%
12.8
17%
74.8
19.1
45%
19.1
45%
23.7
55%
42.8
141.4 100%
141.4
Statutory audits – other clients
Other auditor reports and assurance
(related) reports – other clients
Other clients
KPMG Corporate
Total
125.8
28%
79.4
18%
44.1
Table 7 / Segmentation of revenue per type of service in EUR million (FY 2013/2014)
© 2014 KPMG N.V. All rights reserved.
40
10%
249.2
56%
199.4
44%
448.6
INTEGRATED REPORT 2013/2014
Other auditor
reports and
assurance
(related) reports
Other
statutory
audits
Statutory
legal audits
Total
Assuranceservices
Advisory
Total
Statutory legal audits – OOB clients
40.2
53%
19.7
26%
4.5
6%
64.3
85%
11.3
15%
75.6
Statutory legal audits– other clients
84.5
59%
32.1
22%
7.2
5%
123.8
86%
20.6
14%
144.3
52.6
71%
3.6
5%
56.2
76%
17.9
24%
74.1
8.4
36%
8.4
36%
14.8
64%
23.2
136.0 100%
136.0
Statutory audits – other clients
Other auditor reports and assurance
(related) reports – other clients
Other clients
KPMG Corporate
Total
3.0
124.7
27%
104.3
23%
23.6
Table 8 / Segmentation of revenue per type of service in EUR million (FY 2012/2013)
© 2014 KPMG N.V. All rights reserved.
41
5%
252.6
55%
200.6
45%
456.2
INTEGRATED REPORT 2013/2014
Compliance with the internal
system of quality controls
Personal independence
In FY 13/14 over 86 (2012: 94) of our
professionals across the Firm were subject to
Personal Independence audits. Professionals
displaying non-compliance were sanctioned
in accordance with our disciplinary policy for
independence. Any professional providing
services to an audit client is also required
to notify the Ethics & Independence Director
if they intend to enter into employment
negotiations with that audit client.
For FY 13/14, 24 sanctions (FY 12/13: 21) were
issued on a total staff number of 2,925 FTE.
As in previous years, none of the infringements
pertain 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 infringements
pertain to prohibited services. Furthermore,
all infringements were corrected.
© 2014 KPMG N.V. All rights reserved.
2013/2014
2012/2013
Partners
Other
Total
Partners
Other
Total
Audit
5
7
12
3
5
8
Advisory
4
8
12
6
7
13
Support Staff
-
-
-
-
-
-
Total
9
15
24
9
12
21
Table 9 / Ethics & Independence infringements / sanctions per function
2013/2014
2012/2013
2
1
22
20
PHAC notifications
-
-
Late submittal of
compliance letters
-
-
24
21
Prohibited investments
KICS updates
Total
Table 10 / Infringements per type
42
INTEGRATED REPORT 2013/2014
Other non-compliances
Our mission of becoming the undisputed
standard in the industry implies that we should
have our act together also in terms of compliance
with our internal system of quality controls.
To this effect we have again expanded our
compliance monitoring activities during FY 13/14.
As a consequence, we see an increase in the total
number of non-compliances as compared to last
year. We distinguish behavioural non-compliance
and quality related non-compliance.
Table 11 provides an overview of those instances
in which we deemed the issue to be quality
related.
Where warranted, we improved our system
of quality controls. All non-compliances were
followed up by either the Compliance Officer
or the respective Heads of Function depending
on the seriousness of the non-compliance.
2013/2014
2012/20132
4
-
Client and Engagement Acceptance procedures
27
3
Professional Code
24
1
3
-
11
10
Consultation of specialists
6
3
Engagement Performance
52
13
127
30
Tone from the top
Integrity
Confidentiality
Total
Table 11 / CO Issue Tracker per element and per function
2
Adjusted for comparison purposes.
© 2014 KPMG N.V. All rights reserved.
43
INTEGRATED REPORT 2013/2014
We demonstrate social responsibility
Social Investments
Community programmes
As part of our purpose, KPMG believes it is
important to be an active and responsible player
in the community and is aware that investing in
employment adds value to make the economy
and society permanently stronger. In addition,
we believe it is important that everyone has
an opportunity to work and have income.
Certain groups in society are less fortunate
in this area.
Our community programmes focus on sharing
our skills and knowledge with a strong
preference for educational programs or projects
to strengthen non-profit organizations. In our
previous reports, we highlighted our community
programs like BRIGHT, the Millennium Villages
Project and the Battle of the Business Bands.
For the purpose of this reporting year, we have
chosen to feature two other projects, Enactus
and the Low Car Diet.
There are a large number of organizations that
support the cause for these vulnerable groups in
society with strong effort and without the
expectation of monetary returns. The deployment
of knowledge and expertise of our KPMG
professionals can actively contribute to improving
the position of these groups in the society. We
want to do this on a structural base and are
currently making initial small steps by offering a
place in our client facing engagement teams to
people from vulnerable workforce groups.
© 2014 KPMG N.V. All rights reserved.
Enactus
KPMG NL, KPMG International and KPMG
practices around the world have been actively
involved in Enactus for many years. Enactus is an
international organization that connects student,
academic and business leaders through
entrepreneurial-based projects that empower
people to transform opportunities into real,
sustainable progress for themselves and their
communities. In the Netherlands Enactus offers
44
KPMG an interesting network and platform for
our people who take up a programme manager
role by supporting the student teams and at
the same time work to further develop their
professional skills e.g. time management
and coaching abilities. KPMG offers ‘in kind’
knowledge and skills to Enactus, including the
programme managers, participation in the
Enactus jury, and is a member of the Enactus
executive board.
Low Car Diet
This year ten KPMG partners and employees
participated in the Low Car Diet programme.
The goal of the Low Car Diet is to introduce and
actively experience the use of sustainable
mobility and to support the implementation of
sustainable mobility in the business process.
A challenge for our KPMG-professionals, but as
a result of their efforts they have saved 31% in
carbon emissions. We focus to reduce our carbon
footprint, participating in the Low Car Diet raises
awareness about sustainable mobility and
contributes to this goal.
INTEGRATED REPORT 2013/2014
The Future of the Auditing
Profession
Following the chain of events regarding
the profession the Dutch Institute of
Accountants (NBA) launched an initiative to
discuss and design the future of auditing in
the summer of 2014. We want to regain our
position as the industry’s standard and
therefore KPMG actively participated in both
the working group and the steering group of
the initiative with Caspar Segers and Marc
Hogeboom respectively representing KPMG.
We gained insights from the working group’s
stakeholder dialogues and group analysis
as well as confirmatory evidence that we
are on the right track by implementing
new governance structures and a new
remuneration policy for external auditors.
We fully support the proposed measures of
the working group, which have either been
incorporated into our quality agenda or for
which separate projects have been identified.
© 2014 KPMG N.V. All rights reserved.
Innovation and thought leadership
In order to serve our clients in helping them grow
and improve we invest in our Strategic Growth
Initiatives supported by a central Innovation
Programme led by the Partner in Charge of
Innovation and supervised by an Innovation
Council.
These Strategic Growth Initiatives are as follows:
• Dynamic Audit;
• Regulatory Change;
• Data & Analytics; including our successful
proposition Facts2Value
• Extreme Digital;
• Asset-Based Services.
The common thread we foresee in the majority
of these initiatives is that of Big Data and Big
Data Grids. We recruited a number of Big Data
specialists from non-traditional sources already
in the past, such as CERN in Switzerland, to
strengthen our knowledge and experience in this
area. We are already seeing the first results of
these efforts as projects with clients are launched.
45
We are also investing in data analytics as part of
our audit services. We have developed specific
tooling to assist our audit professionals in
analysing large streams of account information in
identifying abnormal transactions or even fraud.
We have aligned our national efforts with other
KPMG member firms to maximise our return
on investment as well as expanding our global
mind set.
Our thought leadership and contributions in
the abovementioned areas can be found at
http://www.kpmg.com/nl/nl/topics. Through our
KPMG Blog our professional publish their
thoughts and insights on a variety of business
related topics to trigger our clients and make
them aware of issues and challenges.
Any finally, we continue to share our collective
insights through our social media app KPMG
One, which is available for all our stakeholders
through the iTunes App store and shortly also at
Google Play.
INTEGRATED REPORT 2013/2014
05
© 2014 KPMG N.V. All rights reserved.
Our People are
Extraordinary
46
INTEGRATED REPORT 2013/2014
Our partners lead by example
Leadership engagement
Partner and staff involvement (Audit)
In light of the events we faced in the year under
review, the general public particularly reproaches
us for the fact that we did not lead by example.
We have therefore made this topic a focal point
in our strategy towards regaining public trust.
We measure leadership engagement through
feedback from our people survey, which is
conducted in full on a bi-annual basis. We do
pulse surveys (in October of each year), which
focus on specific questions. We just started the
survey for 2014. As such we do not have the
formal measurement available for FY13/14, but
from the FY13/14 survey we know that the trend
is a negative one. In addition, we score our
partners using lead by example feedback from
the people survey. The lead by example index is
also aggregated to the overall leadership index.
As part of the NBA Future-initiative, the working group suggests that audit firms disclosure their
partner involvement on audit engagements. We already use this measure as part of our Partner
Portfolio Reviews. The figures below present the % of engagement hours for client facing staff per
staff level and type of engagement.
Here we see a significant decrease as compared
to last year and our professionals have sent a very
clear message to the partnership. We followed
up with intense and in-depth dialogue sessions
where partners invited professionals and fellow
partners to their homes to discuss the purpose
and values of KPMG and devise how to improve
our culture of delivering quality through
collaboration.
© 2014 KPMG N.V. All rights reserved.
OOB Legal Audits
OOB Other Audits
FY 13/14
FY 13/14
FY 12/13
FY 12/13
0
10
20
30
40
50
60
0
70
10
Legal Audits
Other Audits
FY 13/14
FY 13/14
FY 12/13
FY 12/13
0
10
Partner
20
30
EQCRP
40
50
Senior Manager
47
60
70
Manager
80
0
Staff
IT Audit
10
20
20
Advisory
30
30
Total
40
40
50
50
60
60
70
80
INTEGRATED REPORT 2013/2014
Consistent high levels of engagement and performance
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
in such a way that we deliver on our vision of being
The Clear Choice. This requires recruitment,
development, promotion and retention of personnel
and a robust capacity and resource management
processes. We believe it is essential to attract and
retain the best people. During FY 13/14 383
(FY 12/13: 385.4) FTEs joined our Firm, whereas
558.9 (2012: 474.9) FTEs left the Firm. The retention
rate – the percentage of professionals remaining
with the Firm – amounts to 84.0% (FY 12/13:
82.1%). Overall absenteeism remained low at 2.7%
(FY 12/13: 2.7%). We actively manage our highpotential talent pool across our group through our
Emerging Leaders Programme, in which currently
55 people are enrolled (FY 12/13: 35). Of those
Emerging Leaders 29% is female (FY 12/13: 31%).
Partners
Employee engagement
Employee engagement is measured through the
Employee Engagement Index (EEI) and the
Performance Engagement Index (PEI), both as
part of the people survey. The EEI measures
© 2014 KPMG N.V. All rights reserved.
Audit
Advisory
Corporate
Total
85
56
8
149
Professionals
1,261
934
-
2,195
Support staff
103
59
419
581
1,449
1,049
428
2,925
92
62
13
167
Professionals
1,264
1,075
-
2,339
Support staff
104
66
455
625
1,460
1,203
468
3,131
FY 13/14
Total
FY 12/13
Partners
Total
Table 12 / FTEs per function per FY
employee motivation to contribute and display
organisational citizenship behaviour (trust,
respect, growth and development), whereas the
PEI measures commitment to excellence (client
service, service quality and continuous
improvement). The EEI has decreased compared
to last year from 59 to 47, mainly due to negative
media attention for KPMG and the effect it has on
employee satisfaction in combination with
decreased trust in leadership. The Board has
therefore decided to measure this on a quarterly
basis commencing FY 14/15.
48
INTEGRATED REPORT 2013/2014
Skill development and
knowledge contribution
We provide knowledge and support to
professional bodies such as the Dutch Institute
for Auditors (‘Nederlandse Beroepsvereniging
Accountants’), the Dutch Council for Accounting
Standards (‘Raad voor de Jaarverslaggeving’)
and the Dutch Institute for IT Auditors (‘Neder­
landse 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 through university positions. In
total, the KPMG community includes 7 professors,
at least 19 PhD’s and 8 professionals starting or
doing their PhD-research.
When we implemented our new IT information
system last year, we also implemented a new
cost centre structure. As a result, last year’s
figures are not fully comparative to current
year’s figures. We have therefore opted not to
© 2014 KPMG N.V. All rights reserved.
report last year’s figures. During FY 12/13 our
professionals spent an average of 5.1% (FY
11/12: 6.3%) of their available hours on training.
During the year under review we increased
our training requirements for the annual Audit
training from 2 days to 5 days. The additional time
was geared towards quality related findings from
AFM and QPR reviews.
As we stress the importance of training and
development, we expanded our monitoring on
training attendance and completion since mid FY
12/13. This resulted in 129 violations of our
training policies and procedures (FY 12/13: 44).
Cost (EUR Average hours
1,000)
per FTE
FY 13/14
FY 13/14
Audit
4,495
176
Advisory
2,716
60
528
11
7,739
104
Business Support
Total
Table 13 / Average training cost and hours per function per FY
49
At its core, we apply uniform employment
benefits for all employees, including wages and
salaries, which also means that a priori there are
no differences in pay between male and female
employees. 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 85.0% against male
professionals (FY 12/13: 85.5%) and for bonus
pay this ratio is 56.8% (FY 12/13: 45.9%).
INTEGRATED REPORT 2013/2014
Diversity in our workforce
Diversity is a challenging subject in terms
of gender as well as in terms of cultural
background and diversity in personalities.
We have implemented specific diversity targets
for a number of years now and gradually we
increasingly see the results of those targets.
Figure 6 provides the details for female diversity
in percentage per job level for Audit and Advisory
combined. We have had success in diversifying
our partner population and witness an increase
from 7% to 10% per 1 October 2014. Relatively
speaking the population as a whole remains
male dominated. Other ranks remain stable
compared to last year. Overall, however, we do
not meet the requirement of 30% as set by
diversity standards. We will therefore further
upscale our efforts in this particular area and have
The second diversity category we have identified
is that of ethnic diversity, which has become
increasingly important given the changing
demographics of society in the Netherlands.
As figure 7 shows we again see results from
our efforts as cultural diversity increases over
the years. In comparison to last year we see a
decline at senior levels, particularly in the rank of
directors. We are in the process of analysing the
root causes behind that decline. FY 14/15 will
bring specific mitigating actions towards cultural
diversity, partially based on the scientific
in-house research we performed last year.
Gender balance
2,925
35
30
Absentism
25
Partner
15
Senior
Manager
Partner
Manager
Director
Director
30
Manager
20
Ass.
Manager
Senior
Manager
Supervisor/Adv.
Manager
Ass. Manager
25
10 Supervisor/Adv.
15
20
Senior
10
Senior
Ass. Manager
Trainee/Jr.
Adv.
Supervisor/Adv.
Trainee/Jr. Adv.
515
5
Senior
10
0
okt-10
okt-11
okt-12
okt-13
Figure 6 / Female diversity per job level
© 2014 KPMG N.V. All rights reserved.
okt-14
5
Trainee/Jr. Adv.
okt-10
okt-11
okt-12
okt-13
okt-14
0
Figure 7okt-09
/ Ethnic diversity
perokt-11
job level
okt-10
50
okt-12
okt-13
34%
66%
2,7%
FY 12/13 2,7%
Partner
2040
Director
35
Senior Manager
FY 12/13
fte 3,13fte
25
40
0
already included diversity as a specific strategic
KPI for FY 14/15. The % of female Board
members is currently 15%.
INTEGRATED REPORT 2013/2014
06
© 2014 KPMG N.V. All rights reserved.
Our Clients See the
Difference in Us
51
INTEGRATED REPORT 2013/2014
Top brands want to work with KPMG ‘for life’
National network turnover
Audit
Advisory
Market presence
Tax
256
245
210
207
150
146
2013 / 2014
2012 / 2013
Figure 8 / Network revenue in EUR million (FY 11/12
Audit adjusted for comparison purposes).
KPMG Accountants N.V.
Statutory legal audits
115
130
2013 / 2014
Other services
125
127
2012 / 2013
KPMG is one of the Big 4 professional service
firms with a significant position in Listed Clients
and Financial Services. Revenue per service line
is presented in our financial statements
disclosure and depicted in figure 8. 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.
Figure 9 provides the details for the Audit
revenue of the Firm. 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. We
expect this decrease in revenue to continue for
our Audit services as we continue the mandatory
firm rotation for PIE/OOB audit clients. As we aim
for long-term relationships with our clients, we
will undertake initiatives to become preferred
supplier for advisory services for all clients where
we will rotate off as auditors.
Figure 9 / Segmentation of revenue for
the audit organisation.
© 2014 KPMG N.V. All rights reserved.
In terms of network revenue KPMG ranks 4th
among the Big 4 firms (FY 12/13: 4th) with a
market share of roughly 25% 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.
Mandatory firm rotation
The recent 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
PIE/OOB audit clients and for which we will no
longer be able to provide audit services for the
next 8 years, such as for AkzoNobel, Heineken,
and Royal Philips. We have rotated off from
11 clients and were able to win 13 clients,
including ING, DSM and Unilever.
Mandatory
Firm
Rotation
52
13wins
INTEGRATED REPORT 2013/2014
Clients are positive about 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 to them. The feedback that
we receive from this programme is considered
by the operating firms and individual client
service teams to ensure that we continually learn
and improve the levels of client service that we
deliver. Any urgent actions arising from client
feedback are followed up by the engagement
partner to ensure that concerns on quality are
dealt with on a timely basis. Our client
satisfaction ((Net Promoter Score) decreased
from 47.6 to 42.9 during the year under review.
This decrease unfortunately reflects the current
general reputational perception of KPMG,
particularly for Audit where the NPS decreased
from 48 to 36.4 and Advisory stabilising at 46.1
from 47.2 last year.
Overall client satisfaction (see table 14 where
the combined scores for ‘very satisfied’ and
‘satisfied’ are shown) has decreased slightly
compared to last year as clients have been more
neutral about their satisfaction, which resonates
with the decreases in Relationship and Added
Value.
© 2014 KPMG N.V. All rights reserved.
Following media attention and overall client
satisfaction we also see similar decreases in
the scores for our brand attributes, with the
exception of the score for Global Mind set. Table
15 provides the combined scores for ‘completely’
and ‘to a high extent’ for our brand attributes.
FY 13/14 (%)
92.2
FY 12/13 (%)
96.1
94.1
Overall satisfaction
96.7
90.4
Relationship
89.7
82.2
Quality of Service
88.1
Added Value
Table 14 / Satisfaction scores (FY 13/14 n=231 and FY 12/13 n=185)
FY 13/14 (%)
82.1
83.2
Passionate
FY 12/13 (%)
70.4
73.6
Value Adding
66.1
67.1
Forward Thinking
Table 15 / Brand Attributes scores (FY 13/14 n=231 and FY 12/13 n=185)
53
64.8
61.6
Global Mindset
74.8
77.3
Expert
INTEGRATED REPORT 2013/2014
07
© 2014 KPMG N.V. All rights reserved.
Operational
Excellence
54
INTEGRATED REPORT 2013/2014
Sustainable Profit
The financial figures for the Firm are
presented in the financial statements
section of this report from page 129
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.
Discussion of trends and
results
Revenue decreased in the financial year by 1.7%
to EUR 449 million. Profit before income tax
increased by 6.4% to EUR 70 million. Revenues
dropped 2.9% in Audit and increased slightly in
Advisory by 0.7%.
Personnel costs decreased by 6.6% mainly
explained by a decrease in the number of FTEs
of 6.3%. The decrease in FTEs was mainly
caused by a decrease in FTEs in Advisory.
The average number of partners and staff
decreased by 206 FTEs (6.6%) to 2,925 FTEs.
The number of partners decreased by 18 FTEs to
149 FTEs. The number of professional staff has
decreased by 144 FTEs (6.2%) to 2,195 FTEs,
while the number of support staff has dropped
by 52 FTEs (9.2%) to 515 FTEs. The decrease in
professional staff is due to a decrease in Audit
of 3 FTEs (0.2%) and a decrease of 141 FTEs
(13.1%) in Advisory. Part of this decrease is
explained by more work performed by the
KPMG firm KGS in India. The dedicated team
for KPMG N.V. in India has grown by 40 FTEs to
135 FTEs. As of 1 November 2014 the Board of
© 2014 KPMG N.V. All rights reserved.
55
Management comprises 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 goal still is to
meet this criterion, although this will be a longer
term scenario since new board members have
just started in their role.
The other operating expenses increased by
EUR 10.8 million (8.6%) mainly explained by
the settlement of EUR 7 million with the Public
Prosecution Office other settlements and
the adjusted tax return 2010 regarding the
development of the building in Amstelveen, and
the provisions formed for vacant offices space.
The profit before tax in Audit decreased by
EUR 6.9 million (8.0%) and the profit before tax in
Advisory increased by EUR 24.7 million (58.7%).
The decrease in Audit is mainly explained by a
reduction in revenues and investments in quality.
The increase in profit before tax in Advisory is
explained by a lower number of staff (141 FTEs)
generating revenues slightly higher than previous
year. Corporate costs increased due to the Ballast
Nedam settlement, high legal costs and the
provision for vacant office space. Income tax
expense is high compared to previous year due
to the provision formed as a consequence of the
INTEGRATED REPORT 2013/2014
uncertain tax position 2010 KPMG Gebouw II B.V.
the corporate vehicle for the development of the
building in Amstelveen. Fees paid to partners
under management agreements decreased by
EUR 3.3 million (5.3%).
Investments in property, plant and equipment
remain limited and were only made in
replacement of computer and communication
equipment. The investments in intangible assets
relate to the acquisition of Innovation Factory B.V.
(in previous year Bridging Solutions B.V. and
Conquaestor B.V.). Material investments in hours
have been made in innovation projects in Audit,
like Dynamic Audit, and within Advisory for
example in Big Data.
Financing is provided by loans from partners.
At the end of the year this amounted to
EUR 39.5 million, an increase of EUR 0.1 million
compared to previous year (EUR 39.4 million).
During the past financial year, cash increased by
EUR 24.7 million. This is mainly explained by
higher net cash inflow from operating activities.
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
© 2014 KPMG N.V. All rights reserved.
diversity of clients of KPMG, the price, liquidity
and cash flow risk is minimal. KPMG does not
make use of financial derivatives and follows
procedures and guidelines to limit the size of the
credit risk with each counterparty and market.
The cash is placed with banks which have a
credit rating of 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 see note
24 in the financial statements.
In the current economic conditions we expect
a slight decline in revenue. As a result of the
legislation to rotate audit firms and an analysis
of our current good market share in the top
segment, we expect a further decline in Audit
revenues in 2015. Audit firm rotation will result in
more opportunities for Advisory and we expect
Advisory revenues to increase slightly. We also
expect to further grow in Advisory due to further
acquisitions of Advisory businesses.
56
Due to more investments in our audit quality
and change programme, we expect no growth
in profitability in the coming financial year.
The total number of staff in The Netherlands is
expected to decline slightly as a result of the
decline in revenues and a further build-up of
capacity in India to assist our professionals in
The Netherlands. Investments are related to
possible acquisitions in Advisory and continued
investments in innovation. Financing by partners
is expected to remain at current levels.
The launch of our change programme “true blue”
gives us confidence regarding the future and
emphasises the importance to invest in the
long-term success of our organisation, especially
in our people and the quality of our services.
INTEGRATED REPORT 2013/2014
Net promotor Score
42.9
FY 12/13
47.6
We refer to our 2013/2014 Financial Statements for further details.
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
Revenue from intersegments
Profit before tax
Table 16 / Segmented financials for KPMG N.V. for FY 2013/2014 (in EUR 1,000)
Audit
Advisory
Corporate
Total
252,347
200,833
3,015
456,195
298
5,671
-5,969
-
Other income
-
-
14,923
14,923
Total income
252,645
206,504
11,969
471,118
86,222
42,148
-62,613
65,757
Revenue
Revenue from intersegments
Profit before tax
Table 17 / Segmented financials for KPMG N.V. for FY 2012/2013 (in EUR 1,000)
© 2014 KPMG N.V. All rights reserved.
57
INTEGRATED REPORT 2013/2014
Partner remuneration
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 arrange­
ments 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.
For non-equity partners and directors, a salary
scale, set annually by the Board of Management,
applies. This scaling depends on the role and the
responsibility of a the individual. A bonus
incentive can be granted for a non-equity
partner’s or director’s 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.
© 2014 KPMG N.V. All rights reserved.
Partner remuneration varies with the grading
of each partner, the partner’s performance and
the overall profitability of KPMG N.V. At the start
of each financial year, after advice from the
leadership team for Audit and Advisory, the
Board of Management determines the grading
of each individual partner. At the end of the
financial year, the Board of Management has the
discretion to grant variable income depending
on performance relative to agreed targets.
The partner assessment process is monitored
and the individual rating is determined by the
Board of Management after consultation with the
Remuneration Committee (see also Appendices).
The Firm appraises partner performance against
the relevant performance criteria.
Quality & Risk metrics are part of these criteria
and partners are assessed on the partner’s
quality of services provided and compliance with
internal and external regulations. The specific
Quality & Risk Metrics are listed in table 20.
58
A (continued) substandard performance on
quality and compliance has a negative effect
on partner remuneration and on their continued
association with the Firm.
Within our performance management process
we distinguish 5 internally developed scales an
external auditor can obtain during the annual
appraisal process: NI for Needs Improvement,
SP- for Inconsistent Performance, SP for
Strong Performance, SP+ for Highly Effective
Performance and EP for Excellent Performance.
Criteria supporting each of these scales were
also internally developed. As the scales and
criteria incorporate the impact of quality as well
as other factors, the performance ratings /
grading do not necessarily 1:1 reflect compliance
with external laws and regulations.
INTEGRATED REPORT 2013/2014
Partners with NI or SP- scores are, however, closely monitored for quality
purposes and where considered appropriate or necessary, the leadership
team for Audit or Advisory will take requisite action. The tables 18 and 19
displays the scores throughout the partner population.
Audit
Rating
• Members of the Board of Management will be paid a fixed salary with a
variable component set at a maximum of 10%. They will no
longer be eligible for profit shares;
Advisory
2013/2014
2012/2013
2013/2014
2012/2013
NI
3
3
1
3
SP-
5
5
2
6
SP
62
68
33
35
SP+
16
14
18
16
2
3
1
3
EP
Commencing 1 October 2014 the remuneration policies for partners have
changed. The new partner remuneration model focuses on quality,
measurable performance and long term impact. The main elements of the
new model are:
• The remuneration of partners will be linked to performance focused on
criteria for the realization of quality requirements, the motivation of
employees and client satisfaction. Not meeting these quality
requirements may result in individual profit shares being withheld.
• The introduction of 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.
Table 18 / Performance Management scores for equity partners
Audit
2013/2014
Advisory
2012/2013
2013/2014
2012/2013
NI
1
1
-
7
SP-
2
1
8
11
SP
35
25
34
27
SP+
17
19
18
21
EP
6
3
5
6
• The exit package for partners will be limited. The period of notice is
reduced from one year to six months. And when leaving, a partner will
receive a maximum of one year’s salary, depending on the number of
years of service at KPMG (was 2 years).
Table 19 / Performance Management scores for non-equity partners
© 2014 KPMG N.V. All rights reserved.
59
INTEGRATED REPORT 2013/2014
Follow up on quality performance
Metric
Potential Impact
Compliance Letter availability
Negative if not available
Compliance with Continuous Professional
Development
Negative if not met
Acting as Professional Practice Partner
Positive if on par or above
Acting as Risk Management Partner
Positive if on par or above
Acting as eAudIT Change Manager
Positive if on par or above
Acting as Quality Performance Reviewer
Positive if on par or above
Quality System Infringements
Negative if sanctioned
Regulatory findings
Negative if occurred
Quality Performance Review ratings
Negative if LTS (Less Than Satisfactory)
or U (Unsatisfactory)
A specific analysis was done on engagements rated as less than
satisfactory to assess their pervasiveness. The Board has followed up on all
external auditors with pervasive quality related issues. This resulted in
actions such as revoking a partner’s mandate to sign audit reports,
postponing promotions to more senior levels within the firm, monetary
fines, and in some cases termination of management contracts.
Table 20 / Quality & Risk Metrics
© 2014 KPMG N.V. All rights reserved.
60
INTEGRATED REPORT 2013/2014
Sustainability performance
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.
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.
Category
2013
2012
2011
4,685
5,067
5,368
11,157
8,701
13,705
97%
95%
94%
Paper usage (in kg)
115,686
219,429
221,974
Total waste (in kg)
477,868
621,650
613,423
Recycled waste (in kg)
321,891
390,966
429,730
Water usage (in 1,000 litres)
15,566
20,598
30,187
Air travel (in 1,000 km)
22,501
27,017
22,767
5,037
4,140
5,269
5,973
4,910
8,851
12,350
12,407
12,722
2,751
3,300
2,776
63
-
-
Gross CO2 emission
21,137
24,348
24,558
Emission reductions
(renewable energy and VER)
-21,137
-24,348
-24,558
Natural gas consumption (in 1,000 kWh)
Electricity consumption (in 1,000 kWh)
To further decrease our carbon footprint, the Board of Management
supports the staff departments of Human Resources, Facilities, Mobility,
CSR and Finance to collaborate on their actions, such as, encouraging the
use of economical (hybrid) cars, electric cars, use of electric taxis, company
bicycles, promotion of fuel-efficient driving, and to encourage HALO and
web meetings.
Renewable electricity consumption
Car travel (in 1,000 litres)
Category
2013
2012
2011
Gas
0.1819
0.1748
0.2038
Electricity
0.4590
0.4625
0.5660
Petrol
2.3018
2.3000
2.3117
Diesel
2.6502
2.6300
2.6676
Other
1.4906
1.4900
1.4918
Rail
0.0300
0.0350
-
Air flights (average)
0.1631
0.1639
0.1667
CO2 emissions (in tonnes)
Electricity, Heating & Cooling
Car Travel
Air Travel (average)
Train travel
Table 21 / Conversion factors per KPMG International
Table 22 / Environmental data3
3 © 2014 KPMG N.V. All rights reserved.
61
As KPMG NL shares its offices and facilities with KPMG Meijburg & Co, the figures in this table
represent the combined data.
INTEGRATED REPORT 2013/2014
Supply Chain Management
KPMG Sustainability supported our organization
in the further strengthening and embedding of
responsible procurement in our purchasing
process. One of the findings was that it is
imperative to strengthen governance regarding
Corporate Purchasing. At the same time
sustainable topics, such as environment,
climate and social impact in the Netherlands’,
are reported as specific focus areas to drive
through to our top 20 suppliers during requests
for proposals and/or the re-negotiation of
contracts.
By doing so KPMG safeguards its leading role
as a service provider to our clients, but we also
continue to manage the corporate purchasing
processes by being active in creating shared
value at the highest levels of our supply chain.
In a world where transparency is taking annual
reviews to another level, it is essential to be in
control, to distinguish ourselves in the market,
and report clearly on our ambitions and results
regarding responsibility in the chain as well.
Corporate Purchasing cooperates more closely
with KPMG Sustainability and Corporate
Responsibility on tender requests to our top
20 suppliers.
Alzheimer Lab
As one of the founding fathers KPMG is proud
to be part of Alzheimer Lab. Alzheimer Lab is a
co-creation of McKinsey, &samhoud and KPMG.
It is a challenging one-year programme for future
leaders of organizations that on the one hand
accept the challenge to raise money for the
VUmc Alzheimer Center on a structural base
and on the other hand work on their (social)
entrepreneurship skills, creativity and personal
development.
Alzheimer’s is the epidemic of the 21st century.
One in five people will get some form of
dementia. Ten percent of people with dementia
is younger than 65 years. This number is only
increasing. The cause is largely unknown.
Anno 2013 Alzheimer’s disease is still incurable.
The Alzheimer Lab is designed as a platform to
connect talents in wide networks. It offers the
possibility for organizations to take responsibility
© 2014 KPMG N.V. All rights reserved.
62
by developing talent through a programme
of inspiration and unexpected challenges.
Being close to the science network it enriches
innovative power of future leaders and its
organizations. The teams consist of researchers
from the Alzheimer Center VUmc and two top
talents of participating leading companies in the
Netherlands with the goal to share knowledge,
experience and capabilities to raise as much
money as possible money for scientific research
for the Alzheimer Centre VUmc over a period of
12 months.
Engagement
KPMG International is signatory of the UN Global
Compact since 2002. The UN Global Compact
asks companies to embrace, support and enact,
within their circle of influence, a set of core
values, the ten business principles, in the
areas of human rights, labour standards, the
environment and anti-corruption.
In the Netherlands we monitor these values
through our professional and supplier code of
conducts, and partly report about it in our
integrated annual report. On top of that, every
business participant of the UN Global Compact
INTEGRATED REPORT 2013/2014
commit to issue an annual Communication on
Progress (COP) report. KPMG International
composes the report for the entire network.
For a third consecutive year KPMG NL
participated in the Dutch UN Global Compact
Network. In this network our peers share their
feedback on our most recent COP report. The
comments from our peers confirm our struggles
as a network organization: it is challenging to
have a consistent approach to supply chain
management, living wage and human rights for
example. Due to the network structure of KPMG
and the role of KPMG International, we are
somewhat limited in how we can holistically
present information in our COP report. It is up
to the member firms to communicate in a
transparent manner about the progress with
regard to the ten business principles. For the
coming year, the COP report will be fully
integrated into the International Annual Review.
KPMG International will not be issuing a
standalone report. KPMG NL supports this
process and if topic related, we will deliver
content for the International Annual Review.
© 2014 KPMG N.V. All rights reserved.
In the past year, in alignment with our purpose,
we (under)signed the following covenants and
initiatives:
the Green Deal ‘New Social Capital’
This Deal enables a coalition of 13 large
companies to cooperate with civil society
organizations on making visible their impact on
nature and the well-being of people. The parties
will work together with the Dutch Ministry of
Economic Affairs.
the Covenant ‘de Ambitie van Zuid’
We strive to achieve a proportionate contribution
to the agreement from the social contract
(100,000 jobs in 2026) by contracting employees
with a labour disability in the primary process of
our organisation. We make arrangements with
suppliers on the deployment of workers with an
employment disability and focus in business
networks on inclusive labour markets and the
participation of people with disabilities. Finally,
we are in dialogue with the government about
the (im)practicality of participation and / or a
quota for knowledge-intensive firms and
communicate about the results as reached.
63
the Sustainable Development Goals and the
Post-2015 agenda Business Manifesto.
The Sustainable Development Goals set out an
ambitious agenda for all 7 billion of the world’s
people, not just the poorest. Success will depend
on the ability to mobilize different mechanisms
from traditional overseas aid models delivered by
governments, to new models of partnership
requiring co-investment and collaboration by a
diverse range of actors. It is a transition that
KPMG worldwide acknowledges and is an
ongoing process where KPMG International will
take the lead in.
INTEGRATED REPORT 2013/2014
08
© 2014 KPMG N.V. All rights reserved.
Statement on effectiveness
of quality controls and
independence
64
INTEGRATED REPORT 2013/2014
Statement on effectiveness of quality
controls and independence
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 non-compliance with relevant laws
and regulations would be prevented or detected.
The Board of Management has considered:
• The design and operation of the quality
management systems as described in this
report;
• The findings from the various compliance
programmes operated by the Firm (including
the KPMG International Compliance
Programmes and our local compliance
monitoring programmes);
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.
Amstelveen, 2 December 2014
Jan Hommen
Barbara Lamberts
Andrew Cranston
Han van Delden
Bert Ferwerda
Rob Fijneman
Marc Hogeboom
• 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.
© 2014 KPMG N.V. All rights reserved.
65
INTEGRATED REPORT 2013/2014
09
Governance &
Risk Management
© 2014 KPMG N.V. All rights reserved.
66
INTEGRATED REPORT 2013/2014
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.
The rights of member firms to use the KPMG name and marks are
contained within agreements with KPMG International.
FY 13/14
FY 12/13
2,925
3,131
149
167
% Male (FTE-base)
66%
67%
% Female (FTE-base)
34%
33%
% Female partners (FTE-base)
9%
7%
% Female directors (FTE-base)
11%
15%
10
10
Total income (EUR 1,000)
467,310
471,118
Turnover statutory legal audits (EUR 1,000)
114,784
125,360
69,956
65,757
# of Independence infringements
24
21
# of QPR significant audit findings
97
117
% of satisfactory QPR scores
93
89
# of audit reports for OOB statutory audit clients
348
266
# of audit reports for other statutory audit clients
1,920
1,982
12,170
13,259
FTEs
# of partners
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.
We employ approximately 3,100 partners and professionals and operate
out of 11 offices in the Netherlands with Amstelveen serving as
headquarters. Further details of the service offerings can be found on the
website at the following link: Service Portfolio. We also refer to the
Appendices for further details.
# of national offices
Profit before tax (EUR 1,000)
Table 23 provides an overview of the size and performance of our
practice.
# of audit reports in total
Table 23 / Overview of KPMG NL (excluding Tax)
© 2014 KPMG N.V. All rights reserved.
67
INTEGRATED REPORT 2013/2014
Governance
Board of Management
Public Interest Committee
The Board of Management of KPMG N.V. is
ultimately responsible for the organisation and
the main pillars of our strategy, being Public
Trust, Client Difference, Extraordinary People
and Operational Excellence. The Board of
Management includes the formal policy makers
(‘beleidsbepalers’) in the context of the Dutch
Supervision Act on Audit Firms (Wet toezicht
accountantsorganisaties; hereafter Wta).
Within the Board of Management the Head of
Audit is responsible for the KPMG NL’s audit
organisation. The Board of Management is
supported by Partners in Charge for Quality &
Risk and Markets. Board members are appointed
to the Board by the Supervisory Board. All
appointments are for an initial term of 4 years.
Following our exit from KPMG Europe LLP we
also need to re-install a national Public Interest
Committee going forward to ensure we remain
compliant with the NBA Audit Firm Code. We are
in the final stages of appointing our independent
and external Supervisory Board and its members
will also form our Public Interest Committee.
The Terms of Reference are available in draft and
will be issued after the Committee is formally
instituted.
Supervisory Board
The guiding principle of a Public Interest
Committee, particularly in bringing an outside-in
approach and view to the organisation, was in our
view met with the appraisal by Jan Hommen and
Jaap de Keijzer early May 2014. We refer to the
introduction to this report for further details on
their findings.
The (regional) audit practice leaders for Corporate
Clients, Financial Services and National Practice,
together with the Functional Quality and Risk
Management Partner Audit and the COO Audit
form the leadership team Audit, chaired by the
Head of Audit. The members of the leadership
team Audit are co-policy makers in the context
of the Wta and charged with the operational
management of the audit organisation.
This includes, for example:
• Compliance with quality management system;
• Supervision and appraisal of partners in all
areas of competence;
• Ascertain adequate follow up of compliance
violations and incidents;
• Manage professionals in terms of availability
and ability to the level required to service our
clients;
Supervisory Board (soon to be solely constituted
by external independent) members are appointed
by the shareholder of KPMG N.V., and ultimately
by the individual equity partners of KPMG in the
Netherlands. All appointments are for an initial
term of 4 years.
© 2014 KPMG N.V. All rights reserved.
Audit Leadership Team
• Maintain and strengthen our market presence.
68
INTEGRATED REPORT 2013/2014
Board of
Management
Organisational structure
The operational structure of the organisation is depicted in figure 10. In all,
the Board distinguishes three main units: Audit, Advisory and Business
Support. Audit and Advisory are subsequently organised around markets or
solutions. The main units of Audit are Corporate Clients, Financial Services
and National Practice. And for Advisory the main units are Management
Consulting, Risk Consulting and Transactions & Restructuring. The Office
of the Board consists of the Board’s Strategy Office, Corporate
Communications and Legal Affairs. Business Support provides services to
both Audit and Advisory.
CQRMP
General
Counsel
KPMG
Europe LLP
Office of
the Board
Management
Team Audit
Business
Support
Management
Team Advisory
Quality & Risk
Management
Group
Marketing,
Sales &
Communications
Human
Resources
Department
of professiional
Practice
IT Services
Figure 10 / Operational structure of KPMG NL
© 2014 KPMG N.V. All rights reserved.
69
Finance
Facilities
INTEGRATED REPORT 2013/2014
Legal structure and ownership
KPMG N.V. is the holding company of companies that operate in the Audit or
Advisory business segments. KPMG Nederland B.V. holds the shares in
KPMG N.V. and issued depository receipts to Coöperatie KPMG U.A. (‘the
Cooperative) for these. Commencing 1 October 2014 the individual Dutch
equity partners hold the shares in the Cooperative through their professional
companies. 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. Further details about KPMG International and its business,
including our relationship with it are set out in the remainder of this section.
Individual Dutch
Partners
100%
Dutch Partner
Holdings
100%
Dutch Partner
Practices
KPMG N.V. has its registered office at Laan van Langerhuize 1-11, 1186 DS
Amstelveen, 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.
100%
KPMG
Europe LLP
Cooperative
KPMG U.A.
100%
The Company’s financial year runs from 1 October to 30 September of the
following calendar year. The financial statements for 2013/2014 were
approved for issuance on 2 December 2014.
KPMG
Nederland B.V.
The legal structure within which the Firm was set during its fiscal year is
depicted in figure 11. As per 26 September 2014 KPMG N.V. exited KPMG
Europe LLP and from that date the full ownership of KPMG NL is back to its
Dutch equity partnership. The legal structure remains essentially the same
as seen in figure 11 with the exception of the KPMG Europe LLP related
entities.
KPMG
MKB B.V.
100%
KPMG N.V.
KPMG
Accountants N.V.
KPMG
Advisory N.V.
KPMG
Staffing &
Facilities B.V.
Figure 11 / Legal structure of KPMG NL4
4 © 2014 KPMG N.V. All rights reserved.
Model
Management
Agreement
70
In the case of the Netherlands, each partner’s interest in KPMG Europe LLP was owned through
a personal holding company wholly owned by the relevant partner.
INTEGRATED REPORT 2013/2014
KPMG Europe LLP
Legal structure and ownership
KPMG Europe LLP itself was incorporated as a
UK limited liability partnership under the Limited
Liability Partnerships Act 2000. It was the holding
entity for a number of KPMG operating firms in
Europe.
KPMG Europe LLP was wholly owned by its
members (partners), all of whom work in
KPMG firms in specific countries .
As described in this section, all KPMG
International member firms (including KPMG N.V.
and KPMG Europe LLP) belong to one of four
regions – Asia Pacific (ASPAC), the Americas,
Europe, or Middle East and Africa (EMA). KPMG
Europe LLP and its key operating firms all belong
to the EMA region. As we remain committed to
building the foremost professional services firm
in Europe, the Middle East and Africa, we have
also witnessed a significant change in the global
marketplace in the past decade, especially in
EMA. Many of our clients are looking for KPMG
to demonstrate even greater borderless and
‘best team responses’. For this reason we
have taken the opportunity to build on the
© 2014 KPMG N.V. All rights reserved.
success of our ELLP to create a broader KPMG
EMA structure led by a new and reinvigorated
leadership team.
Network arrangements
Legal structure
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.
KPMG International carries on business activities
for the overall benefit of the KPMG network of
member firms but does not provide professional
services to clients. Professional services to
clients are exclusively provided by member firms.
The structure is designed to support consistency
of service quality and adherence to agreed values
wherever in the world the member firms operate.
One of the main purposes of KPMG International
is to facilitate the provision by member firms of
high-quality Audit, Tax and Advisory services to
their clients. For example, KPMG International
establishes, and facilitates the implementation
and maintenance of, uniform policies and
standards of work and conduct by member firms
71
and protects and enhances the use of the KPMG
name and brand.
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 obligate 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.
Responsibilities and obligations of
member firms
KPMG is the registered trademark of KPMG
International and is the name by which the
member firms are commonly known. The rights
of member firms to use the KPMG name and
marks are contained within agreements with
KPMG International.
In these agreements, member firms commit
themselves to a common set of KPMG Values.
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
INTEGRATED REPORT 2013/2014
includes having a structure that ensures
continuity and stability and being able to adopt
global 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)
are 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.
KPMG International’s activities are funded by
amounts paid by member firms. The basis for
calculating such amounts (which is currently
based on revenue) is approved by the Global
Board and consistently applied to the member
firms.
© 2014 KPMG N.V. All rights reserved.
Professional Indemnity Insurance
A substantial level of insurance cover is
maintained in respect of professional negligence
claims. The cover provides a territorial coverage
on a worldwide basis and is principally written
through a captive insurer though a programme
that is available to all KPMG member firms.
Governance structure
The key governance and management bodies of
KPMG International are the Global Council, the
Global Board, and the Global Management Team.
The Global Council focuses on high-level
governance tasks and provides a forum for open
discussion and communication among member
firms. It performs functions equivalent to a
shareholders’ meeting (albeit that KPMG
International has no share capital and, therefore,
only has members, not shareholders). Among
other things, the Global Council elects the
Chairman for a term of up to four years
(renewable once) and also approves the
appointment of Global Board members. It
includes representation from 56 member firms
that are ‘members’ of KPMG International as a
matter of Swiss law. Sub-licensees are generally
indirectly represented by a member.
72
The Global Board is the principal governance and
oversight body of KPMG International. The key
responsibilities of the Global Board include
approving strategy, protecting and enhancing the
KPMG brand, overseeing management of KPMG
International, and approving policies and
regulations. It also admits member firms and
ratifies the global chairman’s appointment of the
global deputy Chairman and members of the
Global Management Team.
The Global Board includes the global chairman,
the global deputy chairman, the chairman of each
of the three regions (the Americas; Asia Pacific
(ASPAC); and Europe, the Middle East, and Africa
(EMA)) and a number of senior partners of
member firms. It is led by the global chairman
who is supported by the Executive Committee,
consisting of the global chairman, the global
deputy chairman, the chairman of each of the
regions and currently three other senior partners
of member firms.
One of the other Global Board members is
elected as the lead director by these Global Board
members who are not also members of the
Executive Committee of the Global Board (‘nonexecutive’ members). A key role of the lead
INTEGRATED REPORT 2013/2014
director is to act as liaison between the Chairman
and the ‘non-executive’ Global Board members.
The list of Global Board members, as at 1
October 2014 is available in the International
Annual Review.
The Global Board is supported in its oversight and
governance responsibilities by several other
committees, including a Governance Committee;
an Operations Committee, and Investments
Committee; a Quality & Risk Management
Committee; and a Professional Indemnity
Insurance Committee. The lead director
nominates the chairs and members of certain
Global Board committees for approval by the
Global Board.
The Global Board has delegated certain
responsibilities to the Global Management Team.
These responsibilities include developing global
strategy by working together with the Executive
Committee. The Global Management Team also
supports the member firms in their execution of
© 2014 KPMG N.V. All rights reserved.
the global strategy and is responsible for holding
them accountable for commitments. It is led by
the global deputy chairman, and includes the
global chairman, the global deputy chairman, the
global chief operations officer, global function and
infrastructure heads and the general counsel. The
list of Global Management Team members, as at
1 October 2014, is available in the International
Annual Review.
The Global Steering Groups are responsible for
supporting and driving the execution of the
strategy and business plan in their respective
areas and act under oversight of the Global
Management Team. The role of the Global Quality
& Risk Management Steering Group is outlined in
more detail in the KPMG International
Transparency Report.
Each member firm is part of one of three regions
(the Americas, ASPAC and EMA). Each region has
a Regional Board comprising a regional Chairman,
regional Chief Operating or Executive Officer,
73
representation from any sub-regions, and other
members as appropriate. Each Regional Board
focuses specifically on the needs of member
firms within their region and assists in
implementation of KPMG International’s policies
and processes within the region.
Further details about KPMG International,
including the governance arrangements, can be
found at: http://www.kpmg.com/Global/en/about/
international-annual-review/Pages/default.aspx
Area Quality & Risk Management Leaders
KPMG International has a network of Area
Quality & Risk Management Leaders (ARLs),
reporting to the Global Vice Chair–Quality, Risk
Management and Regulatory. The ARLs are
members of the Global Quality & Risk
Management Steering Group and each ARL
performs a monitoring function over a group of
member firms. Their role is to enhance the KPMG
network’s ability to proactively monitor quality
and risk management across member firms.
INTEGRATED REPORT 2013/2014
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 NL
implemented an Enterprise Risk Management
Framework to identify and mitigate its strategic
risks.
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 our 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.
© 2014 KPMG N.V. All rights reserved.
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 in a cost effective and efficient
way, while ensuring 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.
74
INTEGRATED REPORT 2013/2014
Risk Appetite
Top strategic risks and related controls
Tables 24 and 25 provide insight into how we approach the Firm’s risk
appetite in terms of likelihood and impact, both of which are the
same as last year.
The following table details the risks in the top right quadrant of our risk matrix,
providing context to the risk identified and the related internal controls to
mitigate the risk.
Classification of risk impact
Non-financial
Financial
Quality
Markets
People
EUR
Catastrophic
Extensive negative media coverage & enduring
disruption of client or industry confidence
Total loss of confidence, breakdown
in relationships, leading to loss of
majority of clients
Loss of reputation as a good employer,
unable to retain or hire effectively
Going concern
Major
Extended negative national or industry wide
coverage & some disruption to client confidence
Loss of confidence leading
to loss of major clients
Dissatisfied employees, significant
loss of key talent
>20m
Moderate
Negative local coverage & short-term disruption
to local client confidence
Loss of confidence leading
to loss of some local clients
Dissatisfied employees, some loss
of key talent
5-20m
Minor
Negative coverage barely noticeable
Isolated cases of dissatisfied clients
Small numbers of dissatisfied employees
< 5m
Table 24 / Determining risk appetite
Classification of likelihood
of occurrence
%
Probable
> 50%
Possible
10%-50%
Unlikely
5%-10%
Remote
< 5%
Table 25 / Determining risk likelihood
© 2014 KPMG N.V. All rights reserved.
75
INTEGRATED REPORT 2013/2014
Description
Potential impact
REGAINING PUBLIC TRUST
Failure to ensure that our behaviour including
(audit) service delivery acknowledges
public trust and public interest.
• Reputational damage in marketplace from press publicity • Independent Supervisory Board and Public Interest
resulting in loss of major clients or
Committee
inability to attract new talent into our Firm
• true blue change programme, including Activ8 Your Audit
• Regulatory sanctions
Quality
• License to operate in jeopardy
• External members appointed to the Board of Management
• Active stakeholder dialogue
REGULATORY RELATIONSHIPS
Failure to maintain good relationships with
audit regulators or deal with any adverse
findings from regulatory inspections to the
regulator’s satisfaction.
• Loss of major audit clients
• The inability to attract new talent into our Firm
• Reputational damage in marketplace from
press publicity
• Regulatory sanctions
• We nominated specific individuals responsible for interaction
with regulatory authorities and a clear framework for
understanding local regulatory matters
• Majority of our Board are ’Qualified Individuals’ with
appropriate (audit) training and background
• Relevant leadership have visibility of local regulatory findings
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.
• 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
• Controls to deliver an effective and efficient audit
• Commitment to continuous improvement through monitoring
© 2014 KPMG N.V. All rights reserved.
Mitigation
76
INTEGRATED REPORT 2013/2014
Description
Potential impact
Mitigation
• Significant defence costs and/or settlement costs
MAJOR LITIGATION /
REGULATORY INVESTIGATION
incurred/ regulatory sanctions
Major litigation or regulatory investigation
• Reputational damage and resulting regulatory scrutiny
arising as a result of actual or suspected failure
• Excessive use of leadership time in resolving issues
of our services which we delivered either
domestically, in 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
Acceptance of clients that are inappropriate
to our brand and/or delivery of services
which are either illegal, unethical, contravene
professional standards, or are otherwise
perceived by investors, regulators or other
stakeholders as inappropriate.
• Reputation in the marketplace impacted by working for
the wrong clients or delivering the wrong service
• Regulatory sanctions including temporary loss of licence
• Loss of major clients
• Increased risk of litigation
• 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
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
non-audit services to their audit clients
• 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
DATA LOSS
Failure to protect client confidential or personal
data.
• 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
© 2014 KPMG N.V. All rights reserved.
77
INTEGRATED REPORT 2013/2014
Description
Potential impact
Mitigation
• Failure to quickly and fully exploit growth opportunities
REACTING TO NEW TRENDS
Inability to quickly and effectively match key
resulting in loss of revenue
skills to growth areas due to organisational
• Failure to match resource to demand could result
barriers; skills shortages; slowness in
in an excessive cost base in areas of reducing demand
identifying/recruiting appropriate skills; or a lack • Failure to develop future leaders with the right
of staff mobility and/or flexibility.
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
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.
• 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
•
•
•
•
TALENT MANAGEMENT
Inability to recruit and retain sufficiently
qualified, motivated and experienced people or
to build lead partner capability.
• 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
Table 26 / Strategic risks and responses.
Financial risks
The financial risks, such as credit risk and liquidity risk are disclosed in the
financial statements notes section 24.
© 2014 KPMG N.V. All rights reserved.
78
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
INTEGRATED REPORT 2013/2014
10
© 2014 KPMG N.V. All rights reserved.
Report from the
Supervisory Board
79
INTEGRATED REPORT 2013/2014
Governance
In May 2014 external advisors to the Board of Management and
Supervisory Board were appointed to review the governance structure
of KPMG N.V. This review evolved into an improvement and change
programme, ultimately called true blue, that not only focused on governance
but also on culture, remuneration, audit quality, business model and
regaining public trust in the accountancy profession in general and in
KPMG specifically.
The agenda of the Supervisory Board has this year been challenging,
resulting in a high number of 17 meetings (2012/13: 8). Attendance at all
meetings was high with no Board member being regularly absent.
In December 2013, we reached a settlement with the Public Prosecutor’s
Office in a case related to our conduct as auditors of Ballast Nedam in respect
of payments the company had made to foreign agents in connection with
its projects. Ballast Nedam had itself reached a settlement with the PPO in
respect of those payments approximately a year earlier. The Supervisory
Board performed its oversight role through regular update meetings with
the Board of Management and direct contact with external legal counsel.
The Supervisory Board was involved in the development of a remedial
programme and is monitoring the implementation of the proposed measures.
The programme clearly identified the positive effects of bringing an external
perspective to both the Board of Management as well as the Supervisory
Board. This was already effected by appointing an external Chairman of the
Board of Management, Jan Hommen, a Chief Operating Officer from the
KPMG network and appointing an external Chief Human Resources Officer
and an external Chief Financial Officer. The Supervisory Board believes that
with these new appointments the Board of Management is well positioned
to meet the challenges in the coming years.
In February 2014 the public prosecutor’s office informed KPMG about
an investigation into potential unlawful acts in connection with the
development of the current office building of KPMG in Amstelveen.
The Board of Management responded immediately and ordered an
investigation by an external law firm. The Supervisory Board was involved
in the scoping of the engagement. The Supervisory Board was updated by
management and the external law firm on a regular basis. Furthermore the
Chairman of the Supervisory Board took an active role in liaising between
the Supervisory Board and members of the Board of Management.
The governance has been adapted to give the Supervisory Board a more
independent role. This independent role is achieved by a mandate similar to
a Supervisory Board at a large Dutch corporate (structuurvennootschap) and
the current Supervisory Board expects to be able to appoint new members
to the Supervisory Board with relevant experience and a diverse background
in the near future.
In May 2014 media attention focused on the investment in a real estate
project initiated in 2007 by a group of KPMG partners. The Supervisory
Board requested KPMG International to conduct an independent
investigation. The investigation was performed by an external law firm
and has been finalised.
© 2014 KPMG N.V. All rights reserved.
80
INTEGRATED REPORT 2013/2014
Other activities
of the Board
Financial statements
and discharge
The Supervisory Board reviewed and discussed a
number of regular items during the year, amongst
other attention was given to the developments
of the results and the impact that the ongoing
media attention could have on staff.
The Supervisory Board hereby submits to the
shareholders for approval the 2013/2014 Annual
Report which has been prepared by the Board of
Management and which comprises the Annual
Report of the Board of Management and the
2013/2014 Financial Statements. The Financial
Statements have been audited by the external
auditor Grant Thornton. Their findings have been
discussed with the Supervisory Board in the
presence of the Board of Management. The
auditors have expressed an unqualified opinion
on the Financial Statements, which can be found
on the last page of this Annual Report.
We have reviewed the Financial Statements and
recommended that the Annual General Meeting
of Shareholders (AGM) on 2 December 2014
adopts them. We also proposed that the AGM, in
accordance with Article 20 of the Articles of
Association, discharges the members of the
Board of Management from management as
carried out in the past financial year and the
members of the Supervisory Board for its
supervision.
In September 2014 the AFM reported on their
inspection into the quality of selected files from
the Big 4 in The Netherlands. We appreciate the
results had an additional negative impact on
the already low public trust in the Big 4 and the
audit industry at large. The Supervisory Board
will closely monitor the execution of the quality
improvements plans already in place.
© 2014 KPMG N.V. All rights reserved.
81
INTEGRATED REPORT 2013/2014
To conclude
The reporting year has been very challenging,
not only for KPMG as an organization but the
ongoing attention from media and the political
environment put a strain on management and
staff. The Supervisory Board recognises that it
affected not only the professional lives of our
colleagues but also their personal lives.
The Supervisory Board has been impressed with
the commitment of management, partners and
staff to bring the organization, in spite of the
challenging times, back to the forefront of the
industry. We feel supported by our clients, who
still recognize us as a leading professional firm
and confirmed this by awarding us our fair share
of the new engagements in direct competition
with other leading firms, both for audit as well
as advisory services. We thank all our partners
and staff for the energy and commitment they
showed in delivering quality work to our clients.
Erik Weusten
Onno Sloterdijk
Erik Weusten is 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.
Onno Sloterdijk joined KPMG in 1992 and made
partner in 2000. He is the current Head of Private
Equity within KPMG Corporate Finance and is also
a member of the Global Private Equity Steering
Committee of KPMG. Mr. Sloterdijk has won the
award for best M&A advisor for mid markets three
consecutive years in 2007-2009 and again in 2012.
(1963, Male, Dutch nationality)
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.
Amstelveen, 25 November 2014
Supervisory Board:
E.H.W. Weusten (chairman)
D.E.M. Aleman
M.O. Sloterdijk
R.R.J. Smeets
© 2014 KPMG N.V. All rights reserved.
82
(1964, Male, Dutch nationality)
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 is
also a Board member of the Cooperative KPMG U.A..
INTEGRATED REPORT 2013/2014
11
Appendices
© 2014 KPMG N.V. All rights reserved.
83
INTEGRATED REPORT 2013/2014
Public Interest Entities
KPMG Accountants N.V. has signed an audit opinion in the year ended
30 September 2014 for the following public interest entities (in accordance
with the Wta: ‘organisaties van openbaar belang’).
ABN AMRO Bank N.V.
Anadolubank Nederland N.V.
Banque Artesia Nederland N.V.
Chapei 2007 B.V.
ABN AMRO Captive N.V.
Ansvar Verzekeringsmaatschappij N.V.
BASF Finance Europe N.V.
Chapel 2003-1 B.V.
Access Finance B.V.
ARCADIS N.V.
BE Semiconductor Industries N.V.
Colonnade Securities B.V.
Adidas International Finance B.V.
Ares European CLO III B.V.
Beluga Master Issuer B.V.
Contego CLO I B.V.
Afinance B.V.
ASN Beleggingsfondsen N.V.
BNP Paribas OBAM N.V.
Conti-Gummi Finance B.V.
Ageas Finance N.V.
ASR Aanvullende
Ziektekostenverzekeringen N.V.
Boats Investments (Netherlands) B.V.
Corsair (Netherlands) B.V.
Cable and Wireless International Finance
B.V.
Credit Europe Bank N.V.
ASR Bank N.V.
ASR Basis Ziektekostenverzekeringen N.V.
Cadogan Square CLO B.V.
ASR Levensverzekering N.V.
Cadogan Square CLO II B.V.
ASR Nederland N.V.
Cadogan Square CLO III B.V.
ASR Schadeverzekering N.V.
Cadogan Square CLO IV B.V.
Asset Repackaging Trust Five B.V.
Cairn CLO I B.V.
Asset Repackaging Trust SIX B.V.
Cairn CLO II B.V.
Avoca CLO II B.V.
Cairn CLO III
Axent Nabestaandenzorg N.V.
Caja Vital Finance B.V.
Air Berlin Finance B.V.
Airbus Group Finance B.V.
Akzo Nobel N.V.
Allianz Finance II B.V.
Allianz Finance III B.V.
Allianz Holland Paraplufonds N.V.
Allianz Nederland Asset Management B.V.
Allianz Nederland Levensverzekering N.V.
Allianz Risk Transfer N.V.
Amsterdam Trade Bank N.V.
© 2014 KPMG N.V. All rights reserved.
84
Credit Life International N.V.
Creditor B.V.
Cryo-Save Group N.V.
Daimler International Finance B.V.
Dalradian European CLO I B.V.
Dalradian European CLO II B.V.
Dalradian European CLO III B.V.
Dalradian European CLO IV B.V.
De Eendragt Pensioen N.V.
INTEGRATED REPORT 2013/2014
DECO 14 - Pan Europe 5 B.V.
FEET Egi B.V.
HDI-Gerling Verzekeringen N.V.
Jubilee CDO I-R B.V.
Deutsche Bank Nederland N.V.
Finance & Credit Ukraine B.V.
Heijmans N.V.
Jubilee CDO II B.V.
DOCdata N.V.
Fishbowl Master Issuer B.V.
Heineken Holding N.V.
Jubilee CDO III B.V.
Dolphin Master Issuer B.V.
Fornax (Eclipse 2006-2) B.V.
Heineken N.V.
Jubilee CDO IV B.V.
Dryden 32 Euro CLO 2014 B.V.
Fugro N.V.
Hof Hoorneman Bankiers N.V.
Jubilee CDO IX B.V.
Duchess IV CLO B.V.
Fugu CLO B.V.
Holland Homes MBS 2000-1 B.V.
Jubilee CDO V B.V.
Duchess V CLO B.V.
GarantiBank International N.V.
Holland Homes MBS 2003-1 B.V.
Jubilee CDO VI B.V.
Duchess VI CLO B.V.
Global Re N.V.
Holland Homes Oranje MBS B.V.
Jubilee CDO VII B.V.
Duchess VII CLO B.V.
Goldfish Master Issuer B.V.
Jubilee CDO VIII B.V.
E-MAC DE 2009-I B.V.
Green Park CDO B.V.
Holland Mortgage Backed Series (Hermes)
X B.V.
EDP Finance B.V.
Gresham Capital CLO I B.V.
EnBW International Finance B.V.
Gresham Capital CLO II B.V.
ENO Aanvullende Verzekeringen N.V.
Gresham Capital CLO III B.V.
ENO Zorgverzekeraar N.V.
Gresham Capital CLO IV B.V.
Eolo Investments B.V.
Gresham Capital CLO V B.V.
European Aeronautic Defence and Space
Company EADS N.V.
Groothandelsgebouwen N.V.
Holland Mortgage Backed Series (Hermes)
XVIII B.V.
Grosvenor Place CLO I B.V.
Home Credit B.V.
Lowland Mortgage Backed Securities 2 B.V.
Grosvenor Place CLO II B.V.
Hyde Park CDO B.V.
LSP Life Sciences Fund N.V.
Grosvenor Place CLO II B.V.
IMCD N.V.
LUKOIL International Finance B.V.
Grosvenor Place CLO III B.V.
Imtech N.V.
Lusitano Leverage Finance No. 1 B.V.
Hamlet I Leveraged Loan Fund B.V.
Jubii Europe N.V.
Madrileña Red de Gas Finance B.V.
European Mortgage Securities VIII B.V.
Europeesche Verzekering Maatschappij N.V.
Exact Holding N.V.
Exfin Capital B.V.
© 2014 KPMG N.V. All rights reserved.
Holland Mortgage Backed Series (Hermes)
XI B.V.
Holland Mortgage Backed Series (Hermes)
XII B.V.
Holland Mortgage Backed Series (Hermes)
XV B.V.
85
Kendrion N.V.
Koninklijke Boskalis Westminster N.V.
Koninklijke Philips Electronics N.V.
Koninklijke Ten Cate N.V.
Leoforos B.V.
Linde Finance B.V.
Lowland Mortgage Backed Securities 1 B.V.
INTEGRATED REPORT 2013/2014
Malin CLO B.V.
OCI N.V.
PGGM Levensverzekeringen N.V.
Stichting Holland Homes III
MEI- Tsjechië en Slowakije Fonds N.V.
Onderlinge LevensverzekeringMaatschappij
Propertize B.V.
Stichting Holland Homes Oranje II
Prospero CLO I B.V.
Syngenta Finance N.V.
Prospero CLO II B.V.
ThinkCapital ETF''s N.V.
Monastery 2004-I B.V.
Monastery 2006-I B.V.
Monte 2008-I B.V.
N.V. Amersfoortse Algemene Verzekering
Maatschappij
N.V. Bank voor de Bouwnijverheid
N.V. Interpolis Kredietverzekeringen
N.V. Luchthaven Schiphol
N.V. Nationale Borg-Maatschappij
N.V. Nederlandsche Apparatenfabriek
Nedap
Nationale Onderlinge
Waarborgmaatschappij tegen Brandschade
Nederlandse Financierings-Maatschappij
voor Ontwikkelingslanden N.V.
Nederlandse Waterschapsbank N.V.
NedSense Enterprises N.V.
Nieuwe Steen Investments N.V.
Nutreco Assurantie N.V.
Nutreco Holding N.V.
Oceanarium Master Issuer B.V.
© 2014 KPMG N.V. All rights reserved.
Onderlinge Verzekering Maatschappij
Donatus U.A.
Onderlinge Verzekering Maatschappij Univé Proteq Levensverzekeringen N.V.
"Het Zuiden" U.A.
REAAL Schadeverzekeringen N.V.
Onderlinge Verzekering Maatschappij Univé
Regent's Park CDO B.V.
Hollands
RiMaXX International N.V.
Onderlinge Verzekering Maatschappij Univé
Noord-Nederland
Robein Leven N.V.
Onderlinge Waarborgmaatschappij AZVZ
U.A.
ONVZ Aanvullende Verzekering N.V.
ONVZ Ziektekostenverzekeraar N.V.
Ovostar Union N.V.
Palmer Capital Emerging Europe Equity
Fund N.V.
Palmer Capital Emerging Europe Property
Fund N.V.
Palmer Capital Russian Midcap Fund N.V.
Pangaea ABS 2007-1 B.V.
PEARL Mortgage Backed Securities 1 B.V.
PEARL Mortgage Backed Securities 2 B.V.
Triodos Bank N.V.
Triodos Cultuurfonds N.V.
Triodos Groenfonds N.V.
Triodos Vastgoedfonds N.V.
TVM Particulier N.V.
Roche Finance Europe B.V.
TVM Zakelijk N.V.
Rockall CLO B.V.
Unilever N.V.
Roeminck Insurance N.V.
Univé Oost Brandverzekeraar N.V.
Rothschilds Continuation Finance B.V.
Univé Regio+ Brandverzekering N.V.
SBM Offshore N.V.
Verenigde Assurantiebedrijven Nederland
N.V.
SMILE Securitisation Company 2007 B.V.
SNS Bank N.V.
SNS Beleggingsfondsen N.V.
SNS REAAL N.V.
SPP Infrastructure Financing B.V.
SRLEV N.V.
St. James's Park CDO B.V.
Wolters Kluwer N.V.
Wood Street CLO I B.V.
Wood Street CLO II B.V.
Wood Street CLO III B.V.
Wood Street CLO IV B.V.
Wood Street CLO V B.V.
Wood Street CLO VI B.V.
PEARL Mortgage Backed Securities 4 B.V.
86
INTEGRATED REPORT 2013/2014
Summary of our system of quality controls
This summary provides an overview of our
system of quality controls and is therefore not
necessarily the entire system as operating within
the firm.
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 14 / Our system of quality controls
© 2014 KPMG N.V. All rights reserved.
Tone at the top
For us, 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.
87
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).
INTEGRATED REPORT 2013/2014
The Board has particularly made it an objective to
ensure public trust and public interest is part of
our internal processes. Not only will we install a
fully independent Supervisory Board, but we
have also appointed three external members to
the Board. 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 value chain.
As Board we also drive and protect our corporate
values and will not shunt 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.
© 2014 KPMG N.V. All rights reserved.
Association with the right
clients
Prospective client and engagement
evaluation process
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. Where the client is considered
to be ‘high risk’ a quality and risk management
partner is involved in approving the evaluation.
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
88
(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
including a review of any non-audit services
provided to the client and of other relevant
relationships.
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.
INTEGRATED REPORT 2013/2014
Continuance process
We undertake an annual re-evaluation of all
clients. In addition, clients are re-evaluated earlier
if there is an indication that there may be a
change in their risk profile. Recurring or longrunning engagements are also subject to reevaluation.
This re-evaluation serves two purposes. Firstly,
we will decline to act for any client who is unable
to deliver to our expected level of quality or if we
consider that it would not be appropriate to
continue to be associated with the client.
Secondly, and more commonly, our firms use the
re-evaluation process to consider whether or not
any additional risk management or quality control
procedures need to be put in place for the next
engagement (this may include the assignment of
additional professionals or the need to involve
additional specialists on the audit).
© 2014 KPMG N.V. All rights reserved.
Clear standards and
robust tools
All of our professionals are expected to adhere
to KPMG policies and procedures (including
independence policies) that we set. We provide a
range of tools to support them in meeting these
expectations. The policies and procedures set for
the Audit function also incorporate the relevant
requirements of accounting, auditing, ethics, and
quality control standards, and other relevant laws
and regulations.
Personal 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. This confirmation is used
89
to evidence the individual’s compliance with and
understanding of the operating firm’s
independence policies.
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.
Our professionals are responsible for making
appropriate enquiries to ensure that they do not
have any personal financial interests that are
restricted for independence purposes. In
common with other member firms of KPMG
International, we use a web-based independence
tracking system (KICS) to assist our professionals
in their compliance with personal independence
investment policies. This system contains an
inventory of publicly available investment
products (including the Publicly Held Audit
Clients List, or PHAC list). Partners and clientfacing managers are required to use this system
prior to entering into an investment to identify
whether they are able to do so. They are also
required to maintain a record of all of their
investments in the system, which automatically
notifies them if their investments subsequently
become restricted.
INTEGRATED REPORT 2013/2014
Firm independence
Audit partner rotation
Audit partners are subject to periodic rotation of
their responsibilities for audit clients under
applicable laws and regulations and
independence rules. These limit the number of
years that partners in certain roles may provide
audit services to an audit client. Our policies are
consistent with the IESBA Code of Ethics and
also require us to comply with any stricter
applicable rotation requirements. The rotation
monitoring is subject to compliance testing.
Non-audit services and conflicts of interest
KPMG policies, consistent with IESBA principles
and applicable laws and regulations, require the
lead audit engagement partner to evaluate the
threats arising from the provision of non-audit
services and the safeguards available to address
those threats. KPMG International’s proprietary
system, SentinelTM, facilitates compliance with
these policies. Lead audit engagement partners
are required to maintain group structures for their
publicly traded and certain other audit clients and
their affiliates in the system. Every engagement
entered into by any KPMG member firm in our
network is required to be included in the system
prior to starting work. The system then enables
© 2014 KPMG N.V. All rights reserved.
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.
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. An escalation
procedure exists in the case of dispute between
member firms. If a potential conflict issue cannot
be resolved, the engagement is declined or
terminated.
It may be necessary to apply specific procedures
to manage the potential for a conflict of interest
to arise or be perceived to arise so that the
confidentiality of all clients’ affairs is maintained.
Such procedures may, for example, include
establishing formal dividers between
engagement teams serving different clients and
making arrangements to monitor the operation of
such dividers.
90
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. Compliance with
these policies and procedures is reviewed
periodically. Our Supplier Code of Conduct also
contains Corporate Social Responsibility (CSR)
and Diversity objectives and we require our
suppliers to adopt our Supplier Code. As one of
the industry leaders, we fully support the
development of CSR in our supply chain. We are
profoundly convinced that issues such as child
labour, forced labour, slavery, discrimination,
inequality, corruption and bribery, large-scale
devastation of our natural habitats as well as
other forms of ethical wrongdoing no longer
should prevail in the 21st century. In this respect,
we enhanced the KPMG CSR Supplier Code to
support our ambitions to take our responsibility in
our secondary supply chain a step further.
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
INTEGRATED REPORT 2013/2014
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. KPMG Europe LLP’s operating
firms may also add local requirements and/or
guidance in KAM to comply with additional
professional, legal or regulatory requirements.
Our audit methodology is supported by eAudIT,
KPMG’s electronic audit tool, which provides
KPMG auditors worldwide with the methodology,
guidance, and industry knowledge needed to
perform efficient, high-quality audits. eAudIT has
been deployed to all audit professionals.
eAudIT’s activity-based workflow provides
engagement teams with ready access to relevant
information at the right time throughout the
audit, thereby enhancing effectiveness and
efficiency and delivering value to our audit
clients.
KAM contains, among other things, procedures
intended to identify and assess the risk of
material misstatement and procedures to
respond to those assessed risks.
© 2014 KPMG N.V. All rights reserved.
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.
Advisory methodologies and tools
The materials included in our Advisory Services
Directory are 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
globally-available 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, to help address our client’s
business needs.
91
Methodologies and tools are available for
multiple service lines and engagement types.
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.
Engagement partners are required to be satisfied
that their engagement teams have appropriate
competencies and capabilities, including time, to
perform audit engagements in accordance with
KAM, professional standards and applicable legal
and regulatory requirements. This may include
involving KPMG’s local and global specialists.
When considering the appropriate competence
and capabilities expected of the engagement
team as a whole, the engagement partner’s
considerations may include the following:
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• An understanding of, and practical experience
with, engagements of a similar nature and
complexity through appropriate training and
participation;
• An understanding of professional standards
and legal and regulatory requirements;
• Appropriate technical skills, including those
related to relevant information technology and
specialised areas of accounting or auditing;
• Knowledge of relevant industries in which the
client operates;
• Ability to apply professional judgement;
• An understanding of KPMG’s quality control
policies and procedures.
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.
© 2014 KPMG N.V. All rights reserved.
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.
Everyone has role to play in protecting client and
confidential information. Policies and practices
are communicated to all personnel and, as
appropriate, reinforced through guidance,
awareness and training. We published an
Acceptable Use Policy that applies to all KPMG
personnel. This policy encourages effective and
appropriate use of KPMG information technology
resources, and highlights the protection
requirements of all employee, KPMG, and client
confidential and personal information. Data
privacy policies are also in place governing the
handling of personal information.
In addition, we have a formal document retention
policy concerning the retention period for audit
documentation and other records relevant to an
engagement in accordance with the relevant
IESBA requirements as well as other applicable
92
laws, standards and regulations. As part of KPMG
International requirements, we have appointed a
National IT Security Officer (NITSO), with the
necessary authority, 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). The National IT
Security Officer (NITSO) also reports to the
operating firm’s Senior Management and to the
Global IT Security Officer and Global Head of
Information Protection. We have an incident
response procedure to minimise the impact of a
security breach or data loss.
INTEGRATED REPORT 2013/2014
Recruitment, development and
assignment of appropriately
qualified personnel
We are totally committed to equipping our people
with the skills and tools they need to cut through
the complexity of today’s world – complexity that
sees our people increasingly working across
borders, collaborating on a global basis and taking
on challenging and innovative projects.
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 onboarding programme, which includes training in
areas such as ethics and independence, quality
and risk management principles and our people
management procedures. Our on-boarding
programme also includes ensuring that any
© 2014 KPMG N.V. All rights reserved.
issues of independence or conflicts of interest
are addressed before the individual’s
employment or partnership commences.
Personal development
It is important that all professionals have the
necessary business and leadership skills to be
able to perform quality work in addition to
technical skills.
A partner development framework is in place that
links particular training programmes to various
partner levels and roles. Partners are encouraged
to make use of these development opportunities,
and also to contribute to the development of
other partners and staff through coaching,
mentoring, and teaching on our core
programmes.
In relation to audit we provide opportunities for
professionals to develop the skills, behaviours
and personal qualities that form the foundations
of a successful career in auditing. 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
93
the job, stretch assignments, country rotational
and global mobility opportunities and the like.
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.
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. This is achieved through our global
performance management process, which is
supported by a web-based application. These
evaluations are conducted by performance
managers and partners who are in a position to
assess the professionals’ performance. In
preparation for their counselling, all of our people
are required to seek evidence of their
performance during the year. As part of the
year-end counselling process they are awarded a
INTEGRATED REPORT 2013/2014
grading based on how well they have performed
in meeting their objectives. This grade directly
influences the total amount of remuneration that
they are paid. The results of the annual
counselling are also considered when promotion
decisions are being made.
risk of each audit and then to consider whether or
not, taken as a whole, the specific engagement
leader has the appropriate time, suitable
experience and the right level of support to
enable them to perform a high-quality audit for
each client in their portfolio.
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 of internal monitoring
programmes. As part of these metrics, an overall
grading is awarded. We refer to chapter 7 for
further details on partner remuneration.
Compensation and promotion
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.
As an additional control in Audit (where the
services are of more of a recurring nature than
across much of the rest of our business), each
national Head of Audit together with the national
Audit Quality & Risk partner performs an annual
review of the portfolio of all of our Audit
engagement leaders. The purpose of this
portfolio review is to look at the complexity and
© 2014 KPMG N.V. All rights reserved.
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.
94
Commitment to technical
excellence and quality service
delivery
We provide all professionals with the technical
training and support they need, including access
to networks of specialists, the Department of
Professional Practice (DPP) and the Quality &
Risk Management Group (QRMG) or equivalent
which are made up of senior professionals with
extensive experience in audit, reporting and risk
management, either to provide resources to the
engagement team or for consultation.
At the same time, we use accreditation and
licensing policies to require professionals to have
the appropriate knowledge and experience for
their assigned engagements. Our structure
enables our engagement teams to apply their
business understanding and industry knowledge
to deliver valued insights and to maintain quality.
Technical support is also available to our
operating firms for work on SEC foreign
registrants through the International Standards
INTEGRATED REPORT 2013/2014
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 have accreditation requirements for many of
our services (for example for US audit and
accounting work, International Financial
© 2014 KPMG N.V. All rights reserved.
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 Audit and
Advisory professionals are also required to
maintain accreditation with their applicable
professional bodies and satisfy the Continuing
Professional Development requirements of such
bodies (at a minimum, professionals comply with
IESBA requirements). Our policies and
procedures are designed to ensure that those
individuals who require a licence to undertake
their work are appropriately licensed.
Training
In addition to personal development discussed
earlier, our policies require all professionals to
maintain their technical competence and to
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.
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.
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.
95
In addition to structured technical training, there
is a coaching culture that encourages
consultation, on-the-job training and mentoring.
INTEGRATED REPORT 2013/2014
Performance of effective and
efficient engagements
Timely partner and manager involvement
To identify and respond to the significant risks
applicable to each audit, the engagement team
requires an understanding of the client’s
business, its financial position (particularly in
Audit) and the environment in which it operates.
The engagement partner is responsible for the
overall quality of the engagement and therefore
for the direction, supervision and performance of
the engagement.
The engagement partner is a key participant in
planning meetings, reviews key documentation
– in particular documentation relating to
significant matters arising during the
engagement and conclusions reached – and is
responsible for all engagement deliverables. The
engagement manager assists the partner in
meeting these responsibilities and in the day-today 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
© 2014 KPMG N.V. All rights reserved.
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
We consider all audit evidence obtained during
the course of the audit, including consideration of
contradictory or inconsistent audit evidence. The
nature and extent of the audit evidence we
gather is responsive to the assessed risks. We
recognise that audit evidence obtained from
external sources tends to be more persuasive.
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.
Professional scepticism involves a questioning
mind and alertness to contradictions or
inconsistencies in audit evidence. Professional
scepticism features prominently throughout
auditing standards and receives significant focus
96
from regulators. 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.
Ongoing mentoring and on-the-job coaching and
supervision during an engagement include:
• Engagement partner participation in planning
discussions;
• Tracking the progress of the engagement;
INTEGRATED REPORT 2013/2014
• Considering the competence and capabilities
of the individual members of the engagement
team, including whether they have sufficient
time to carry out their work, whether they
understand their instructions, and whether the
work is being carried out in accordance with
the planned approach to the engagement;
• Helping engagement team members address
any significant matters that arise during the
engagement and modifying the planned
approach appropriately;
• Identifying matters for consultation with more
experienced team members during the
engagement.
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.
Appropriate involvement of the Engagement
Quality Control (EQC) reviewer
EQC reviewers are appointed by the Country
Quality & Risk Management Partner and have
appropriate experience and knowledge to
perform an objective review of the decisions and
© 2014 KPMG N.V. All rights reserved.
judgements made by the engagement team.
They are experienced KPMG professionals who
are independent of the engagement team. They
offer an objective review of the more critical and
judgemental elements of the engagement.
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.
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.
Commitment to continuous
improvement
Before the date of the deliverable (e.g. the
auditor’s report), these individuals review:
• Selected audit documentation and client
communications;
• The appropriateness of the financial
statements and related disclosures (Audit
only);
• The significant judgements the engagement
team made and the conclusions it reached.
97
We focus on ensuring our work continues to
meet the needs of participants in the capital
markets. To achieve this goal, we employ a broad
range of mechanisms to monitor our
performance, respond to feedback and
understand our opportunities for continuous
improvement.
Additionally, we have processes in place to
proactively identify emerging risks and to identify
opportunities to improve quality and provide
insights.
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
INTEGRATED REPORT 2013/2014
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.
Quality Performance Reviews (QPR)
The International QPR programme 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 programme
assesses engagement level performance in the
Audit, Tax, and Advisory functions and identifies
opportunities to improve engagement quality. All
engagement partners are generally subject to
selection for review at least once in a three-year
cycle. The reviews are tailored to the relevant
function, performed at a member firm level,
overseen by a Lead Reviewer from outside the
specific operating firm being reviewed, and are
monitored regionally and globally. Remedial
action plans for all significant deficiencies noted
are required at an engagement and operating
firm level. We disseminate our findings from the
QPR programme to our professionals through
written communications, internal training tools,
© 2014 KPMG N.V. All rights reserved.
and periodic partner, manager and staff
meetings. These areas are also emphasised in
subsequent inspection programmes to gauge the
extent of continuous improvement.
Each engagement partner is selected for review
at least once every three years. Engagements
are graded as satisfactory or less than
satisfactory(LTS) for Audit. Less than satisfactory
can be further graded as performance
improvement necessary or unsatisfactory. In
Advisory, engagements are graded ‘Satisfactory’,
or ‘Unsatisfactory’.
A ‘Satisfactory’ 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 requirements (Audit
only), and (ii) key judgements concerning
significant matters in the engagement and – for
Audit only – the audit opinion itself to have been
appropriate.
A ‘Performance Improvement Necessary’
grading is attributed where the engagement
deliverable is generally supported by the work
performed and – again for Audit only – the
auditor’s report is appropriate. However,
improvements are necessary in one or more
98
significant area including with respect to the
documentation of the work performed.
An ‘Unsatisfactory’ 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.
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.
INTEGRATED REPORT 2013/2014
Risk Compliance Programme (RCP)
The RCP is a member firm’s annual selfassessment programme. The objectives of the
RCP are to monitor, assess, and document firm
wide/cross-functional 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. The programme
is overseen and monitored regionally as well as
globally.
Member firms are required to self-assess their
overall levels of compliance as ‘Green’, ‘Amber’ or
‘Red’. A ‘Green’ grade indicates that the firm is
substantially compliant with KPMG’s policies and
procedures and where there are issues identified
these are minor and isolated and are acted on
promptly. An ‘Amber’ grade also indicates that
the firm is substantially compliant with KPMG
policies and procedures although there may be
several instances of non-compliance with
policies or procedures, however, these do not
indicate serious deficiencies within the firm as a
whole. A ‘Red’ grade indicates that there are
serious deficiencies.
© 2014 KPMG N.V. All rights reserved.
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 ‘traffic light’ rating by the GCR review team. A
‘Green’ rating indicates that policies and
procedures are generally satisfactory and that
the firm is substantially compliant with KPMG
International’s policies and procedures. A ‘Yellow’
rating is given when the results indicate that the
firm is generally compliant with KPMG
International’s policies and procedures. There
may be several instances of non-compliance with
policies and procedures; however, these do not
necessarily indicate serious deficiencies within
the firm as a whole. A ‘Red’ rating indicates that a
firm has serious deficiencies.
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INTEGRATED REPORT 2013/2014
12
Financial
Statements
© 2014 KPMG N.V. All rights reserved.
100
INTEGRATED REPORT 2013/2014
Financial Statements
2013/2014
Table of contents
© 2014 KPMG N.V. All rights reserved.
Annual Report Board of Management
131
Report of the Supervisory Board
133
Consolidated statement of comprehensive income
135
Consolidated statement of financial position
136
Consolidated statement of cash flows
137
Consolidated statement of changes in equity
138
Notes to the consolidated financial statements
139
Separate statement of financial position
167
Separate statement of comprehensive income
168
Notes to the separate financial statements
169
Other information
173
101
INTEGRATED REPORT 2013/2014
Annual Report Board of Management
Revenue decreased in the financial year by 1.7%
to EUR 449 million. Profit before income tax
increased by 6.4% to EUR 70 million. Revenues
dropped 2.9% in Audit and increased slightly in
Advisory by 0.7%.
Personnel costs decreased by 6.6% mainly
explained by a decrease in the number of FTEs
of 6.3%. The decrease in FTEs was mainly
caused by a decrease in FTEs in Advisory.
The average number of partners and staff
decreased by 206 FTEs (6.6%) to 2,925 FTEs.
The number of partners decreased by 18 FTEs to
149 FTEs. The number of professional staff has
decreased by 144 FTEs (6.2%) to 2,195 FTEs,
while the number of support staff has dropped
by 52 FTEs (9.2%) to 515 FTEs. The decrease in
professional staff is due to a decrease in Audit
of 3 FTEs (0.2%) and a decrease of 141 FTEs
(13.1%) in Advisory. Part of this decrease is
explained by more work performed by the
KPMG firm KGS in India. The dedicated team
for KPMG N.V. in India has grown by 40 FTEs to
135 FTEs. As of 1 November 2014 the Board of
Management comprises 1 female and 6 male
board members. The Board of Management is
aware of the 30% diversity criterion with respect
© 2014 KPMG N.V. All rights reserved.
to female board members and the goal still is to
meet this criterion, although this will be a longer
term scenario since new board members have
just started in their role.
The other operating expenses increased by
EUR 10.8 million (8.6%) mainly explained by
the settlement of EUR 7 million with the Public
Prosecution Office other settlements and
the adjusted tax return 2010 regarding the
development of the building in Amstelveen, and
the provisions formed for vacant offices space.
The profit before tax in Audit decreased by
EUR 6.9 million (8.0%) and the profit before tax in
Advisory increased by EUR 24.7 million (58.7%).
The decrease in Audit is mainly explained by a
reduction in revenues and investments in quality.
The increase in profit before tax in Advisory is
explained by a lower number of staff (141 FTEs)
generating revenues slightly higher than previous
year. Corporate costs increased due to the Ballast
Nedam settlement, high legal costs and the
provision for vacant office space. Income tax
expense is high compared to previous year due
to the provision formed as a consequence of the
uncertain tax position 2010 KPMG Gebouw II B.V.
the corporate vehicle for the development of the
102
building in Amstelveen. Fees paid to partners
under management agreements decreased by
EUR 3.3 million (5.3%).
Investments in property, plant and equipment
remain limited and were only made in
replacement of computer and communication
equipment. The investments in intangible assets
relate to the acquisition of Innovation Factory B.V.
(in previous year Bridging Solutions B.V. and
Conquaestor B.V.). Material investments in hours
have been made in innovation projects in Audit,
like Dynamic Audit, and within Advisory for
example in Big Data.
Financing is provided by loans from partners.
At the end of the year this amounted to
EUR 39.5 million, an increase of EUR 0.1 million
compared to previous year (EUR 39.4 million).
During the past financial year, cash increased by
EUR 24.7 million. This is mainly explained by
higher net cash inflow from operating activities.
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 does not
make use of financial derivatives and follows
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
procedures and guidelines to limit the size of the
credit risk with each counterparty and market.
The cash is placed with banks which have a
credit rating of 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 see note
24 in the financial statements.
In the current economic conditions we expect
a slight decline in revenue. As a result of the
legislation to rotate audit firms and an analysis
of our current good market share in the top
segment, we expect a further decline in Audit
revenues in 2015. Audit firm rotation will result in
more opportunities for Advisory and we expect
Advisory revenues to increase slightly. We also
expect to further grow in Advisory due to further
acquisitions of Advisory businesses.
© 2014 KPMG N.V. All rights reserved.
Due to more investments in our audit quality
and change programme, we expect no growth
in profitability in the coming financial year.
The total number of staff in The Netherlands is
expected to decline slightly as a result of the
decline in revenues and a further build-up of
capacity in India to assist our professionals in
The Netherlands. Investments are related to
possible acquisitions in Advisory and continued
investments in innovation. Financing by partners
is expected to remain at current levels.
Board of Management under the
Articles of Association:
J.H.M. Hommen (chairman)
A.J.A. Cranston
J. van Delden
B. Ferwerda
R.G.A. Fijneman
M.A. Hogeboom
B. Lamberts
The launch of our change programme “true blue”
gives us confidence regarding the future and
emphasises the importance to invest in the
long-term success of our organisation, especially
in our people and the quality of our services.
Amstelveen, 25 November 2014
103
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
Report of the Supervisory Board
The agenda of the Supervisory Board has this
year been challenging, resulting in a high number
of 17 meetings (2012/13: 8). Attendance at all
meetings was high with no Board member being
regularly absent.
In December 2013, we reached a settlement with
the Public Prosecutor’s Office in a case related to
our conduct as auditors of Ballast Nedam in
respect of payments the company had made to
foreign agents in connection with its projects.
Ballast Nedam had itself reached a settlement
with the PPO in respect of those payments
approximately a year earlier. The Supervisory
Board performed its oversight role through regular
update meetings with the Board of Management
and direct contact with external legal counsel.
The Supervisory Board was involved in the
development of a remedial programme and is
monitoring the implementation of the proposed
measures.
In February 2014 the public prosecutor’s office
informed KPMG about an investigation into
potential unlawful acts in connection with the
development of the current office building of
KPMG in Amstelveen.
© 2014 KPMG N.V. All rights reserved.
The Board of Management responded
immediately and ordered an investigation by an
external law firm. The Supervisory Board was
involved in the scoping of the engagement. The
Supervisory Board was updated by management
and the external law firm on a regular basis.
Furthermore the Chairman of the Supervisory
Board took an active role in liaising between the
Supervisory Board and members of the Board of
Management.
In May 2014 media attention focused on the
investment in a real estate project initiated in
2007 by a group of KPMG partners. The
Supervisory Board requested KPMG International
to conduct an independent investigation. The
investigation was performed by an external law
firm and has been finalised.
Governance
In May 2014 external advisors to the Board of
Management and Supervisory Board were
appointed to review the governance structure
of KPMG N.V. This review evolved into an
improvement and change programme, ultimately
called true blue, that not only focused on
governance but also on culture, remuneration,
104
audit quality, business model and regaining public
trust in the accountancy profession in general
and in KPMG specifically.
The programme clearly identified the positive
effects of bringing an external perspective to
both the Board of Management as well as the
Supervisory Board. This was already effected by
appointing an external Chairman of the Board of
Management, Jan Hommen, a Chief Operating
Officer from the KPMG network and appointing
an external Chief Human Resources Officer and
an external Chief Financial Officer.
The Supervisory Board believes that with these
new appointments the Board of Management is
well positioned to meet the challenges in the
coming years.
The governance has been adapted to give the
Supervisory Board a more independent role. This
independent role is achieved by a mandate
similar to a Supervisory Board at a large Dutch
corporate (structuurvennootschap) and the
current Supervisory Board expects to be able to
appoint new members to the Supervisory Board
with relevant experience and a diverse
background in the near future.
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
Other activities of the Board
The Supervisory Board reviewed and discussed a
number of regular items during the year, amongst
other attention was given to the developments
of the results and the impact that the ongoing
media attention could have on staff.
In September 2014 the AFM reported on their
inspection into the quality of selected files from
the Big 4 in The Netherlands. We appreciate the
results had an additional negative impact on
the already low public trust in the Big 4 and the
audit industry at large. The Supervisory Board
will closely monitor the execution of the quality
improvements plans already in place.
Financial statements and discharge
The Supervisory Board hereby submits to the
shareholders for approval the 2013/2014 Annual
Report which has been prepared by the Board of
Management and which comprises the Annual
Report of the Board of Management and the
2013/2014 Financial Statements. The Financial
Statements have been audited by the external
auditor Grant Thornton. Their findings have been
discussed with the Supervisory Board in the
presence of the Board of Management. The
auditors have expressed an unqualified opinion
© 2014 KPMG N.V. All rights reserved.
on the Financial Statements, which can be found
on the last page of this Annual Report.
We have reviewed the Financial Statements and
recommended that the Annual General Meeting
of Shareholders (AGM) on 2 December 2014
adopts them. We also proposed that the AGM, in
accordance with Article 20 of the Articles of
Association, discharges the members of the
Board of Management from management as
carried out in the past financial year and the
members of the Supervisory Board for its
supervision.
and confirmed this by awarding us our fair share
of the new engagements in direct competition
with other leading firms, both for audit as well
as advisory services. We thank all our partners
and staff for the energy and commitment they
showed in delivering quality work to our clients.
and confirming this by allowing us winning our
fair share in direct competition with other
leading firms, both for audit as well as advisory
engagements. We thank all our partners and
staff for the energy and commitment they
showed in delivering quality work to our clients.
To conclude
The reporting year has been very challenging,
not only for KPMG as an organization but the
ongoing attention from media and the political
environment put a strain on management and
staff. The Supervisory Board recognises that it
affected not only the professional lives of our
colleagues but also their personal lives.
The Supervisory Board has been impressed with
the commitment of management, partners and
staff to bring the organization, in spite of the
challenging times, back to the forefront of the
industry. We feel supported by our clients, who
still recognize us as a leading professional firm
105
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
Consolidated statement of comprehensive income
For the year ended 30 September 2014
Note
2013/2014
2012/2013
(in thousands of euros)
Note
2013/2014
2012/2013
Income tax expense
8
7,816
832
Fees paid to partners under management
agreements
9
58,876
62,299
3,264
2,626
-
-
3,264
2,626
3,264
2,626
-
-
3,264
2,626
(in thousands of euros)
Revenue
2
448,624
456,195
Other income
3
18,686
14,923
467,310
471,118
Total income
Profit for the year
Costs of outsourced work and
other external charges
38,891
41,815
4
210,609
225,443
10, 11
9,636
10,078
5
136,920
126,118
396,056
403,454
71,254
67,664
280
71
-1,578
-2,067
-1,298
-1,996
Share of profit of associate
-
89
Profit before income tax
69,956
65,757
Employee benefits expenses
Depreciation and amortisation
Other expenses
Total expenses
Results from operating activities
Finance income
Finance costs
Net finance costs
6
Other comprehensive income after tax
Total comprehensive income for the year
Profit and total comprehensive income
attributable to:
Owners of the company
Non-controlling interest
The notes on pages 10 to 36 inclusive are an integral part of these consolidated financial statements.
© 2014 KPMG N.V. All rights reserved.
106
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
Consolidated statement of financial position
As at 30 September 2014
Note
30 September
2014
30 September
2013
Note
30 September
2014
30 September
2013
19
3,726
4,452
Employee benefits
20
2,978
3,058
(in thousands of euros)
(in thousands of euros)
Assets
Non-current liabilities
Non-current assets
Coöperatie KPMG U.A. relating to:
- loans from former partners
Property, plant and equipment
10
21,026
25,560
Intangible assets and goodwill
11
21,000
20,820
Receivables
12
393
-
Bank loans
21
423
-
Investment in securities
13
1,225
-
Provisions
22
3,532
1,483
43,644
46,380
10,659
8,993
Current liabilities
Current assets
Coöperatie KPMG U.A. relating to:
Unbilled services
14
31,935
36,239
Trade receivables
15
81,205
89,105
- loans from partners
19
39,473
39,438
Other receivables, prepayments
16
14,011
10,806
- loans from former partners
19
13,651
14,903
Cash and cash equivalents
17
27,835
3,107
- VAT liability
19
2,059
2,337
154,986
139,257
Advance billings
14
24,032
26,361
198,630
185,637
Trade and other payables
23
50,156
44,822
8,531
2,261
Total assets
Income tax
Equity and liabilities
Equity
Share capital
18
5,500
5,500
10,400
12,600
Reserves
2,360
2,360
Profit for the year
3,264
2,626
21,524
23,086
6
6
21,530
23,092
Share premium
Total equity attributable to equity
holders of the Company
Non-controlling interest
Total equity
© 2014 KPMG N.V. All rights reserved.
Employee benefits
20
25,948
22,849
Bank loans
21
339
-
Provisions
22
2,252
581
166,441
153,552
Total liabilities
177,100
162,545
Total equity and liabilities
198,630
185,637
The notes on pages 10 to 36 inclusive are an integral part of these consolidated financial statements.
107
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
Consolidated statement of cash flows
For the year ended 30 September 2014
Note 2013/2014
2012/2013
Note 2013/2014
(in thousands of euros)
(in thousands of euros)
Profit for the year
3,264
2,626
Adjustments for:
Income tax expense
8
7,816
832
Fees paid to partners under management
agreements
9
58,876
62,299
Gain on sale of businesses
3
-1,712
-
10, 11
9,636
10,078
Finance income
6
-280
-71
Finance costs
6
1,578
2,067
79,178
77,831
Depreciation and amortisation
2012/2013
Cash flows before movements in working
capital and provisions
Acquisition of property, plant and equipment
10
-2,147
-3,228
Proceeds from sale of property, plant and equipment
10
120
1,894
Acquisition of businesses net of cash
11
27
-2,086
Investment in back office software
11
-26
-5,142
Divestment
12
1,319
-
Investment in securities
13
-1,225
-
6
280
96
-1,652
-8,466
600
300
Interest received
Net cash used in investing activities
Addition to share premium by new partners
Increase resp. decrease in financing by partners
19
35
-17,849
Decrease resp. increase in financing by former partners
19
-1,978
4,813
Payment to partners based on management contracts
11
-58,876
-62,299
6
-950
-1,598
-5,426
-7,677
-74
-
-66,669
-84,310
Change in unbilled services and advance billings
14
1,975
1,950
Change in trade receivables
15
8,174
-2,345
Change in other receivables and prepayments
16
-2,178
937
Change in trade and other payables
23
1,385
4,807
Change in provisions
22
3,720
-478
Change in employee benefits
20
3,019
-3,890
Net increase (decrease) in cash and cash equivalents
17
24,728
-15,746
95,273
78,812
Cash and cash equivalents at 1 October
17
3,107
18,853
27,835
3,107
Cash flows from operating activities
Interest paid to partners and former partners
Dividends paid to Coöperatie KPMG U.A.
Payment on bank loans
Net cash from financing activities
Cash and cash equivalents at 30 September
Interest paid
6
-678
-419
Income tax paid
8
-1,546
-1,355
93,049
77,030
Net cash from operating activities
© 2014 KPMG N.V. All rights reserved.
21
The notes on pages 10 to 36 inclusive are an integral part of these consolidated financial statements.
The comparative figures have been reclassed for presentation purposes. The principles of valuation
and determination of result remained unchanged compared to prior years.
108
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
Consolidated statement of changes in equity
Share capital
Share
premium
Treasury
shares
Reserves
Profit for
the year
Total equity
attributable to
equity holders
Noncontrolling
interest
Total
equity
5,500
16,500
-1,500
1,474
5,863
27,837
6
27,843
-
-
-
5,863
-5,863
-
-
-
-
-
-
-
2,626
2,626
-
2,626
Transfer
-
-1,500
1,500
-
-
-
-
-
Dividend paid
-
-2,700
-
-4,977
-
-7,677
-
-7,677
Additions
-
300
-
-
-
300
-
300
Balance at 30 September 2013
5,500
12,600
-
2,360
2,626
23,086
6
23,092
Balance at 1 October 2013
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
5,500
10,400
-
2,360
3,264
21,524
6
21,530
(in thousands of euros)
Balance at 1 October 2012
Transfer
Total comprehensive income for the year
Profit for 2012/2013
Transaction with owners of the Company,
recognised directly in equity
Transfer
Total comprehensive income for the year
Profit for 2013/2014
Transaction with owners of the Company,
recognised directly in equity
Balance at 30 September 2014
The notes on pages 10 to 36 inclusive are an integral part of these consolidated financial statements.
© 2014 KPMG N.V. All rights reserved.
109
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
Notes to the consolidated financial statements
All amounts are in thousands of euros unless
otherwise stated.
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).
On 26 September 2014 the demerger of KPMG
Europe LLP has taken place and as a result
the shares of KPMG N.V. were transferred to
Coöperatie KPMG U.A. (‘the Cooperative’).
The practice companies of the partners are no
longer member of KPMG Europe LLP. 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
© 2014 KPMG N.V. All rights reserved.
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
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 2013/2014 were approved
for issue by the Board of Management on
25 November 2014.
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
110
General
The financial statements are prepared on a
historical cost basis and stated in thousands
of euros unless otherwise specified.
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.
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
Judgements made by the Board of Management
in the application of adopted EU IFRS that have
a significant effect on the financial statements
and estimates with a significant risk of material
adjustment in the next year are discussed in
note 29.
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 2014,
and have not been applied in preparing these
consolidated financial statements. None of these
is expected to have a significant effect on the
consolidated financial statements of the Company.
Basis of consolidation
Business combinations
For business combinations, fair values that reflect
conditions at the date of the business combination
© 2014 KPMG N.V. All rights reserved.
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 comprehensive income.
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.
Therefore, the underlying interests are presented
as already owned by the Company, both in the
statement of comprehensive income and the
statement of financial position, even though
legally they are still non-controlling interests.
Company. Control exists when the Company
has the power, directly or indirectly, to determine
the financial and operating policies of an entity
so as to obtain benefits from its activities.
The financial statements of subsidiaries are
included in the consolidated financial statements
from the date that control commences until the
date that control ceases.
A list of significant subsidiaries is included in
note 26.
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.
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.
Subsidiaries
Subsidiaries are entities controlled by the
111
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
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
comprehensive income.
Derivative financial instruments
When derivative financial instruments are used
to hedge exposure to foreign exchange risks of
recognised monetary assets or liabilities, hedge
accounting is not applied and a gain or loss on
the hedging instrument is recognised in the
statement of comprehensive income.
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, to 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 three
years for a maximum amount of EUR 4 million.
© 2014 KPMG N.V. All rights reserved.
For the remaining 20% of the shares of
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.
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 comprehensive income when
they are incurred.
112
Depreciation
Depreciation is recognised in the statement of
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
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
amortisation and impairment losses. Back office
software is stated at cost less accumulated
amortisation and impairment losses.
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
© 2014 KPMG N.V. All rights reserved.
immediately in the statement of comprehensive
income.
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
113
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
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
that reflects current market assessments of the
time value of money and the risks specific to the
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.
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.
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.
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.
These employee benefits relate primarily to
supplementary WAO (Occupational Disability
Insurance Act) benefits and a provision for
long-service benefits.
© 2014 KPMG N.V. All rights reserved.
114
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
Revenue
Revenue from services performed is recognised
in the statement of 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.
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 and IHQ staff expenditures charged to
third parties that occupy buildings belonging to
the Company.
Operating lease payments
Payments made under operating leases are
recognised in the statement of 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.
© 2014 KPMG N.V. All rights reserved.
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 comprehensive income using the
effective interest method.
Fees paid to partners under
management agreements
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 part of
fees paid to partners under the management
agreements 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.
115
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. Consequently, there are no
temporary differences in respect of which
deferred tax needs to be recognised.
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 an estimated average rate. Exchange rate
differences concerning finances are shown
separately in the cash flow statement.
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
Corporate income taxes, issuance of share
capital, interest received, interest paid and
dividends received are presented under the cash
flow from operating activities. Dividends paid are
presented under the cash flow from financing
activities.
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.
As the Company operates in The Netherlands,
there is only one geographic segment.
The pricing of intersegment transactions is
determined in accordance with objective and
commercial principles. There has been no
change in the system in 2013/2014 relative to
the previous year.
Earnings, assets and liabilities of a segment
include items that can be allocated to the
segment directly or on a reasonable basis.
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.
© 2014 KPMG N.V. All rights reserved.
116
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
Segmentation 2013-2014
Audit
Advisory
Corporate
and
reconciliations
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
Profit before tax
79,325
66,876
-76,245
69,956
Profit before
tax/revenue (%)
32.4
32.7
Revenue from intersegment
transactions
Other assets
198,630
15.6
Liabilities by segment
Taxation
-7,816
Fees paid to partners
under agreements
-58,976
Prepayments
Other liabilities
18,387
5,645
-
24,032
1,056
5,105
168,437
174,598
198,630
Profit (loss) for the year
3,264
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
© 2014 KPMG N.V. All rights reserved.
117
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
Segmentation 2012-2013
Audit
Advisory
Corporate
and
reconciliations
Total
Revenue and profit
Revenue
Audit
Advisory
Corporate
and
reconciliations
Total
Capital expenditure
-
-
3,228
3,228
Depreciation
-
-
8,033
8,033
66,616
55,437
3,292
125,345
-
10,487
49,805
60,292
Property, plant
and equipment
252,347
200,833
3,015
456,195
298
5,671
-5,969
0
252,645
206,504
-2,954
456,195
Other income
0
0
14,923
14,923
Assets by segment
Total income
252,645
206,504
11,969
471,118
Unbilled services and
trade receivables
86,222
42,148
-62,613
65,757
34.2
21.0
Revenue from
intersegment transactions
Profit before tax
Profit before tax/revenue (%)
Other assets
185,637
14.4
Taxation
-832
Fees paid to partners
under agreements
-62,299
Profit (loss) for the year
Liabilities by segment
Prepayments
Other liabilities
21,852
4,509
-
26,361
-
1,374
134,810
136,184
162,545
2,626
FTEs
Partners
92
62
13
167
Professionals
1,264
1,075
-
2,339
Support staff
104
66
455
625
1,460
1,203
468
3,131
Total FTEs
© 2014 KPMG N.V. All rights reserved.
118
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
3. Other income
2013/2014
2012/2013
Premises costs charged externally
3,908
3,989
IT services charged externally
2,890
1,617
KPMG International employee expenses charged externally
10,176
9,317
1,712
-
18,686
14,923
2013/2014
2012/2013
174,393
186,639
Social security costs
22,621
23,443
Pension costs
13,570
14,932
25
429
210,609
225,443
2013/2014
2012/2013
2,195
2,339
515
567
66
58
2,776
2,964
149
167
2,925
3,131
Gain on sale of business activities
Premises costs and IT services charged externally relate primarily to KPMG
Meijburg & Co and KPMG International. Employee expenses of KPMG
International charged externally are the result of the commencement of
employment of personnel of KPMG International at KPMG Staffing &
Facility Services B.V. These costs have been rebilled in full to KPMG
International. Gain on sale of business activities relates to a management
buy-out of part of the advisory services regarding business process support.
4. Employee benefits expenses
Salaries
Long-term employee benefits
Number of staff and partners
The average salary per FTE increased by 1.5% (previous year:
increase of 2.8%).
(FTEs)
Number of staff:
Professional staff
Support staff
Support staff for KPMG International
Partners
© 2014 KPMG N.V. All rights reserved.
119
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
5. Other expenses
2013/2014
2012/2013
Other employee expenses
29,747
29,127
Travelling, car leases and representation expenses
31,179
33,291
Premises costs
33,483
31,777
Office and IT expenses
11,926
13,115
Other expenses
30,585
18,808
136,920
126,118
The decrease in travelling, car leases and representation expenses is
explained by lower costs for car leases. Premises costs increased due
to an addition of EUR 4,301 to the provision for vacant properties.
Office and IT expenses decreased mainly due to lower
telecommunication costs. Other expenses mainly increased due to the
settlement of EUR 7 million with the Public Prosecution Office
regarding payments to foreign agents by a former Audit client of KPMG
and higher legal expenses.
6. Net finance costs
Net finance costs
2013/2014
2012/2013
280
71
Finance income
Finance costs due to partners
-691
-1,390
Finance costs due to former partners
-259
-208
Other finance costs
-628
-469
© 2014 KPMG N.V. All rights reserved.
-1,578
-2,067
-1,298
-1,996
120
The finance costs due to partners decreased due to lower loans and the
reversal of an overstated accrual from previous year.
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
7. Acquisitions of businesses
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 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. The Company controls these subsidiaries 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 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 acquisitions had the following effect on the group’s assets and
liabilities at acquisition:
Intangible assets
1,697
Trade and other receivables
1,317
Cash and cash equivalents
Trade and other payables
27
-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
0
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.
The following data provides pro-forma information, presented as if the
Company has existed in its form at 30 September 2014 through the two
years ended on that date – that is, including the acquisition of businesses.
© 2014 KPMG N.V. All rights reserved.
121
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
Pro-forma revenue can be analysed by function
as follows:
2013/2014
2012/2013
Audit
245,295
252,645
Advisory
208,731
207,710
-4,559
-2,954
449,467
457,401
Corporate
On a pro-forma basis, as if the Company
has existed through the two years ended
30 September 2014, average full-time equivalent
headcount in 2013/2014 would have been
2,928 (2012/2013: 3,136).
8. Income tax expense
Under management agreements, all earnings
of KPMG N.V. are distributed to the partners
who pay tax on these earnings. As the result
of a ruling by the Dutch Tax Authorities, the
corporation 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 2013/2014, the average rate was
24.9% (2012/2013: 24.7%). The Company’s
effective tax rate was 11.2% (2012/2013: 1.3%).
Additional taxes are levied at partner level.
The Dutch Tax Authorities have questioned the
fiscal treatment of development cost in KPMG
Gebouw Amstelveen II B.V., a subsidiary of
KPMG not part of the fiscal unity, and
subsequently concluded that the tax return for
that subsidiary over fiscal year 2010 is incorrect.
The Company has recorded a provision of
EUR 5,000 reflecting its best estimate of the
exposure.
© 2014 KPMG N.V. All rights reserved.
122
9. Fees paid to partners under
management agreements
The management fee that is payable to a 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.
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.
In addition to their management fee, the practice
companies of the partners also received expense
allowances amounting to a total of EUR 3.2
million (2012/2013: EUR 3.5 million) and interest
on financing totalling EUR 1.0 million (2012/2013:
EUR 1.1 million). These costs are shown in the
statement of comprehensive income under other
expenses and finance costs, respectively.
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
10. Property, plant and equipment
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.
Fixtures, fittings
and alterations
Computers and
communications
equipment
Office furniture
and equipment
Total
16,883
16,847
22,255
55,985
Additions
157
2,813
258
3,228
Disposals
-2,004
-2,877
-1,371
-6,252
Balance at 30 September 2013
15,036
16,783
21,142
52,961
Balance at 1 October 2013
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 2012
7,413
8,009
8,304
23,726
Depreciation for the year
1,451
3,899
2,683
8,033
Disposals
-1,335
-1,687
-1,336
-4,358
Balance at 30 September 2013
7,529
10,221
9,651
27,401
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
At 1 October 2012
9,470
8,838
13,951
32,259
At 30 September 2013
7,507
6,562
11,491
25,560
At 30 September 2014
6,203
5,828
8,995
21,026
Cost
Balance at 1 October 2012
Additions
Acquisition of subsidiaries
Depreciation and impairment losses
Acquisition of subsidiaries
Disposals
Balance at 30 September 2014
Carrying amounts
© 2014 KPMG N.V. All rights reserved.
123
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
11. Intangible assets and goodwill
This fiscal year goodwill relates to the 40%
acquisition of Innovation Factory Intellectual
Property B.V., Innovation Factory Software
Services B.V. and Innovation Factory B.V.
No impairment is necessary as all acquisitions
are part of Advisory and this business segment
had positive results in the fiscal year and expect
positive results in the coming fiscal year.
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%, for Innovation Factory 14.5%
Indefinite growth rate 0.0%
Profit before tax CGU EUR 66,876
The impairment calculation resulted in sufficient
headroom and therefore no impairment.
Back office software relates to the
implementation of a new system developed
by KPMG International.
© 2014 KPMG N.V. All rights reserved.
Goodwill
Customer
relationships and
similar items
Back office
software
Total
Balance at 1 October 2012
4,434
7,200
6,006
17,640
Acquisition of subsidiaries
1,827
383
-
2,210
-
-
5,142
5,142
Balance at 30 September 2013
6,261
7,583
11,148
24,992
Balance at 1 October 2013
6,261
7,583
11,148
24,992
Acquisition of subsidiaries
1,516
1,697
-
3,213
-
-
26
26
7,777
9,280
11,174
28,231
Balance at 1 October 2012
-
2,096
31
2,127
Amortisation for the year
-
1,440
605
2,045
Balance at 30 September 2013
-
3,536
636
4,172
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
At 1 October 2012
4,434
5,104
5,975
15,513
At 30 September 2013
6,261
4,047
10,512
20,820
At 30 September 2014
7,777
4,086
9,137
21,000
Cost
Additions
Additions
Balance at 30 September 2014
Amortisation and impairment losses
Carrying amounts
124
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
12. Receivables
15. Trade receivables
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 costs.
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.
13. Investment in securities
Trade receivables are shown net of impairment losses amounting to
EUR 5,830 (2012/2013: EUR 5,573). In the statement of comprehensive
income an expense of EUR 1,381 (2012/2013: expense of EUR 679) has
been recognised under other expenses.
The investment is accounted for as available for sale securities and refers
to initial payments in creating a 2.9% interest in the KPMG International
Capital investment fund. The fund is being established to invest in
opportunities that will generate benefit across a number of KPMG
International member firms and will operate through a new entity.
16. Other receivables, prepayments
14. Unbilled services and advance billings
Unbilled services are subject to a first pledge in favour of Coöperatie
KPMG U.A. as security for loans advanced.
30 September 2013
Unbilled services
31,935
36,239
Advance billings
24,032
26,361
7,903
9,878
© 2014 KPMG N.V. All rights reserved.
30 September 2013
Other receivables
7,854
6,600
Prepayments
6,157
4,206
14,011
10,806
All other receivables are due within one year.
30 September 2014
Balance of unbilled services
and advance billings
30 September 2014
125
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
17. Cash and cash equivalents
Bank balances, including business savings accounts, are subject to a first
pledge in favour of Coöperatie KPMG U.A. to secure loans advanced.
19. Coöperatie KPMG U.A.
30 September 2014
30 September 2013
39,473
39,438
3,726
4,452
13,651
14,903
17,377
19,355
2,059
2,337
58,909
61,130
2013/2014
2012/2013
Balance at the beginning of the year
39,438
57,287
Fees to partners under management agreements
58,976
62,299
691
1,390
-59,632
-81,538
39,473
39,438
Partners:
- current loans Coöperatie KPMG U.A.
18. Equity
Former partners:
- non-current loans Coöperatie KPMG U.A.
The Company has authorised capital of EUR 20 million (2012/2013:
EUR 20 million), which is divided into 800 shares of EUR 25 each
(2012/2013: 800 shares of EUR 25 each). The issued share capital
consists of 220 (2012/2013: 220) shares at a nominal value of
EUR 25 (2012/2013: EUR 25) each, representing a total nominal value
of EUR 5.5 million (2012/2013: EUR 5.5 million). All of the shares are
fully paid up.
- current loans Coöperatie KPMG U.A.
VAT liability
Movements in financing by partners:
The number of shares in issue at 30 September was 205
(2012/2013: 205).
KPMG N.V. is obliged to distribute all earnings that constitute profits
as part of fees paid to partners under the management agreements
or as dividend, except for the amount the Board of Management
proposes to add to the reserves. Reserves are set up over a 5 year
period to finance goodwill on acquisitions.
Interest due to Coöperatie KPMG U.A.
relating to partners
Other movements (net withdrawal)
Balance at the end of the year
Other movements refer mainly to amounts withdrawn by partners.
© 2014 KPMG N.V. All rights reserved.
126
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
Current loans from Coöperatie KPMG U.A. relating to partners
The interest charged on current loans is 2.7% (2012/2013: 2.3%).
Movements in long-term employee benefits:
Loans from former partners
Non-current loans from former partners have an average term of
3.1 years (2012/2013: 3.3 years) and an average interest rate of 1.6%
(2012/2013: 1.2%). The average interest on current loans from former
partners is 1.6% (2012/2013: 1.5%).
Balance at 1 October
2012/2013
3,598
3,466
Interest
41
87
Utilised
-386
-488
Addition
131
365
31
168
3,415
3,598
25,511
22,309
28,926
25,907
Change in discount rate
The fair value of loans from Coöperatie KPMG U.A. approximates the
carrying amount.
Balance at 30 September
Short-term employee benefit obligations
20. 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.
30 September 2014
30 September 2013
< 1 year
> 1 year
Total
< 1 year
> 1 year
Total
Long-term employee
benefits
437
2,978
3,415
540
3,058
3,598
Short-term employee
benefit obligations
25,511
-
25,511
22,309
-
22,309
25,948
2,978
28,926
22,849
3,058
25,907
© 2014 KPMG N.V. All rights reserved.
2013/2014
21. Bank loans
Bank loans refers to a loan granted to Innovation Factory at 6.45%.
The loan expires on 1 January 2022 and is repayable in quarterly
instalments.
127
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
22. Provisions
23. Trade and other payables
Movements in provisions in 2013/2014:
Trade payables
Vacant properties
Balance at 1 October
Tax and social insurance contributions
2,064
Utilised
-582
Added
4,302
Balance at 30 September
5,784
Other current liabilities
Accruals
30 September 2014
30 September 2013
8,905
4,717
22,564
25,201
7,117
1,846
11,570
13,058
50,156
44,822
Trade payables increased mainly due to payables to lease car companies
and to related parties. Other current liabilities increased due to liabilities for
professional indemnity insurance and goodwill obligations regarding the
acquisition of Innovation Factory. Accruals have been made primarily to
cover premises costs and charges for third-party services still to be paid.
The addition of the provision for vacant properties relates to the office
buildings in Amstelveen and Rotterdam. The periods within which
provisions are expected to be utilised are as follows:
24. Financial instruments
30 September 2014
Provision for
vacant properties
30 September 2013
< 1 year
> 1 year
Total
< 1 year
2,252
3,532
5,784
581
> 1 year
1,483
Total
2,064
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.
© 2014 KPMG N.V. All rights reserved.
128
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
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. 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.
© 2014 KPMG N.V. All rights reserved.
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.
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.
129
The recoverable amount of unbilled services
and trade receivables is estimated every quarter.
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 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 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.
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
Movement in the provision for doubtful debts:
Exposure to credit risk
Maximum exposure to credit risk at 30 September.
2014
2013
2013/2014
2012/2013
393
-
Balance at 1 October
5,572
5,814
Unbilled services
31,935
36,239
Trade receivables
87,035
94,677
Added
7,412
4,383
Other receivables
14,011
10,806
Written off
-1,160
-938
Cash and cash equivalents
27,835
3,107
-5,994
-3,687
161,209
144,829
5,830
5,572
Non-current receivable
Released
Balance at 30 September
Provision for doubtful debts
Debtor ageing analysis:
30 September 2014
30 September 2013
Gross
Provision
Gross
Provision
Not yet due: age 0-15 days
32,724
0
34,717
6
Overdue: age 16-180 days
45,102
320
51,667
104
Overdue: age 181-365 days
3,863
1,555
2,959
1,502
Overdue: age over 365 days
5,346
3,955
5,334
3,960
87,035
5,830
94,677
5,572
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.
© 2014 KPMG N.V. All rights reserved.
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.
KPMG N.V. has a loan facility of EUR 50 million (2012/2013: EUR 50
million), of which a draw down was made of EUR 0.1 million (2012/2013: no
draw down) in the form of guarantees. A first right of pledge has been
granted on trade receivables as security.
130
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
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 2014, the solvency ratio was 26.3% (30 September 2013:
29.8%).
Market risk
Market risk is the risk of 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.
Summary of financial liabilities:
Carrying
amount
Contractual
cash flows
Due within
1 year
Due after
1 year
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
Coöperatie KPMG U.A.
61,130
63,367
58,791
4,576
Trade and other payables
44,822
44,822
44,822
-
Employee benefits
25,907
25,907
22,849
3,058
131,859
134,096
126,462
7,634
Interest rate risk
The financial assets of KPMG N.V. consist primarily of investments in noncurrent assets, trade receivables and cash and cash equivalents. Trade and
other receivables do not bear interest.
30 September 2014
Bank loans
30 September 2013
© 2014 KPMG N.V. All rights reserved.
It is estimated that as at 30 September 2014, a general rise in interest rates
by one percentage point would have no effect on the Company’s profit
before tax (30 September 2013: decrease EUR 0.3 million).
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):
131
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
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
Receivable
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
2013/2014
Bank loans
2012/2013
Cash and cash equivalents
0.0%
3,107
-
-
-
-
-
3,107
Loans from partners
2.3%
-39,438
-
-
-
-
-
-39,438
Loans from former partners
1.5%
-14,903
-1,908
-1,536
-525
-329
-154
-19,355
-51,234
-1,908
-1,536
-525
-329
-154
-55,686
Currency risk
Transactions are only carried out in foreign
currency on a limited basis, and assets and
liabilities are also usually denominated in euros.
For these reasons, foreign currency risks are
limited. When derivative financial instruments
are used to hedge exposure to foreign exchange
risks associated with recognised monetary
assets or liabilities, hedge accounting is not
© 2014 KPMG N.V. All rights reserved.
applied and any gain or loss on a hedging
instrument is recognised in the statement of
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 2013/2014 by
approximately EUR 0.1 million (2012/2013:
EUR 0.1 million).
132
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.
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
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
interest-bearing 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 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.
© 2014 KPMG N.V. All rights reserved.
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 5.6 million, EUR 2.2 million will be paid out
as dividends during the 2014/2015 financial year.
Average financing per partner (excluding other
reserves) amounted to EUR 372 as at 30
September 2014, compared with EUR 345 as at
30 September 2013. Total financing by partners
as at 30 September 2014 amounted to 27.9%
of total assets (30 September 2013: 31.0%).
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. No changes were
made to the Company’s approach to capital
management during the year. Neither the
Company nor its subsidiaries are subject to
externally imposed capital requirements.
133
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
25. Operating leases and other commitments
The commitments regarding property leases increased due to renegotiated
of the lease of the Amstelveen office. Due to that the duration was
extended with 11 years at a lower lease per year.
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 285,108 (2012/2013:
EUR 245,403).
The future rental income from sub-leases is as follows:
The nominal commitments fall due as follows:
30 September 2013
4,325
3,446
Between 1 and 5 years
13,204
11,184
After 5 years
29,173
11,300
46,702
25,930
Within 1 year
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
30 September 2014
The following operating lease and rental expenses were recognised in the
consolidated statement of comprehensive income for the year ended 30
September 2014:
2013/2014
2012/2013
Properties
22,920
25,237
Cars
14,254
14,858
6,719
12,545
30 September 2013
Property
leases
Operating
leases (cars)
Other
contracts
Total
Within 1 year
24,390
16,489
6,719
47,598
Between 1 - 5 years
90,253
30,512
13,655
134,420
After 5 years
62,848
-
537
63,385
177,491
47,001
20,911
245,403
© 2014 KPMG N.V. All rights reserved.
Other contracts
134
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
26. List of subsidiaries
27. Contingencies
Unless otherwise stated, the following subsidiaries are wholly owned by
KPMG N.V.
For EUR 0.1 million bank guarantees are issued as per 30 September 2014
(2012/2013: no bank guarantees).
KPMG Accountants N.V.
KPMG MKB B.V. KPAS B.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%)
KPMG N.V. has issued two letters of comfort relating to a facility of
USD 85 million and a facility of USD 125 million for KPMG International.
In these letters 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’.
Amstelveen
Amstelveen
Amstelveen
Amstelveen
Amstelveen
Amstelveen
Amstelveen
Amstelveen
De Meern
De Meern
Amsterdam
Hilversum
Amsterdam
Amsterdam
Amsterdam
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 Cooperative controls these three entities.
The Cooperative controls these subsidiaries by virtue of an agreement
with one of its other shareholders.
© 2014 KPMG N.V. All rights reserved.
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.
The investigation of the Dutch Tax Authorities and public prosecutor with
respect to the tax position of KPMG Gebouw II B.V., a subsidiary of
KPMG N.V. has not been finalized. The Company has recorded a provision
reflecting its best estimate of the exposure.
The Board of Management believes that it is unlikely that the outcome of
the procedures in relation to the claims referred to above will have a
materially adverse effect on the Company’s future financial position or
profits.
135
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
28. Collaboration agreements and related parties
Transactions with key management personnel
Collaboration agreements
The following information relates to the Company’s Board of Management.
KPMG Meijburg & Co
In The Netherlands, the Company collaborates with an independent firm
of tax consultants, KPMG Meijburg & Co. The financial figures of this firm
are not included in the consolidated financial statements of KPMG N.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. As a result of this
affiliation, the Company collaborates closely with other member firms.
2013/2014
2012/2013
Number of members of the Board of Management
during the year
3,40
4,25
Fees paid under management agreement/salaries
2,151
2,138
Severance payment
1,419
-
Expense allowances
73
80
Interest paid on partners’ accounts
15
26
The members of the Board of Management are required to fund their
pension provision and social security costs from this remuneration.
The Supervisory Board members do not receive a remuneration.
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 limited companies owned
by partners. Under these agreements, partners are made available to the
Cooperative, which in turn makes these partners available to KPMG N.V.
and its subsidiaries to perform their duties in the Audit or Advisory
business segments.
© 2014 KPMG N.V. All rights reserved.
136
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
29. Accounting estimates and judgements
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
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.
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
© 2014 KPMG N.V. All rights reserved.
• 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.
137
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
Separate statement of financial position
The statement of financial position was drawn up prior to the
distribution of profit.
Note
30 September 2014
30 September 2013
5,500
5,500
10,400
12,600
(in thousands of euros)
Equity and liabilities
Note
30 September 2014
30 September 2013
Equity
4
(in thousands of euros)
Share capital
Assets
Share premium
Non-current assets
Reserves
2,360
2,360
Non-current financial assets:
Profit for the year
3,264
2,626
21,524
23,086
3,726
4,452
- loans from partners
39,473
39,438
- loans from former partners
13,651
14,903
2,059
2,337
Amounts owed to group companies
16,082
6,632
Tax and social insurance contributions
23,576
16,882
94,841
80,192
98,567
84,644
120,091
107,730
Investments in group companies
28,940
7,716
393
-
Receivable
9,333
Total equity
7,716
Current assets
Coöperatie KPMG U.A. relating to:
Amounts due from group companies
Cash and cash equivalents
Total assets
Non-current liabilities
3
87,986
96,922
22,772
3,092
Loans from former partners
110,758
100,014
Current liabilities
120,091
107,730
Coöperatie KPMG U.A. relating to:
- VAT liability
Total liabilities
Total equity and liabilities
5
The notes on pages 40 to 43 inclusive form an integral part of these company financial statements.
© 2014 KPMG N.V. All rights reserved.
138
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
Separate statement of comprehensive income
For the year ended 30 September 2014
2013/2014
2012/2013
Profits of group companies
11,043
11,483
Other income
51,097
53,442
-58,876
-62,299
3,264
2,626
(in thousands of euros)
Fees paid to partners under management agreements
Profit after tax
The notes on pages 40 to 43 inclusive form an integral part of these company financial statements.
© 2014 KPMG N.V. All rights reserved.
139
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
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
KPMG N.V. has elected to exercise the option
provided under Section 362(8) of Book 2 of the
Netherlands Civil Code. 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’)
approved by the International Accounting
Standards Board and adopted by the European
Union. Details of these policies are provided in
notes 1.3 to 1.21 to the consolidated financial
statements. For these separate financial
statements NL-GAAP is applied.
© 2014 KPMG N.V. All rights reserved.
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.
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
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 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.
2. Non-current financial assets
This represents investments in group companies.
Movements in these investments during the
2013/2014 financial year:
2013/2014
2012/2013
Balance at 1 October
7,716
7,691
Additions
1,224
25
Profits of group companies
11,043
11,483
Dividends received from
group companies
-11,043
-11,483
8,940
7,716
Balance at 30 September
A list of significant subsidiaries is disclosed in
note 26 of the consolidated financial statements.
Other
Since the figures of KPMG N.V. are included in
the consolidated financial statements that
form part of these financial statements,
140
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
3. Cash and cash equivalents
4. Equity
Cash and cash equivalents comprise
cash at hand and bank balances and
are freely available. The interest rate
applicable to business savings
accounts was 0.7% over the first
EUR 2,5 million; in the previous
year 1.4%.
Details of equity are disclosed in
note 18 to the consolidated financial
statements and the consolidated
statement of changes in equity.
5. Coöperatie KPMG U.A.
30 September 2014
30 September 2013
39,473
39,438
Partners:
- current loans Coöperatie KPMG U.A.
Former partners:
- non-current loans Coöperatie KPMG U.A.
- current loans Coöperatie KPMG U.A.
3,726
4,452
13,651
14,903
VAT liability
17,377
19,355
2,059
2,337
58,909
61,130
Movements in financing by partners:
2013/2014
2012/2013
Balance at the beginning of the year
39,438
57,287
Fees paid to partners under management agreements
58,976
62,299
691
1,390
-59,632
-81,538
39,473
39,438
Interest due to partners
Other movements (net withdrawal)
Balance at the end of the year
© 2014 KPMG N.V. All rights reserved.
141
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
Other movements refer mainly to amounts
withdrawn by partners.
Loans from Coöperatie KPMG U.A. relating
to partners
The interest charged on current loans is 2.7%
(2012/2013: 2.3%). Partners also have the
opportunity to subscribe on one year deposits,
the total amount subscribed in 2013/2014 was
EUR 10.6 million with an interest rate of
4.0% (2012/2013 EUR 11.5 million at 3.1%).
Loans from Coöperatie KPMG U.A. relating
to former partners
Non-current loans from former partners have an
average term of 3.1 years (2012/2013: 3.3 years)
and an average interest rate of 1.6% (2012/2013:
1.2%). The average interest on current loans from
former partners is 1.6% (2012/2013: 1.5%).
6. Financial instruments
Details on financial instruments are provided in
note 24 to the consolidated financial statements.
7. 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 two letters of comfort
relating to a facility of USD 85 million and a
facility of USD 125 million for KPMG
International. In these letters of comfort KPMG
N.V. has confirmed 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.
Tax group
Together with its subsidiaries, excluding KPMG
Gebouw Amstelveen II B.V. and Innovation
Factory, KPMG N.V. forms a tax group for value
added tax and corporation 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. KPMG N.V. incurs
the income tax expense of the tax group.
8. Number of partners
On average, 149 (2012/2013: 167) partners were
active for the Company under management
agreements.
KPMG N.V. has a loan facility of EUR 50 million
(2012/2013: EUR 50 million), of which a draw
down was made of EUR 0.1 million (2012/2013:
no draw down) in the form of guarantees.
© 2014 KPMG N.V. All rights reserved.
142
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
9. Remuneration of the Board of
Management
Details of the remuneration of members of the
Board of Management are disclosed in note
28 to the consolidated financial statements.
10. Auditors’ remuneration
The remuneration of the Company’s auditors for
the 2013/2014 financial year was EUR 0.1 million
(2012/2013: EUR 0.1 million) and related to the
audit of financial statements of the Company.
Amstelveen, 25 November 2014
Board of Management under
the Articles of Association:
J.H.M. Hommen (chairman)
A.J.A. Cranston J. van Delden B. Ferwerda
R.G.A. Fijneman
M.A. Hogeboom
B. Lamberts
© 2014 KPMG N.V. All rights reserved.
Supervisory Board:
E.H.W. Weusten (chairman)
D.E.M. Aleman
M.O. Sloterdijk
R.R.J. Smeets
143
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
Other Information
Independent auditors’ report
Please refer to the report of the independent
auditors below.
Provisions in the Company’s Articles of
Association governing the appropriation
of profit
Article 29 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.
© 2014 KPMG N.V. All rights reserved.
• 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 3,264 and the
Company proposes to pay EUR 2,245 as
dividends and EUR 1,019 will be added to the
reserves.
144
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
© 2014 KPMG N.V. All rights reserved.
145
FINANCIAL STATEMENTS
INTEGRATED REPORT 2013/2014
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. in paragraph 3.3.5- External assurance:
To: the readers of the KPMG N.V. Integrated Report 2013/2014
INDEPENDENT ASSURANCE REPORT
Grant Thornton
Accountants en Adviseurs B.V.
De Passage 150
P.O. Box 71003
1008 BA Amsterdam
The Netherlands
T +31 88 676 90 00
F +31 88 676 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;
•
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 chapter 3 in the Integrated
Report 2013/2014. 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.
Reviewing internal and external documentation on a sample basis to determine whether
the non-financial information is adequately supported.
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.
Scope of assurance engagement
Conclusion
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.
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 2014
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.
Grant Thornton Accountant en Adviseurs B.V.
Reporting criteria used by KPMG
N.H.B. Jonker RA
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).
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.
© 2014 KPMG N.V. All rights reserved.
146
INTEGRATED REPORT 2013/2014
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.
17-18
This also relates to
Audit Firm Code (‘Code
Accoun­tantsorganisatie’),
principle 1.1
Broader trends (such as macroeconomic or political) affecting the organisation and influencing
sustainability priorities.
5-13
Key events, achievements, and failures during the reporting period.
5-13
Views on performance with respect to targets.
5-13
Outlook on the organisation’s main challenges and targets for the next year and goals for the coming 3-5
years.
5-13
Strategy and Analysis
G4-1
G4-2
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 23-30
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.
17-18
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.
23-30
A description of the main processes in place to address performance and relevant changes.
17-18
Section 2: description of the most important risks and opportunities for the organisation arising from
sustainability trends.
75-79
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.
75-79
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.
17-18; 75-79
Section 2: concise description of governance mechanisms in place specifically to manage these risks
and opportunities, and identification of other related risks and opportunities.
75-79
Organisational Profile
G4-3
Report the name of the organisation.
Cover
G4-4
Report the primary brands, products, and services
67
G4-5
Report the location of the organisation's headquarters.
67
© 2014 KPMG N.V. All rights reserved.
147
AFC 1.5
INTEGRATED REPORT 2013/2014
GRI Disclosure table
Disclosure
Further explanation
Page
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.
67
G4-7
Report the nature of ownership and legal form.
70-73
G4-8
Report the markets served (including geographic breakdown, sectors served, and types of customers
and beneficiaries).
52
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
48; 57
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).
48
G4-11
Report
Report the percentage of total employees covered by collective bargaining agreements.
G4-12
Describe the organisation’s supply chain.
29
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
30
G4-14
Report whether and how the precautionary approach or principle is addressed by the organisation.
68
G4-15
List externally developed economic, environmental and social charters, principles, or other initiatives to
which the organisation subscribes or which it endorses.
44, 45
© 2014 KPMG N.V. All rights reserved.
148
Reference
0%
INTEGRATED REPORT 2013/2014
GRI Disclosure table
Disclosure
G4-16
Further explanation
Page
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
49
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.
135
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.
29
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.
30
G4-23
Report significant changes from previous reporting periods in the Scope and Aspect Boundaries
No particular changes
Stakeholder Engagement
G4-24
Provide a list of stakeholder groups engaged by the organisation.
23-25
G4-25
Report the basis for identification and selection of stakeholders with whom to engage.
23
© 2014 KPMG N.V. All rights reserved.
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INTEGRATED REPORT 2013/2014
GRI Disclosure table
Disclosure
Further explanation
Page
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.
23-25
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.
25
Reference
Report Profile
G4-28
Reporting period (such as fiscal or calendar year) for information provided.
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.
info@kpmg.nl
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.
30
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 9
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 9
G4-36
Report whether the organisation has appointed an executive-level position or positions with responsibility Chapter 9
for economic, environmental and social topics, and whether post holders report directly to the highest
governance body.
G4-37
Report processes for consultation between stakeholders and the highest governance body on economic, Chapter 9
environmental and social topics. If consultation is delegated, describe to whom and any feedback
processes to the highest governance body.
© 2014 KPMG N.V. All rights reserved.
150
AFC 0.3
AFC 2.1
AFC 2.2
AFC 2.3
INTEGRATED REPORT 2013/2014
GRI Disclosure table
Disclosure
Further explanation
Page
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
Chapter 9; 82
G4-39
Report whether the Chair of the highest governance body is also an executive officer (and, if so, his or her Chapter 9
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 Chapter 9
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
Chapter 9
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
Chapter 9
G4-43
Report the measures taken to develop and enhance the highest governance body's collective knowledge Chapter 9
of economic, environmental and social topics.
G4-44
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.
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.
© 2014 KPMG N.V. All rights reserved.
151
Chapter 9
Reference
AFC 2.1
AFC 2.2
AFC 2.3
AFC 1.2
AFC 2.4
AFC 3.2
INTEGRATED REPORT 2013/2014
GRI Disclosure table
Disclosure
G4-45
Further explanation
Page
Reference
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.
Chapter 9;
79-82
AFC 2.3
AFC 2.4
AFC 2.5
AFC 3.2
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.
79-82
G4-47
Report the frequency of the highest governance body's review of economic, environmental and social
impacts, risks, and opportunities.
79-82
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.
79-82
G4-49
Report the process for communicating critical concerns to the highest governance body.
79-82
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.
79-82
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.
Chapter 9
G4-52
Report the process for determining remuneration. Report whether remuneration consultants are involved 58-60
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.
© 2014 KPMG N.V. All rights reserved.
152
58-60
Not disclosed
AFC 3.4
INTEGRATED REPORT 2013/2014
GRI Disclosure table
Disclosure
Further explanation
Page
Reference
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 the
average non-equity
partner monthly salary
and average junior
trainee monthly salary is
approximately 7:1.
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
Ethics and Integrity
G4-56
Describe the organisation's values, principles, standards and norms of behavior such as codes of conduct 19
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.
77
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.
77
AFC 0.1
AFC 0.2
Disclosures on Management Approachby
G4-DMA
© 2014 KPMG N.V. All rights reserved.
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
153
23-30
AFC 1.4
AFC 1.6
INTEGRATED REPORT 2013/2014
GRI Disclosure table
Disclosure
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 of
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
74-78
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 of
the financial
statements
© 2014 KPMG N.V. All rights reserved.
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Disclosure
Further explanation
Page
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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Disclosure
Further explanation
Page
Reference
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 61-63
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.
Water
© 2014 KPMG N.V. All rights reserved.
156
61
Not applicable
INTEGRATED REPORT 2013/2014
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Disclosure
Further explanation
Page
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.
61-63
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
DIRECT GREENHOUSE GAS (GHG)
EMISSIONS (SCOPE 1)
© 2014 KPMG N.V. All rights reserved.
a.Report gross direct (Scope 1) GHG emissions in metric tons of CO2 equivalent, independent of any
61
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).
157
Reference
INTEGRATED REPORT 2013/2014
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Disclosure
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
61
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
61
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.
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.
© 2014 KPMG N.V. All rights reserved.
Page
158
Reference
Not applicable
61-63
Not applicable
INTEGRATED REPORT 2013/2014
GRI Disclosure table
Disclosure
Further explanation
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
G4-EN24
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.
© 2014 KPMG N.V. All rights reserved.
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159
61
Reference
Not reported by type as
this is considered to be
not material for further
disclosure
Not applicable
INTEGRATED REPORT 2013/2014
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Disclosure
Further explanation
Page
Reference
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
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.
Not applicable
G4-EN28
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.
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
© 2014 KPMG N.V. All rights reserved.
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.
160
No material fines
INTEGRATED REPORT 2013/2014
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Disclosure
Further explanation
Page
Reference
61
Not applicable
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.
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
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.
Not applicable
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
© 2014 KPMG N.V. All rights reserved.
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.
161
48
INTEGRATED REPORT 2013/2014
GRI Disclosure table
Disclosure
Further explanation
Page
Reference
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
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: <5
yr: 1
month; 5-10 yr: 2 months;
10-15
yr: 3 months; >15 yr: 4
months.
Exceptions may apply.
Termination
by employees: 1-3
months
depending on functional
level
Training and Education
G4-LA9
AVERAGE HOURS OF TRAINING PER
YEAR PER EMPLOYEE BY GENDER,
AND BY EMPLOYEE CATEGORY
© 2014 KPMG N.V. All rights reserved.
Report the average hours of training that the organisation’s employees have undertaken during the
reporting period, by:
--Gender
--Employee category
162
49
INTEGRATED REPORT 2013/2014
GRI Disclosure table
Disclosure
Further explanation
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
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
Page
Reference
14;82
Not all aspects reported
as these are deemed
not material for detailed
disclosure.
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
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 49
significant locations of operation.
b.Report the definition used for ‘significant locations of operation’.
Labor Pactices Grievance Mechanisms
G4-LA16
NUMBER OF GRIEVANCES
ABOUT LABOR PRACTICES FILED,
ADDRESSED, AND RESOLVED
THROUGH FORMAL GRIEVANCE
MECHANISMS
© 2014 KPMG N.V. All rights reserved.
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.
163
Not applicable
INTEGRATED REPORT 2013/2014
GRI Disclosure table
Disclosure
Further explanation
Page
Reference
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
5-13
Anti-Corruption
G4-SO3
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.
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.
© 2014 KPMG N.V. All rights reserved.
164
75-78
100%
100%
INTEGRATED REPORT 2013/2014
GRI Disclosure table
G4-SO5
Disclosure
Further explanation
Page
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
Reference
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
G4-SO8
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.
56-58
Grievance Mechanisms for Impacts on Society
G4-S11
NUMBER OF GRIEVANCES ABOUT
IMPACTS ON SOCIETY FILED,
ADDRESSED, AND RESOLVED
THROUGH FORMAL GRIEVANCE
MECHANISMS
© 2014 KPMG N.V. All rights reserved.
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.
165
55-57
INTEGRATED REPORT 2013/2014
GRI Disclosure table
Disclosure
Further explanation
Page
Reference
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.
Not applicable
43
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.
32-34
QPR results
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.
42-34; 43
QPR results Notifications
to AFM: 11 (FY 12/13: 9).
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
53
© 2014 KPMG N.V. All rights reserved.
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Disclosure
Further explanation
Page
Reference
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.
Not applicable
43
AFC 3.2
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.
5-13; 43
Compliance
G4-PR9
MONETARY VALUE OF SIGNIFICANT
FINES FOR NON-COMPLIANCE
WITH LAWS AND REGULATIONS
CONCERNING THE PROVISION AND
USE OF PRODUCTS AND SERVICES
© 2014 KPMG N.V. All rights reserved.
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.
167
Civil proceedings: 1
Disciplinary proceedings: 7
Administrative proceedings:
/
INTEGRATED REPORT 2013/2014
Glossary
Abbreviation
Explanation
Abbreviation
Explanation
Abbreviation
Explanation
AFC
Audit Firm Code (‘Code
Accountantsorganisatie’)
GDI
Global Development Initiative
PHL -IDC
GRI
Global Reporting Initiative
Public Health Laboratory
Ivo de Carneri
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
QPR
IESBA
Conseil Européen pour la Recherche
Nucléaire or European Organisation for
Nuclear Research
International Ethics Standards Board for
Accountants
Quality Performance Reviews or the
internal inspections of engagements to
assess compliance with professional
standards, including quality
IFAC
International Federation of Accountants
QRMG
Quality & Risk Management Group
IFRS
International Financial Reporting Standards
RCP
CPE
Continuous Professional Education
ISA
International Standards on Auditing
CO
Compliance Officer
ISG
International Standards Group
CSM
Corporate Security Manager
ISO
CSR
Corporate Social Responsibility
International Organisation for
Standardisation
Risk Compliance Programme or the
internal inspections on compliance
with the Firm’s risk management and
independence procedures
SEC
Securities and Exchange Commission
CY
Calendar Year
KAM
KPMG Audit Manual
SP
Strong Performance
DEFRA
Department of Environment,
Food and Rural Affairs
KICS
KPMG Independence Compliance System
SP-
Inconsistent Performance
MDG
Millennium Development Goals
SP+
Highly Effective Performance
ELLP
Europe Limited Liability Partnership
MVP
Millennium Villages Project
VEB
EP
Excellent Performance
NBA
EQCR
Engagement Quality Control Review
Netherlands Professional Association of
Accountants
Vereniging voor Effectenbezitters or
Dutch Association of Shareholders
WAO
EQCRP
Engagement Quality Control Review Partner
NGO
Non-governmental organisation
Wet op de Arbeidsongeschiktheids­
verzekering or Occupational Disability
Insurance Act
EQC(R)
Engagement Quality Control (Review)
NI
Needs Improvement
WEP
Women’s Empowerment Principles
Full time equivalent
NITSO
National IT Security Office
Wta
FY
Fiscal year
PCAOB
Public Company Accounting Oversight Board
GCR
Global Compliance Review
PHAC
Publicly Held Audit Clients
Wet toezicht accountantsorganisaties
or the Dutch Supervision Act on
Audit Firms
CEAC
CERN
FTE
Client and Engagement Acceptance and
Continuation
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