Audit committee report, disclosure of discussions with FRC Conduct Committee

Smiths Group plc – Annual report – 31 July 2017

Industry: manufacturing



FRC Corporate Reporting Review

In August 2017 the FRC Conduct Committee closed its enquiry into the Company’s 2015 Annual Report. During 2017 the Committee continued to monitor the dialogue between the Company and the FRC and discuss the matters raised with the external auditor. As a result of the enquiry, the Annual Report 2017 includes enhanced disclosures for the John Crane, Inc. litigation provision. Disclosures have been amended to explain why the Company judged that the circumstances of this provision are “extremely rare”, to provide more context on the judgement to use a ten-year time horizon to calculate the provision, and to include additional sensitivities around an extended time horizon. To support the provision time period and recommended judgement the Committee received advice from Bates White LLC, Economic Consultants. The enhanced disclosures can be found in note 22 on pages 180 to 183 . Expanded disclosures in respect of provisions, revenue, tax, inventory provisioning and post-retirement benefits arising from the enquiry were included in the Annual Report 2016.

The Committee, after receiving the reports on the significant issues and areas of judgement, was content that the judgements made were appropriate and are correctly reflected in the Annual Report 2017.