Annual Report 2013/2014

Transcription

1 Annual Report 2013/2014

2 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Contents Foreword from our Chairman 3 Key statistics 7 Interview: What megatrends can mean in practice 9 Report of the Local Oversight Board 11 Interview: Creative ideas all around us 15 Report of the Board of Management 17 PwC in the Netherlands 18 About the Report of the Board of Management 19 How we create value 20 Stakeholders and materiality 21 Our strategy and achievements 26 Risk factors 44 Governance and remuneration 47 Expectations for the future 51 Interview: We never contract in external expertise 53 PwC the Netherlands has more than 4,200 people operating from twelve offices and from three different perspectives: Assurance, Tax & HRS and Advisory. We deliver sector-specific services and we seek innovative solutions, not only for national and international companies but also for public sector and civil society organisations. PwC is the brand name under which member firms of PricewaterhouseCoopers International Limited (PwCIL) operate and deliver services. Together these firms make up the global PwC network, within which some 195,000 people in 157 countries share their ideas, experience and solutions in developing new perspectives and meaningful advice In this report, the terms PricewaterhouseCoopers and PwC also refer to PricewaterhouseCoopers B.V. and, depending on the context, its consolidated Dutch group companies. Together, these are also referred to as PwC the Netherlands, PwC NL or the Group. Financial statements of PricewaterhouseCoopers B.V Consolidated financial statements Company financial statements Other information 86 Interview: We have discovered what tremendous expertise we really have within this company 92 Information about PwC 94 Our legal structure 95 Corporate Governance 97 The Board of Management 100 Code of Conduct and complaints procedure 102 Our framework for quality and risk management 103 Our sustainability policies 106 Breakdown of our organisation (in number of people) 108 Article: Sharing expertise in matters relevant to society Five-year summary of financial results 112 Scope of this Annual Report 113 GRI table Glossary 123 Acknowledgements 124 PwC Annual Report Contents GRI 2

3 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Foreword from our Chairman PwC Annual Report 2013/2014 Foreword from our Chairman GRI 3

4 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Foreword from our Chairman It has been a year since we took office as the new management team. Together with the partners and our people, we have re-focussed the ambition of our Dutch organisation: working to restore trust in society and contributing to solving the specific issues that our clients face and to do this with an organisation that is agile and resilient, the employer that our people deserve and can be proud of. Looking back, our first year of management has been a volatile one. The increasing societal dissatisfaction with our sector, in particular with auditors, resulted in an urgent call to the sector from the Second Chamber of Parliament and the Minister of Finance to come up with a robust set of measures to restore trust. Four months later, the Future Accountancy Profession ( Toekomst accountantsberoep ) Working Group presented those measures. We welcome the proposals and we are well aware that these must be vigorously and fully implemented as a first step on the road to the restoration of trust. At the same time, we must also recognise that we are valued by our clients and our people. The results of the People Survey were, with one single exception, the best ever. Our people value us as an employer and they are proud to be working at PwC. Never before did we do so well as now in the Brand Health Index, an independent survey that demonstrated that we are also valued in our key markets and by our clients. We do realise that the picture is overshadowed by the string of mistakes that have been made in our profession and by our inability to make clear, publicly, transparently and coherently, what may be expected of us and what role we need to fill and live up to. Sadly, this has overshadowed the excellent work that our people are delivering on a daily basis. This Foreword is, therefore, also the right and proper place for us to express the great appreciation we have for our people, for their contribution and for their loyalty. A challenging financial year The past year has gone down in our history as one of the most challenging financial years ever. We have been under the microscope more than ever before. We have been hit hard by a number of serious incidents and by a critical report from our regulator, the AFM (the Netherlands Authority for the Financial Markets), regarding the quality of statutory audits. Add to this, increasing regulation, mandatory rotation of audit firms, the trend towards consolidation in the advisory market, global megatrends and a much tougher discussion about fair share as regards taxation and the role of the tax adviser, and one can but conclude that our operating environment has changed dramatically. It is this new reality that is leading the transformation we are currently pushing through. It is also placing great pressure on our people and on the agility and resilience of our organisation. Society is entitled to expect that our people live a culture in which quality, independence, integrity and societal relevance are paramount. They must lead by example, be more prepared to lay themselves open to critical input and not to be led by the short-term sentiments of the day. Implementation of the sector proposals The AFM reports referred to previously and the report of the Future Accountancy Profession Working Group have made it clear that robust, sector-wide reform is inevitable. We will be applying the proposed measures rigorously throughout our entire organisation. Amongst other things we will be: adapting our organisational structure by setting up a supervisory board with external members at the level of the Dutch network entity; making the remuneration of the Dutch network entity s Board of Management and Compliance officer profit-independent; implementing a deferred remuneration scheme, with claw back, for external auditors; and implementing an accelerated quality improvement programme. PwC Annual Report Foreword from our Chairman GRI 4

5 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC PwC is committed to engendering trust in society. While we realize that incidents cannot be avoided entirely, we are convinced that implementation of this set of measures is an important first step in regaining trust. The ball is not only in the auditor s court In addition to the auditor, boards of management, supervisory boards, the legislature, supervisory bodies and shareholders also have a key role to play. Company management must shed the fear of sharing a greater level of information with stakeholders, information that is necessary for them to have a good understanding of the business being audited. As the body responsible for making the statutory audit appointment, supervisory directors must step up to their responsibilities much more so than in the past. We call upon Parliament to update the financial reporting legislation to require businesses to report more about their strategy, value creation processes, strategic and operational risks and going concern analyses. We expect the regulators to be clear about supervisory strategies and standards and that the discussion is not carried out in the public arena. And, finally, shareholders should be clearer as to what information they need for their decision making processes. The Netherlands is not an island We trust that the audit profession will be afforded the time to adjust to this new reality. Any incident that arises is often followed immediately by a call for more regulation, without clarity as to whether or not this would contribute to a reduction in incidents. And, sadly, incidents can never be avoided entirely. When implementing or amending legislation, it is also important not to lose sight of the international context in which organisations are operating. Calls are regularly made in the Netherlands to implement legislation and regulation when this is contrary to what is happening internationally. The debate about tax avoidance is a painful example of this. While there is generally a broad global consensus as to the need for honest and transparent payment of tax by multinational corporations and the OECD has already submitted far-reaching proposals in this area, there are those that think (even if only to avoid a negative image of the Netherlands) that the Netherlands should take action unilaterally. There is little to be gained from passing legislation unilaterally, because governments always find ways to make their business climates attractive to help balance their budgets. A good example is the United Kingdom taking a good look into how it might introduce, in simpler form, some of the arrangements we have here in the Netherlands, for instance the innovation box. It is for good reason that the OECD has stressed the urgency for countries to conform their tax rules and procedures to be better in line with each other, precisely to avoid large companies making use of loopholes in the law. The Netherlands is not an island. We must continue look outside our borders and work internationally. Hats off to our people The past year has put great pressure on our people, both in their work and in their private lives. They are doing their work in an environment in which the demand for our services and products is increasing, while the regulatory framework in which they work is getting tighter, for instance the new independence requirements ( ViO, the Regulation regarding the Independence of Auditors in Assurance Engagements). Now more than ever before, our people are being taken to task in their private lives about the string of incidents occurring in the sector. We understand how difficult it is to speak proudly of your profession when you are constantly on the defensive. Our people deserve better. They have stood firm in the storm that has engulfed them, and we are proud of them. Compliments to our colleagues from both Tax & HRS and Advisory, who have not been distracted and have simply got on with delivering their existing services and developing new ones. Strategy& has joined our global network and that opens up great opportunity. Both Tax & HRS and Advisory have increased their revenues this year and, precisely because they have stayed focussed on client issues, their success continues unabated. PwC Annual Report Foreword from our Chairman GRI 5

6 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Compliments to our Assurance colleagues, who remain continuously focussed on quality. They are making great steps forward with our automated systems, they were successful in converting many of their proposals into wins and, above all else, they have not allowed themselves to be distracted by all the views, justified or unjustified, being bandied around about our fine profession. And compliments also to our Firm Services colleagues. They make it possible for us to deliver the outstanding level of quality to our clients that we do deliver. They are the ones who keep our PwC organisation well oiled. Our results The efforts of our people have been fruitful. Despite a reduced headcount, we were able to book a slight increase in total revenue, with Tax & HRS and Advisory up and Assurance slightly down, and the effectiveness and efficiency improvements we have achieved have generated an increase in profitability, helped also by the greater focus we have had on adding value to clients and the cautiously improving economy. All this has laid a solid foundation for us to deal with the challenges we face. A healthy increase in profitability is not an end in itself. Profitable growth is essential to for us to be able to invest in quality, innovation, technology and talent. We set out in detail in this Annual Report how we are investing significantly in, amongst other things, the quality of our audits and in systems and technologies that support and improve our work. Looking ahead Despite, or indeed because of, all the challenges we have faced, the management team has enjoyed working to better the organisation and working with our people and our stakeholders and we will be continuing to do this during the coming year. The challenges we face are many and we will be taking them head on. We are at the start of the final two years of audit firm rotation in the PIE sector. We will be implementing the sector measures. We will be pushing ahead with our quality improvement programme, to which we have committed 20 million. We will be achieving further synergies between Strategy& and our Dutch organisation, and we will be moving ahead with streamlining our international network. We will make our contribution to the reform of the tax regime and also to the debate about our international fiscal competitiveness position. And, finally, we will bring our expertise and enthusiasm to bear in making social enterprises a societally important sector. About this report This report covers the past financial year. Important drivers have been the messages and dilemmas that our stakeholders that is, our people, our clients and society in general have given us. We have set out the five objectives that we focus on (talent, quality, brand, revenue and profitability) and the achievements that we have made in these areas. We, of course, also provide details of our financial results and how we have performed in our various markets. Our ambition to make PwC more efficient, more agile and more resilient will require not only organisational transformation but also investment in strategic competencies, and these are in progress. Our Annual Report includes a number of interviews that illustrate the strategic choices we have made. Our Chief Economist sets out his eight key societal themes. Consulting leaders tell how the arrival of Strategy& to our worldwide network now enables us to offer the full spectrum of services, from strategy right through to through execution. A social enterprise tells us how our advice has been put to good use. And two PwC people tell how they went about developing a very innovative product. We hope you will find our Annual Report of interest, and we very much welcome any input you may have. Amsterdam, 13 October 2014 Peter van Mierlo, Chair, Board of Management PricewaterhouseCoopers B.V. PwC Annual Report Foreword from our Chairman GRI 6

7 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Key statistics Starters Uitstroom Mannen Vrouwen Results are up following a modest increase in revenue* Starters / /2013 Higher revenue per staff member as a result of more time being spent with clients Uitstroom Mannen 2013/2014 Strategy and growth 2012/ Talent (x 1.000) Vrouwen Financial reporting Financial reporting Strategy and growth Talent See page 37 Net revenue ( millions) Operating profit ( millions) * The five-year summary of our financial results is on page 112. More feedback from clients - level of appreciation remains stable Assurance Tax & HRS Advisory 0-3 jaar 3-6 jaar >6 jaar jaar 3-6 jaar >6 jaar Jaren ervaring Ratio Male : Female Jaren ervaring 30 June % 30 June % Client satisfaction 2013/ / / 2012/ / / 30 June % 663,8 663,8 30 June % Salary costs higher as a result of an increase in the average level of experience 2013/ ,7 90,7 693, , Netto omzet Netto (in omzet mln) (in mln) See page 35 Recommendation 2013/ / / /2013 (x 1.000) 2012/ / / See page ,6 79, Bedrijfsresultaat Bedrijfsresultaat Tax Tax Tijd Tijd PwC Annual Report Key statistics GRI 7

8 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Fewer training hours as a result of the reduced number of starters and revisions to the Summer school structure in Assurance , , / /2013 Per FTE 2013/ Per FTE 2012/ See page 34 More new people Leavers 2013/ / See page 30 and 35 Joiners 2013/ / Excellent results of the people satisfaction survey See page 32 Lower CR hours as we move to a new focus on social enterprises See page 36 PwC recommended as an attractive 74% employer 70% 84% Proud to at PwC 81% 82% PwC offers good 80% opportunities for personal growth 2013/ / / / Number of staff directly involved in CR (per 100 FTEs) 2013/ , / ,803 Number of hours spent on CR projects PwC Annual Report Key statistics GRI 8

9 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC What megatrends can mean in practice Advisory partner, Professor Jan Willem Velthuijsen, was appointed as our Chief Economist in early He will be feeding our people and clients with research into the major trends that are irreversibly changing the world we live in: increasing urbanisation, demographic change, technology advances, climate change, raw material shortages and the shifting balance of economic power. Access to the right economic insights and the most pertinent data enables Jan Willem to link these global developments to the practical needs of companies and organisations. I really do now have the best job there is in PwC, says Jan Willem Velthuijsen, and maybe also outside PwC. Jan Willem Velthuijsen PwC Annual Report 2013/2014 Interview Megatrends GRI 9

10 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC I really do now have the best job there is in PwC, says Jan Willem Velthuijsen, and maybe also outside PwC. We find the position of Chief Economist amongst other places in the banking sector, where the job focusses primarily on macroeconomic developments. Jan Willem is aiming to condense the global issues down to the microeconomic level: As an economist and a generalist, I can jump in anywhere and translate the megatrend contexts into the practical needs of our clients. Numbers and data tell the full story These megatrends cry out for detailed research to identify the practical consequences for companies and organisations. This takes its lead from the definition, says Jan Willem. For instance, when we talk about the shifting balance of economic power, what do we mean by this? Consumption, exports, prosperity, well-being? Only when you drill down deeply enough and underpin this with hard data, can our clients draw the right conclusions. Catalonia has a completely different dynamic from Spain as a whole and the region of Eindhoven is growing faster than the Dutch national average. We know what the megatrends are, but often we don t know what follows. Jan Willem: We don t need to tell the CEO of an energy company that there is a raw material shortage. What we can do is contribute to the thought processes around how energy transition can best be achieved. What role does the business world play, and what role is there the public sector? And what are the implications of transition for the energy company s business model? To come up with the right conclusions on these megatrends, Jan Willem has formulated eight societal themes and these will be the focus of his initial research (see inset). One of the first deliverables from the Chief Economist office is an overview report on the agri-food sector, which will then feed into further sub-studies. Another societal theme that is coming up is the growing influence of regions at the expense of nations. Jan Willem: Catalonia has a completely different dynamic from Spain as a whole and the region of Eindhoven is growing faster than the Dutch national average. One consequence of urbanisation is that political power also shifts from central to local government. We support our propositions with numbers, data and detailed information, all of which tell the full story. The smartest brains What can a company or an organisation do with this sort of knowledge? Jan Willem: When you get down into the detail, you can draw strategic, tactical and practical conclusions. As an example, if you want to get something done in Great Britain, you may be better off lobbying the Mayor of London than the country s Prime Minister more than half the nation s GNP is earned in that capital city. It s heading that way also in the Netherlands. CEOs and supervisory directors need to be asking themselves: Am I moving in the right circles? How can I get into the discussion about the Amsterdam Zuidas business Addressing eight societal themes Chief Economist Jan Willem Velthuijsen has worked the five megatrends into eight societal themes which PwC will be developing further in the coming years. The Netherlands as an attractive nation for the next generation: What does the youth of today think of issues such as social welfare, the role of government, education and urban planning? The financial system: What role is there for bankers and others in the coming decade? Pensions and healthcare: How are we going to deal with the significant consequences of the baby boom on housing, healthcare, our personal finances? district as a top location? Can I influence the developments at Schiphol? What can the Brainport business district of Eindhoven mean for us? And how can I become more involved in the future of universities and hospitals? All these issues fall more within the ambit of mayors than of the cabinet. Other studies we re working on at the moment deal with crypto-currencies (such as the bitcoin) and corruption. We currently have a team of fifteen people, and I m recruiting the smartest brains from within our organisation for research secondments. The dynamism that this releases within a knowledge-based organisation like ours is immensely inspiring. We also work together with research analysts from Marketing, strategy consultants and industry experts, and we want to get input from the more Agri-food: What can we do to keep the Netherlands on the world stage as regards food security? The rise of the regions: What are the internal national consequences of the increasing economic divide? Education, innovation and productivity in the labour market: How do we ensure that people are educated to be an entrepreneur or researcher as well as to be an employee? Energy transition: How can we achieve sustainable energy policies and how do we lead the world in clean energy? Digitisation: How can we use big data to help solve societal problems? influential Dutch professors all of which creates some powerful knowledge networks. The research data generated can then be translated into meaningful insights for direct input into clients strategic agendas and business models in support of their business teams out in the field. Jan Willem: This enables us to increase our relevance to clients. Our people can use this solid knowledge base to determine how risks can be reduced and opportunities increased. In a word, science, concludes Jan Willem, which we can all benefit from. PwC Annual Report 2013/2014 Interview Megatrends GRI 10

11 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Report of the Local Oversight Board PwC Annual Report 2013/2014 Report of the Local Oversight Board GRI 11

12 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Report of the Local Oversight Board As we write this report, the media is full of articles about the audit profession. The AFM s findings from the review they carried out at the Big 4 audit firms and the report from the Future Accountancy Profession Working Group have both just been published. The image of the auditor that emerges from the AFM findings and the Working Group is a negative one indeed, and we need to take this to heart not only because trust in society has been damaged, but all the more because the AFM also found shortcomings in PwC files. Clearly, we need to get back as soon as possible to where we want to be and where society expects us to be: with zero shortcomings! The auditor has an important role to play in the business world. This is codified in law, but we need to live up to it better. Society must be able to rely on the accuracy of an auditor s report and must be able to assume that the auditor has done his work properly. The LOB believes that the recommendations of the Working Group will contribute positively to winning back society s trust in the audit profession. PwC s activities for the coming time will be dominated to a large extent by the implementation of the structural measures in the areas of our quality control system, our remuneration structure and our governance and in getting these embedded into our culture and organisation. The LOB will monitor the BoM s implementation of these measures and the balance of vigour and care with which they do it not only in fairness to PwC s other Lines of Service but primarily because this is what society deserves. This past financial year was the new BoM s first year in office, so the first half of the year was spent working themselves in as a group and agreeing expectations of and with each other. That led quickly to a positive, constructive and open culture, well balanced between working together as a team while not losing sight of individual roles and responsibilities. Communication is swift and transparent, and the LOB is engaged on a timely basis. The past year The recurring matters that came up regularly during the LOB s meetings and discussions during the past year included the following: Quality, compliance and risk management within PwC The public debate about the audit profession and PwC s response to this Strategy execution and the investments needed therefor Human Capital policies and the annual People Survey Remuneration of the members of the Board of Management and of partners The Public Interest Committee and the implementation of its recommendations The ongoing integration of PwC Europe Integration of Strategy& into the global PwC network Rotation and the separation of audit and advisory Preparation of resolutions for the General Meeting Partner admissions Financial results, budgets, forecasts and business planning Approval of specific decisions exceeding a predetermined monetary value. We go into some of these in further detail below. Quality KQuality has perhaps been the most important issue on the agenda and it is always the subject of robust discussion with the BoM at virtually every meeting. Quality reflects directly on our reputation and therefore plays a significant role in the perception society has of PwC. Quality needs to be broadly defined and consists of more than simply technical quality. We have invested time this past year in the implementation of the new Regulation regarding the Independence of Auditors in Assurance Engagements ( de Verordening inzake Onafhankelijkheid ), collective investments, channel choices and the AFM reviews. We have had extensive discussion with the BoM on their response to the provisional AFM findings and how these differ from the results of our own internal reviews, the effect on the remuneration of the partners involved (including members of the BoM) and the effectiveness of the measures proposed. Also discussed were the content and tone of the Transparency Report. There was also, for example, regular discussion of the ethical aspects in the provision of tax advice, including PwC s views on this, and our Tax Code of Conduct. PwC Annual Report Report of the Local Oversight Board GRI 12

13 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Remuneration of the members of the Board of Management and of partners The LOB determines the remuneration of the Chair of the BoM (using mapping based on role and responsibility and a performance rating - see page 48) and, together with the Chair of the BoM, the LOB also determines the remuneration of the members of the Board of Management. The LOB reviews the BoM s finalisation of the outcome of the partner evaluation process, and the LOB plays a role in the appeals procedures when a partner disagrees with the outcome of the evaluation process. A special aspect in this regard last year was the evaluation of the previous members of the BoM and the mapping of the new 1 July 2013 members. Quality was given greater weighting in the evaluation process for all partners this past year, in particular as to how the results of the AFM report were to be handled. There were no appeals arising during the 2013/2014 financial year. The Public Interest Committee The LOB has sight of the minutes of the Public Interest Committee s meetings, and two LOB members are on the Public Interest Committee. The LOB concurs with the Public Interest Committee s conclusions as included in <naam> PricewaterhouseCoopers Accountants N.V. s Transparency Report. The firm needs to focus more on the outside world, our social compass needs to be re-set and the way in which auditors can expand their reporting role needs particular attention. Strategy& Given the monetary amount of the investment, the acquisition of Strategy& (formerly Booz & Company) into the global PwC network needed prior approval of the LOB. The LOB also provided advice to the BoM on the contractual arrangements between the PwC member firms involved in the acquisition. This acquisition is part of our global Advisory strategy and provides us with access to expertise and competencies that we did not previously have in house. Together with the BoM, we have stayed close to developments surrounding the integration. Rotation and the separation of audit and advisory Because of the mandatory separation of audit and advisory services, choices need to be made as to what services PwC can and will provide to Public Interest Entities (PIEs). Naturally, this is a choice made in the first instance by the client itself, but it does require a good level of internal governance as these choices also affect other Lines of Service. This selection process is complicated by the mandatory rotation obligation. This requirement to change audit firm at least every eight years is effective as from 1 January 2016, but PIEs are already starting to implement it. A discussion of PIE proposals with the Chair of the BoM has been on the agenda at almost every meeting. We review proposals won and lost, lessons learned from them and the balance between audit and advisory services. It is too early to draw firm conclusions because each situation is unique and the rotation process has only recently started. We are, therefore, not yet in a position to make a conclusive assessment of the mandatory rotation process and its effects on PwC. Looking to the future The plan to install a supervisory board in the very near future will significantly affect the raison d être and future role of the LOB. For the coming period, the LOB sees a key role for itself in monitoring the BoM s implementation of the measures referred to earlier and the balance of vigour and care with which they do this. Quality improvement will require significant investment on the part of our organisation and also on the part of our people. More time will be spent by partners, directors and staff on the audits, and our people must be given the time and resources to deliver the right level of quality. The workload will need to be carefully monitored as will the size and composition of our workforce, including partners and directors, to determine whether these need to be reinforced and, indeed, whether the number of clients needs to be reduced. Many other factors also affect our remuneration model, but it is clear that there needs to be structural change to the model. In addition to our Assurance activities there are also a number of other matters that warrant attention in the coming period. A few examples of these are the following: the ongoing developments regarding PwC Europe; the regionalisation within the PwC network; the effects of megatrends on our clients and also on our own organisation (and requiring a structurally higher level of investment); and developments in our international service delivery such as digitalisation and the ongoing roll out of our strategy (which in some cases means that we need to bring in direct-entry partners from outside who have competencies that we do not have in house). PwC Europe/Regionalisation As decided during prior year, PwC Belgium joined the PwC Europe SE structure this year. PwC Europe is an organisational collaboration between the Belgian, German, Dutch and Austrian PwC firms. Further integration will be worked on in the coming period, particularly in terms of more centralised direction and further profit sharing. This integration links in with current plans for regionalisation within the global PwC Van links naar rechts: Ruud Dekkers, Pieter Veuger, Janet Visbeen, Maarten van Ginkel, organisation. Jan Maarten van der Meulen, George de Soeten en Hans Bod. In addition to these issues, the LOB (at least until the installation of the supervisory board) will continue to monitor all matters germane to the activities of a supervisory board. The regularly recurring agenda items set out above will continue to be on the agenda for the foreseeable future. PwC Annual Report Report of the Local Oversight Board GRI 13

14 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Organisational matters What does the LOB do? The Local Oversight Board (LOB) is the supervisory body of PwC the Netherlands. The status of the LOB is comparable to that of a supervisory board. It monitors and provides advice to the Board of Management (BoM) and is responsible for approving certain decisions taken by the BoM for instance those above a certain pre-determined monetary value. The LOB is also specifically tasked to supervise the appraisal and remuneration of partners. Composition The Board consists of representatives from PwC s three Lines of Service plus an independent chair. It has seven members, all PwC partners, each appointed for a period of three years. None of the members reaches the end of their period in office this coming year. Committees The LOB has three committees: an Audit Committee, a Compliance Committee and a Remuneration Committee. The activities of the committees are set out below. How do we keep informed? The LOB naturally receives the various periodic reports covering financial matters, quality, Human Capital and compliance. The LOB also receives the agendas and minutes of the meetings of the BoM and the Chair of the LOB has a fortnightly meeting with the Chair of the BoM. Individual members of the LOB hold so-called portfolio meetings with individual members of the BoM. The LOB and the BoM meet together three or four times a year and, every spring and autumn, the LOB organises a series of three meetings with the partners to ascertain the issues that are concerning them. There are good contacts regarding information from the network as four of the LOB members are also members of the Supervisory Board of PwC Europe SE. Furthermore, the Chairman of the LOB is a member of the Global Board, which from supervisory perspective therefore brings us in alignment with the PwC network. Where specific issues arise, individual partners are invited to contribute in consultation with the BoM. The decision making process regarding the annual partnership admissions is always attended by the Chair of the CAD, the committee that manages the candidates through to partnership admission. And, finally, each member of the LOB is part of one of PwC s three Lines of Service, and the information coming from the practice and from the daily contacts with partners and staff is also an important ongoing source of information. Self-assessment The LOB implemented a self-evaluation process in early In an away-day environment, we were first schooled in the roles and responsibilities of a supervisory body. We then went on to discuss the performance of the LOB, and our conclusion was that we needed to improve our timeliness in dealing with strategic themes. We identified key areas of focus for the coming year. Not unexpectedly, these are consistent with the themes set out earlier. Statistics The LOB met fifteen times during the past financial year, five of them by conference call. In addition, we met three times with the BoM. The turnout at meetings averaged in excess of 80%, and in all cases absence was due to short-notice meetings with clients, illness or vacation. In addition to these meetings, the LOB also set up six meetings across the country for direct dialogue with the partners. Annual Report After due consideration of the Annual Report and the financial statements, the LOB has concluded that these present the situation fairly and consistently with prior year. We look back on a financial year in which some fine results have been overshadowed by the AFM s findings and the falling level of trust that society has in the audit profession. The LOB would like to thank all PwC people who, through their support, expertise and commitment, have contributed to where we are now. The year ahead of us will be a year of challenge. Our ambition remains undiminished, and that is to be the number 1 service provider in the areas of audit, tax & legal advice and consultancy. Amsterdam, 13 October 2014 Local Oversight Board, Ruud Dekkers, Chair Janet Visbeen (Tax & HRS) Hans Bod (Assurance) Maarten van Ginkel (Assurance) Jan Maarten van der Meulen (Advisory) George de Soeten (Tax & HRS) Pieter Veuger (Assurance) PwC Annual Report Report of the Local Oversight Board GRI 14

15 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Creative ideas all around us Moving forward side by side with the founding fathers of strategy consulting? That s fantastic, of course, says Martin Blokland, Consulting leader of PwC Advisory. It is not surprising that he was immediately enthusiastic about the global merger with Strategy&. The American company, formerly Booz & Company, has grown since 1914 to be one of the top leading strategy firms in the world. Together with PwC, we are a Category of One, says Hein van Beuningen, member of the Dutch management team of Strategy&. Martin Blokland and Hein van Beuningen PwC Annual Report 2013/2014 Interview Strategy& GRI 15

16 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Together, we can now offer the entire spectrum of services from strategy through execution. Not having to hand over the responsibility for the implementation of strategy to a third party will significantly increase the likelihood that our advice will be successfully implemented. Never before has such a leading strategy house come together with a big professional services provider. What will clients think of this? Martin: Together, we can now offer the entire spectrum of services from strategy through execution. Not having to hand over the responsibility for the implementation of strategy to a third party will significantly increase the likelihood that our advice will be successfully implemented. Hein: We are also seeing that the quality of strategic planning improves when we get PwC people involved who understand implementation. Clients really do need this. After years of cost cutting and process improvement, now is the time for many organisations to marry a clear vision of the future with results-driven execution. Stronger together, therefore. But why then keep dual branding, a partnership in which the two brands, PwC and Strategy&, remain intact? Hein: Because each brand has a strong identity of its own. Clients make conscious decisions to go for the strong implementation skills of PwC or for the analytical power of Strategy&. We very rarely compete in this space. So it wouldn t be wise to sweep away these differences we have in our DNA. Martin: And the complementary nature of our offerings means that we can always join forces when asked. But remember, we re not pushing clients into a one-stop-shop. We are not integrating our businesses, but we want to offer integrated, well thought out solutions wherever possible. Formerly Booz & Company You have mentioned the differences that fit well together. What about your similarities? Martin: Although our target segment of the market is a different one, we re all very keen to get our expertise working at clients. Ours is a people s business. Professional services rely on good relationships between people, and so it is also between Strategy& and PwC colleagues. Hein: Even in these first few months, we are seeing that, despite the inherent differences in emphasis, we have more areas of agreement than difference. At first, I did feel the fear of the unknown, and my colleagues did too. It s no mean step to join forces with 3,500 new colleagues employing more than 195,000 people. But, the worry melted away as soon as we made the contact with the PwC people. They re just regular people, these PwC folks. Hein: Yes, they are indeed. It was clear at our first joint social gathering that we were going to get along. How did we know? Groups of people mixed together and laughed at each other s jokes, for instance. The atmosphere is very positive, and we re all looking forward to this great adventure. Martin: And, while this is a global merger, Hein and I and the partners and staff involved are looking forward to taking the helm in the Netherlands. It really is a great pleasure to be getting together and discovering what expertise and contacts we have between us. Together in the market, with creative ideas all around us! The energy released by this partnership is tremendous. PwC Annual Report 2013/2014 Interview Strategy& GRI 16

17 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Report of the Board of Management PwC Annual Report 2013/2014 Report of the Board of Management GRI 17

18 Contents Foreword Key statistics Report of the Board of Management Report of the LOB Financial statements Information about PwC PwC in the Netherlands Joining forces in Europe PwC the Netherlands Assurance Assurance focusses on the audit of information and processes, and provides assurance thereon. The audit of annual financial statements is by far the largest part of our Assurance practice. We also provide assurance on processes and numerical (non-financial) information and we provide advice on accounting issues. Tax & HRS Tax & HRS assists companies, individuals and organisations with their tax strategies, planning and compliance, and provides a wide variety of specialist advisory services in the areas of remuneration structures, pension plans, cross-border staff exchanges and legal services. Advisory Advisory focuses mainly on transformation processes arising, for instance, from strategic change or from improvement in business processes and systems. Advisory also provides services in the area of mergers and acquisitions, from strategy determination through to assistance with business (unit) integration or carve out, and also provides crisis management services to clients affected by fraud, disputes or inadequate cyber security. Within PwC Europe (see also page 95), we work very closely with the member firms in Germany, Austria and Belgium. The driving force behind this consolidation within Europe is improved client service. It also leads to more effective knowledge sharing and increased investment and innovative power. Gemiddelde bezetting (FTE) Knowledge sharing within eight industry groups Industrial Products Technology, Media and Telecom Composition of PwC the Netherlands 4,500 Retail & Consumer Transport & Logistics 3,000 Financial Services Private Equity 1,500 Energy, Utilities & Mining Public Sector PwC Annual Report Partners 253 PwC worldwide 195,433 people PwC The Nederlands 4,240 people The Netherlands Professional staff 3, Support staff /2014 Offices PwC in the Netherlands GRI 18

19 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC About the Report of the Board of Management This Annual Report addresses the aspects of our strategy that are of most interest to our stakeholders. The strategy has been determined in consultation with our stakeholders. We have opted to base this Annual Report on the framework developed by the International Integrated Reporting Council. To create value for our stakeholders it is essential to know what is important to them and, to ascertain that, we have carried out a so-called materiality analysis (see page 22). In this report, we focus on the matters that are of the greatest relevance to our strategy and to our stakeholders. The GRI table in the appendix (page 115) sets out the matters that, based on this materiality analysis, we have determined are relevant to our stakeholders. The table follows the G4 version of the Global Reporting Initiative (GRI) guidelines, and it lists the pages where information concerning each indicator can be found. G4 requires that an analysis of the impact per indicator be performed in order to determine the scope of the report. We make it clear that the scope of this report is PwC in the Netherlands. In other words, all information about our policy, strategy, procedures and systems, and about the associated indicators, relates to our own organisation (see page 113). G4 distinguishes between two application levels of reporting that meet the requirements of the guidelines: the core level and the comprehensive level. This report is a comprehensive-level report. The GRI table shows which G4 information has been verified by our external auditor. Both the qualitative and quantitative data relate to the past financial year (1 July June 2014). There have been no significant changes in terms of size, structure, ownership or supply chain of PricewaterhouseCoopers B.V. or its subsidiaries. Most of the quantitative information in this report has been measured. Any information that has been obtained by other means (for instance by extrapolation) is identified as such. To the extent possible, all quantitative information in this report is accompanied by comparative information for the prior year. The brief to our external auditor was to provide a reasonable level of assurance on the Report of the Board of Management (excluding Future expectations ), the Information about PwC and the appendices. The external auditor s assurance report, including details of the work carried out, is presented on pages Integrated reporting Integrated reporting is a form of reporting that links the entity s strategy, governance and financial performance with the societal, sustainability and economic context in which it operates. Our aim is to provide stakeholders with better insight into how we implement our strategy and how this impacts society. The reporting elements of the IIRC framework ( are the guiding principles underlying this Annual Report, as follows: How we create value: How we are of value and relevance to our stakeholders Our stakeholders: Who our stakeholders are and how we dialogue with them Our strategy and achievements: What our strategic ambition is, how we plan to achieve it and what we have achieved this past year Risk factors: The risks which we believe could hamper our achievement of our strategic ambition and how we deal with these Governance and remuneration: How our areas of key strategic focus are embedded within our organisation Expectations for the future: Our ambitions for the longer term and the opportunities and uncertainties we see in the market Measuring impact Measuring impact is a relatively new field, and it is attracting more and more attention within PwC, and elsewhere, in the context of integrated reporting and the Green Deal we signed recently, an agreement which we and a number of other parties have concluded with the government regarding transparency about the impact that doing business has on the environment. Measuring our impact helps us to better reflect that impact in our management processes and to increase the impact where possible (or reduce it, where it is negative). As this is the first year of measurement and we do not yet have an overall view on the measurement of our impact, we have decided not to report on this yet. In some instances, we do not yet have all the relevant information and, in others, the measurement processes still need further methodology to be developed. We see this as an ongoing process, which we intend to continue in the coming years. PwC Annual Report About the Report of the Board of Management GRI 19

20 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC How we create value PwC s purpose is to contribute to a greater level of trust in society and to solve important problems. It is essential that we demonstrate this in our daily practice and that we talk regularly with stakeholders about it. They will be the ones who will ultimately determine whether we live up to it. We regularly assess what we do so that we can determine that we are still in line with this stated purpose. Our purpose (why) Our mission (what) Our strategy (how) Our impact Our clients and society Issues/themes Expectations (Global) trends Our people Talent and skills Training and experience (Personal) networks Build trust & in society Solve important problems Our people Our clients Create value for Society Society Clients People Greater trust in financial markets Contribution to the public debate Contribution to development Social Enterprise sector Reliable financial and non-financial information Better insight for internal and external stakeholders Higher efficiency and effectiveness Development Appreciation Social involvement PwC Annual Report How we create value GRI 20

21 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Stakeholders and materiality We wish to create value for society, for our clients and for our people. These stakeholders are the ones who determine the extent to which we achieve this and whether we achieve it in the right fashion. They provide us with issues that need to be incorporated into our strategy (and therefore also need to be addressed in this Annual Report) and they provide us with input. Engaging in a proactive dialogue We have identified our most important stakeholders on the basis of two questions: Who are the stakeholders for whom we have the greatest relevance and who are the stakeholders of most relevance to us? It is with this group that we get into dialogue with very specific and germane questions and dilemmas. Our stakeholder group is wider than simply our portfolio of clients and our people, as our services affect more than only those we advise, audit or employ. This applies not only to Assurance. The societal context in which we provide our services also has a critical and increasingly significant effect on Tax & HRS and Advisory. The knowledge we accumulate and the conclusions we draw from all these discussions drive the fine-tuning of our objectives and strategy. People Clients Society Stakeholder dialogue in the form of: Team and business unit consultation One-on-one discussions Intranet Staff satisfaction survey Articles and opinions in staff magazines and newsletters Discussions with clients Client satisfaction survey Publications and articles (Social) media Seminars Discussions with representatives of the NOB, VBDO, NBA, AFM, VEB, Eumedion, VNO/NCW, UvA, EUR, Nyenrode, Monitoring Committee Corporate Governance and supervisory directors Publications and articles (Social) media Seminars Key topics for stakeholders Independence Quality Innovation Physical and mental well-being Integrity Talent management Role in the public debate Client satisfaction Quality Integrity Independence Role in the public debate Development of talent Diversity Integrity Role in the public debate Quality Independence Transparency Societal impact of our services PwC Annual Report Stakeholders and materiality GRI 21

22 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Stakeholder dialogue feeding the materiality index As a first step on the road to a materiality matrix, we had already 5.00 undertaken an internal survey during the prior year into the level of importance placed on certain topics, both for the people surveyed and for their most important stakeholders. Based on the responses, we have put together a so-called materiality matrix of topics that are of such significance to our organisation that we need to report on them. This year, we then moved on to validate this materiality matrix with our internal and external stakeholders (see the summary on the previous page). We asked them whether they recognised these topics as relevant for themselves, whether they has other key topics to add, and whether 3.00 we had identified topics that they do not view as material. Stakeholders The results of these discussions (which in some cases were with supervisory directors) did not result in any significant changes to the matrix. The only outcome of note was that we added physical and 2.00 mental well-being as a material topic. It was our staff in particular who wanted to see our softer, less-quantifiable side in the matrix. We then validated this updated materiality matrix against the results of the client and people satisfaction surveys. We also carried out a media analysis and a sector analysis, to determine whether the results of 1.00 our materiality matrix might differ from how our peers are thinking or from messages coming from the media. This was not the case Relevance for stakeholders (internal and external) Discrimination Political contributions Human rights Bio-diversity Raw materials Regional economic role Water Materiality matrix PwC Quality Integrity Transparency Independence Client satisfaction Role in Talent management the societal debate Innovation Societal Financial results Diversity impact Internal working relationships Physical and of our mental wellbeing services Complaints arrangements Sustainable procurement Creating employment Local community Energy involvement Transport Waste Emissions Local procurement Relevance for our strategy Business PwC Annual Report Stakeholders and materiality GRI 22

23 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Key topic Addressed on pages: Independence 25, 28-30, 33, 45, 48-50, 102, Integrity 25, 29-30, 45, 49, 50, 102, Quality 24-25, 26-31, 33-34, 41, 44-45, 48-49, 51-52, Role in the public debate 9-10, 24, 36, Societal impact of our services 20, 26, 35, 36, 48, 52, , Diversity 31, 35, 48, 52 Transparency 24, 26-27, 29 Client satisfaction 33, 40, Innovation 29, 40, 43, 45 Talent management 29, 31, 33, 41, 44, 52 Financial results 25, 37-40, 51-52, 55-85, 112 Physical and mental well-being 31 The Board of Management (BoM) uses both quantitative and qualitative indicators to measure the progress of strategic achievements. The BoM has done this twice during the past financial year, covering what had been achieved in the intervening periods, what elements had been started and what still needed to be done. These progress indicators are then discussed in the General Meeting. Quality, independence and integrity fall within the scope of our quality control and risk management policies (see pages ). The framework for this consists of an extensive number of rules, procedures and requirements, some legally mandated and some not. This system is reviewed internally and externally. The BoM receives reporting from the PwC NL Compliance & Independence Offices and from the Internal Audit Department in these areas. Quality (and by extension, independence and integrity) have been top of the weekly BoM agenda as a matter of course. Topics the board discusses vary from the implementation of new regulatory requirements to the results of internal and external reviews and the response to proposals or reports from, for instance, the political world or our professional organisations. The public debate about our profession hinges on the question as to whether we deliver the level of quality that society demands. Consequently, topics such as the societal impact of our services and our role in the public debate (both as a proactive participant and as the subject matter of the debate) are also often on the BoM agenda. Diversity, client satisfaction, innovation, talent management, well-being and our financial results link in to our strategy and are therefore also addressed in the monthly and quarterly reporting to the BoM, and these are used to direct the management of the business. More information is provided in the section Governance and remuneration (page 48). PwC Annual Report Stakeholders and materiality GRI 23

24 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Specific messages from our stakeholders We have identified the key messages that we took from the dialogue we had with our stakeholders in the spring. The very fact that they needed to give us this input indicates that we need to improve on these points. Key messages from stakeholders Explanatory remarks PwC response Take the lead, as profession in ensuring restoration of society s trust in auditors and in other aspects of the public debate Now that the public debate on the quality and independence of the audit profession is well under way, the stakeholders believe that we must set out publicly a clear vision for the future. We should not do this on a stand-alone basis, but together with our peers. The audit profession has historically been inward looking and insufficiently communicative. We provide little transparency as regards our work and the results thereof, which is partly why this lack of trust has arisen in the first place and why we must now describe better who we are, what we do and how we do it. Initiatives have already been taken within the profession, for instance in the area of the new auditor s report (see pages 29 and 109). Put more emphasis on the softer side of the organisation Put yourself in the client s shoes They are also expecting us to make our views known on a number of other issues such as the way in which companies set up their tax affairs and the consequences of megatrends for the economy and society. Our stakeholders have made it clear that the culture and conduct of all PwC professionals is crucial to the quality of our service delivery. External stakeholders believe that we should be more prepared to lay ourselves open to critical input and let the inside and outside world know the dilemmas we are struggling with. Our stakeholders expect PwC to provide the client with broadly based advice. Rather than simply offer our competencies, we should get into a dialogue about the client s strategy, the way in which value is created and how we can contribute to that. Furthermore, the political world, in the guise of the Second Chamber of Parliament, has called upon the audit profession to come up with a plan for restoration of trust. This plan was recently submitted by the Future Accountancy Profession (Toekomst accountantsberoep ) Working Group. The primary theme throughout the set of measures proposed by the working group is improvement in professional quality. Competing on quality is at the heart of the earnings model. A culture in which quality is paramount must be assured within audit firms management and remuneration processes, and this should be achieved by audit firms with a so-called PIE licence installing a supervisory board with external members which appoints and remunerates the Board of Management on the basis of its performance in the area of quality. The Working Group also calls, amongst other things, for more partners on fewer engagements, more time for staff coaching and increased number and depth of internal quality reviews. We will be applying the proposed measures thoroughly throughout our entire organisation (see also page 29). We will present our views on societal issues in a number of ways, varying from client and relationship events to the publication of articles or reports on societally relevant subjects. The appointment of a Chief Economist also fits in well in this context (see page 9). Stakeholders stress that we should listen better and communicate more clearly what we do. We have taken steps to reinforce our culture (see page 30). We do recognise the criticism that we tend to advise from the perspective of our own solution sets rather than from the perspective of what the client is looking for. We have now included a basic principle into our strategy that we always take our societal role, the client s strategy and its value creation process as the starting point for our service delivery (see also page 40). PwC Annual Report Stakeholders and materiality GRI 24

25 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Dilemmas presented to us by stakeholders Our stakeholders have presented us with the following dilemmas that they see as potential barriers to PwC fulfilling its role in society. It is up to us to explain how we deal with these dilemmas. Dilemma How does the need for independence on the part of the one who is auditing stack up with the fact that the one being audited is also the one responsible for making the appointment? How do we deal with it? Regulation There is a wide spectrum of rules and regulations to ensure the independence of the external auditor. Mandatory rotation and separation of audit and advisory have been in place since January 2013 for the audits of public interest entities. With its Regulation concerning the independence of auditors in assurance engagements (ViO), issued in early 2014, the Netherlands Institute of Chartered Accountants (NBA) has tightened up the requirements regarding rotation, gifts, personal demonstrations of hospitality and sponsoring. We monitor compliance with independence requirements very vigorously. We also see that the bodies making the statutory audit appointment are improving in the area of independence by moving the responsibility for the appointment of the external auditor more away from the management board and more towards the internal supervisory bodies or their audit committees. We school our auditors in building and maintaining professional relationships with audit clients through training programmes and coaching on the job. In this training, we teach our people how to handle relationships with the client while still maintaining their independence (see also page 29). Conduct A good relationship is an essential basis for a good quality audit and good collaboration, but also for the robust dialogue that is sometimes needed regarding difficult issues. Standing firm and being of an independent mind set are essential attributes, as is the backing from one s own organisation as and when this is needed. We are committed to providing our auditors with such support. Our approaches to teamwork and consultation also play a significant role in ensuring independence. Our mantra runs: The worst mistake you can make is the mistake you make on your own. How do audit and advisory fit together in one organisation? How does the profit motive of our organisation stack up with the need to strive for the highest possible levels of quality? Making good arrangements We aim to make clear and written agreements with all clients as to the fee and the basis for the fee. This contributes to better insight and transparency and facilitates later accountability. PwC consists of auditors, tax advisers and consultants. They work together and complement each other, if for no other reason than that client issues often are not restricted to one discipline. An impression that some stakeholders have is that auditors and advisers should not operate within the same organisation. We do not share this view. A good quality financial statement audit requires that the external auditor has access to specialist expertise regarding complex issues arising during the audit. The auditor often may not have such expertise, but the specialist has. Examples of this are complex subjects in the areas of taxation, pensions, IT, valuation and treasury. Such specialist expertise must be kept current and therefore needs continuous update. Clearly, a specialist who is part of the audit team may not act as adviser to the same audit client. We are absolutely convinced that access to the best quality expertise can only be assured if these experts are fully active in their area of expertise, also in an advisory role. The mechanisms of the advisory markets can also serve as a measure of quality. Criticasters maintain that the profit motive inherent in our auditors business model threatens the quality that they deliver. We take a different view, and that is that quality leads to value creation both for society in general and for our clients. The resulting profitability provides the resources for further investment in quality, for instance in talented people and in innovative technology. PwC Annual Report Stakeholders and materiality GRI 25

26 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Our strategy and achievements Our strategy focusses on the five objectives which move the strategy forward. Investing in strategic competencies 5 1 Building on the quality of our service delivery 1. Building on the quality of our service delivery Society expects us to aim for high levels of quality, and everything we do must be focussed on this. We evaluate the technical aspects of our service delivery by carrying out quality reviews, and our Assurance practice is regularly reviewed by our external supervisory body. The AFM reviews carried out last year show that the level of our quality needs to be improved, and this has led to the rigorous implementation of a wide-ranging set of radical measures and to additional investments in quality. We are doing this at the sharp end of quality, i.e. investments in training and coaching, quality assurance and simply in spending more time when the complexities so require. We are also working to reinforce the softer elements of quality by pushing through some changes in aspects of our culture and behaviour. What are we focussing on? What have we achieved? What can we do better? 4 2 Delivering the PwC Experience Meeting external and internal standards of quality Greater attention to the softer (behavioural) aspects of quality Internal and external review of our quality Tightening up of our governance Plan of action to reinforce culture and behaviour Quality measures following the AFM review ( Alert ) Implementation of the proposals of the Future Accountancy Profession Working Group Building a culture that is outward looking and inclusive (see also the section Delivering the PwC Experience ) Investing in technology to further support quality and efficiency (see also the section Building a resilient and agile organisation ) Transforming our organisation 3 Taking the opportunities the market offers us Recruitment and retention of talented people Improvement and standardisation of our work flows Amended terms of employment, including higher budgets for salary and bonuses and attention to well-being Outsourcing of routine work to delivery centres (see also the section Building a resilient and agile organisation ) Investment in our audit approach PwC Annual Report Our strategy and achievements GRI 26

27 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC For specific information about our audit firm, we refer to our Transparency Report. This provides details of our policies for quality and of the improvements we are planning in our audit practice. Internal and external reviews Internal testing and external review Our policies for quality include internal and external reviews. One of these is the Engagement Compliance Review (ECR), which is carried out by partners, directors and Results of the internal and external file reviews in Assurance managers independent of the engagement being reviewed. The objective of the ECR programme is to test the quality of the engagements performed and compliance with the applicable procedures and requirements and also to identify areas for improvement (see also pages ). 38 of our audit engagements in Assurance were covered by an ECR this past financial year. Of the engagements selected, 37 met our standards, five of these with areas for improvement ( compliant with review matters ). Review by: Number of engagements reviewed Number of reviews with findings Of which ERC non-compliant PwC network (Engagement Compliance Reviews) AFM 10 4* 3 The US supervisory body (the PCAOB) ADR (the National Audit Office) (in connection with local government welfare payments) Inspectorate of Education Dutch Healthcare Authority (NZa) 4 2* 0 Other ad hoc external reviews *The engagements with findings have been subjected to an ERC. Engagements reviewed (Engagement Compliance Review) Tax & HRS and Advisory Line of Service Number Not meeting our standards Tax & HRS Advisory 82 3 Each Tax & HRS partner and director has two engagements selected annually for review. Advisory includes all partners and directors in its annual review process. One engagement did not comply fully with our internal standards ( non-compliant ) and, where necessary, we have taken remedial action in the files. The validity of the auditor s report issued was not impaired. Assurance has many of different types of review. Not only our external regulator the AFM but also other external supervisory bodies regularly carry out reviews of our quality control and risk management systems (see the table). Tax & HRS and Advisory also have their own review processes. These are generally limited to formal compliance aspects and are therefore not as in-depth as Assurance s are. Each Tax & HRS partner and director has two engagements selected for review annually. Advisory includes all partners and directors in its annual review process. In Tax & HRS, 268 engagements were selected for review. Sixteen of these did not comply fully with our risk management procedures, for instance in areas such as the letter of engagement (or the completeness thereof), terms and conditions, description of the work to be done and file documentation. In Advisory, three of the 82 reviewed engagements did not meet our standards, and there were some instances of incomplete or non-timely compliance with risk management procedures. The importance of these procedures (and of complying with them on a timely basis) has subsequently again been incorporated into our training programmes. AFM review results at odds with what we are striving for The Netherlands Authority for the Financial Markets (AFM) periodically monitors and reviews our quality control and risk management procedures and this includes reviews of individual engagement files. The results of the AFM s regular 2013/2014 review were published at the end of September and they fell short of all that we are striving for in the area of quality. This is particularly the case in the area of compliance with auditing standards, where the AFM rated four of the ten engagements reviewed as unsatisfactory. Our own internal review process had also rated three of these four engagements as non-compliant. We performed follow up work and remediation on these audit engagements and concluded that the auditor s reports issued are still appropriate. We have a difference of opinion with the AFM regarding one of the four engagements that the AFM rated as unsatisfactory. Our own ECR review did highlight findings, but we believe that these should not lead to a non-compliant rating and we rated this engagement as compliant with review matters. We have had several other external reviews in recent years: the regular AFM review, the 2012 AFM review into housing associations, the regular review by the US supervisory body, the PCAOB, and other reviews by the governmental Education, Audit and Healthcare authorities and by the global PwC network organisation. PwC Annual Report Our strategy and achievements GRI 27

28 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC In none of these cases did we receive unsatisfactory ratings to this extent. Where the AFM, the ADR (the National Audit Office) or any other supervisory body reports shortcomings, we carry out an internal review to rate it in accordance with the ECR methodology, primarily in order to ensure consistency of rating and evaluation for the purposes of any financial sanction on the external auditor involved. The Transparency Report provides extensive details of the results of the AFM review. Steps being taken following the AFM review The results of this year s AFM review have really struck home and hurt us. They have been a clear message that a root cause analysis was needed, at individual engagement level, and that structural change needed to follow as a result. In this regard, we will be investing more in the quality and documentation of our audit work. We are doing this under the maxim Alert!, to underscore both the urgency and the vigilance that we expect from all our people. This Alert quality improvement programme focusses specifically on us performing and documenting our audit work well, and at the first time of asking, in accordance with both international auditing standards and our own internal requirements. The Transparency Report provides extensive details. A number of legal cases pending Occasionally, PwC faces actual or potential claims and litigation, including disciplinary procedures arising from professional work we have undertaken at current or former clients. To the extent that these fall under civil law, they can relate either to PwC or to one if its partners, ex-partners, staff members or ex-staff members. Disciplinary procedures always relate to individual professional practitioners. We are involved in various ways in the legal aftermath of a number of bankruptcies. The more important of these relate to Econcern, LCI Technology and a number of Fairfield funds that have incurred losses because of the Madoff fraud. In this last case, there are two civil cases pending in New York and two in Amsterdam. On 3 September 2014, the Amsterdam Court dismissed one of the claims in its entirety, though appeal is still possible. Settlement was reached this year on a smaller bankruptcy in a modest amount (less than 100,000), primarily to avoid further legal costs. New disciplinary procedures arising this year The liquidators and a number of investors in the Econcern case have filed four almost identical complaints with the Court of Auditors. PwC is being held liable by the liquidators and a number of investors for alleged damages caused by what they claim was an incorrectly issued unqualified auditor s report on the 2007 annual financial statements of Econcern. The Court of Auditors heard the case on 18 and 20 August 2014 and the verdict is expected in October. There are no other disciplinary procedures pending that involve PricewaterhouseCoopers Accountants N.V. No incidents reported In addition to reporting disciplinary proceedings, we are also required to notify our regulatory bodies of any internal incidents that arise within the organisation. Incidents that can result in serious consequences for the integrity of our ongoing practice must be notified to the AFM. There were no matters last year that qualified as incidents required by law to be notified to the AFM. Other We have received no requests this year from supervisory bodies regarding data protection and privacy, and we therefore assume that we are in compliance with the applicable legislative and regulatory requirements. Other quality measures Continuously updating our policies for quality There are two aspects of quality that are particularly important to us: firstly, complying with all legislative and regulatory requirements and, secondly, meeting the expectations of our stakeholders. Our policies for quality cover both of these. More extensive details are provided on pages This past year we have invested much time implementing the new NBA regulations, effective 1 January, designed to ensure independence in the performance of audit engagements. There have also been other measures introduced within the context of our policies for quality. Tax & HRS have set up an internal committee to review, as and when requested, whether our responses to tax issues comply with our global Tax Code of Conduct. Advisory has implemented a programme (a dashboard) that provides their professionals with insight into the status of their engagements and the completion status of all required steps and procedures. Tightening up our governance During the financial year, we have tightened up our policies regarding collective investment schemes used by partners. Although these schemes do not contravene any law or professional requirement, we have decided that they are no longer permitted as from 1 July We believe that collective investment schemes among partners are undesirable and we wish to avoid the impression of a partnership within a partnership. PwC Annual Report Our strategy and achievements GRI 28

29 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Introducing a supervisory board We have a Public Interest Committee (see page 99) that supervises the assurance of the public interest within our audit firm. We plan to set up a supervisory board of directors (SB) with outside members in line with principles III.1, III.2 and III.3 of the Dutch Corporate Governance Code and in line with the proposals submitted, on behalf of the sector, by the Future Accountancy Profession Work Group to improve the quality and independence of auditors. In addition to its regular responsibilities, the SB will be focussing particularly on the entity-wide aspects that effect audit quality, independence, integrity and stakeholder interests in the audit and it will set up its own Public Interest Committee. The SB will be responsible for submitting binding proposals for the appointment of members of the BoM of the network member firm and for approving the appointment and dismissal of partners in the audit firm together with the policies for quality and the process by which implementation of these policies is ensured. The SB will also be responsible for approving the policies for the remuneration of the members of the BoM, partners and staff, for determining the remuneration of the members of the BoM of the network firm and for approving the appointment and evaluation of the Compliance Officer. The Compliance Officer will report directly to the SB. The BoM is responsible for managing the business within frameworks set by the SB. Implementing a claw-back arrangement Quality is paramount in our people evaluation processes (see pages 48-49), and we intend to introduce a deferred remuneration scheme with a six year claw-back period for partners and directors in the audit practice. If it becomes apparent within this six-year period that the auditor has issued an inappropriate auditor s report that has caused societal damage, the auditor will lose all or part of the rights to that deferred element of income. It is also our intention that the remuneration of the Members of the BoM of the Dutch PwC network firm and the Compliance Officer will be profit-independent. The fixed element of the remuneration will have no direct relationship with the organisation s annual profitability and the variable element may not exceed 20% of the fixed element. The variable element will be based on the achievement of long-term goals set by the Supervisory Board within the context of the organisation s role and responsibilities within society, including audit quality. Using new technology We will be using new technology to improve our service delivery. In particular, our Assurance practice will be applying data analysis to detect abnormalities in financial statements. As an example, we have invested in a new tool that analyses an organisation s transaction streams. We will be standardising our audit methods as much as possible. The risk of error is reduced if all involved work to exactly the same methodology, and the resultant efficiency savings will allow more audit time for the more complex issues. Communicating better with the outside world The importance of good communication with our stakeholders has become increasingly clear to us. We have also received from them the message that we must provide greater clarity as to what we do (see page 24). This is consistent with our policy (and that of the whole sector) to make a better job of our reporting role and thereby also improve our societal role. An example of better explanation of our work is the more proactive role we have had during our clients shareholder meetings. PwC auditors were present at a number of meetings this past year and, in some cases, they presented their audit findings and responded to questions from shareholders. A further example of better communication is the new auditor s report that is becoming mandatory as from the 2014 audits. In this new report, the auditor must address the key issues arising during the audit and indicate explicit concurrence with management s conclusions as to going concern. We used the new auditor s report for 2013 at seven of our AEX-listed clients and at four Midcap clients. Our experiences with the new auditor s report are summarised in our publication Plain speaking! (see page 109). Culture and behaviour Increasing our focus on behaviour and training As our stakeholders have indicated (see page 24), the success (or lack thereof) of our organisation lies in our behavioural patterns, in living up to standards (including ethical standards) and in being prepared to take a firm stand where needed. We are placing increasing emphasis on this in our learning and development programmes (see also pages 33-34). An example is the Tell it as you see it training that is being widely rolled out in our Assurance Summer School. This is a follow up to last year s professional scepticism training which was a core element of our programme. The theme of Tell it as you see it is that auditors must not just report well but must also communicate clearly. Using case studies for illustration, the participants learn how to recognise behaviour and emotions and how to bring these forward for discussion. The session is led by a behavioural trainer supported by an educational actor. Assurance and Tax & HRS have specific ethics modules in their training programmes. In Tax & HRS, second year juniors (49 staff) completed this module and, in Assurance, 141 staff took it as part of the induction programme. PwC Annual Report Our strategy and achievements GRI 29

30 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Aiming to reinforce our culture We have a number of initiatives ongoing within our organisation designed to reinforce our culture and behaviour. For instance, we have been focussing for many years on the PwC Experience ; this reflects the manner in which we deal with our clients and people (see also page 32). We have also sharpened up our leadership model this past year (see page 33). Our annual survey among staff (the People Survey) provides us with significant information as to how our staff feel about aspects such as culture and behaviour. During this past year, we have taken steps to approach these individual initiatives on a more integrated basis, and we expect this to clarify how much support our culture is really providing in terms of meeting our objectives for quality, independence and creating value for our clients. The results will then feed into a plan of action for any cultural reinforcement that might be needed. Paying extra attention to our Code of Conduct In addition to all our protocols, procedures and requirements, we also have a Code of Conduct that sets out how we are expected to behave and act. We have again this year been proactively promoting the Code to our staff, including the related complaints and notifications policies, through the use of posters in elevators and messages on our intranet (see also page 102). The Code of Conduct is a recurring theme throughout our training programmes, for instance in the study and discussion of dilemmas. How do you respond if a client or a colleague breaks the rules? Or if you are put under undue pressure? The message our people get is that they must always consult with colleagues and superiors when they have questions or doubts. We developed a specific workshop last year designed to encourage discussion regarding dilemmas. Through exposure to practical situations, the participants get better insight into our Code of Conduct and they are encouraged to think about how they would respond in certain grey areas. The workshop was run for the first time during the Assurance Summer School, and we intend to roll it out to our people in Advisory and Tax & HRS. In an in January, we called upon all staff to report to their superior or confidential counsellor any incidents of business misconduct or borderline cases they are aware of (including any from the past). The response to this did not give rise to any notifications that affected our own organisation. External survey conducted Last year, we commissioned an external research firm to carry out a survey into the culture within our organisation. The firm sent out an extensive written survey and supplemented this with a number of individual interviews and 25 group discussions. This approach and the involvement by a third party ensured that we received an independent and objective view. One of the conclusions of the survey was that we have a highly motivated team of people and this was consistent with our annual people satisfaction survey. The agency typified PwC as an organisation with results-focussed, intelligent and ambitious people and reported that the people who participated in the group sessions were full of energy, open and strong people who were clearly proud to be with PwC and with their clients. In general, the survey found that PwC people place great value on growth and ambition, but not at the expense of the collective good. Staff are positive and are keen to make their own contribution to the collective task ahead of us. Our staff believe that quality should stand, and does stand, paramount at PwC. This was good to hear, but the researchers did add that we need to focus more on achieving our stated objectives in the areas of people centricity and long-termism. The survey also found, and this applied across the whole organisation, that our people feel that there is too little attention paid to the innovation and renewal that is needed. While it also concluded that PwC is not at high risk is the areas of culture and behaviour, it did note that, mainly in Assurance, procedures, rules and regulations, check-the-box approaches and management are all gradually gaining the upper hand. To a lesser extent, this applies also in Tax & HRS. Our Advisory people noted, amongst other things, that they would like to see greater attention paid to the development of joint ambitions and objectives. The survey also underscored the importance of having our purpose and strategy clearly translated into practice. There need to be clear and focussed frameworks providing clarity, prioritisation and support for the day-to-day operations at all organisational levels. Turnover (in %) 2013/ /2013 Evaluation Excellent/Very good Good Needs improvement/unsatisfactory Years of experience 0-3 years years > 6 years Illness rate 2013/ /2013 Illness rate (%) PwC Annual Report Our strategy and achievements GRI 30

31 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC We do recognise ourselves in the results of the culture survey. The lessons learnt and areas for improvement will be given specific attention as we go about our daily business processes and as part of our PwC-wide culture transformation programme. Attracting and retaining talent Working to create an inspiring working environment Our Human Capital policies are focussed on recruiting talent and investing in their development. We offer challenging work, many development opportunities and competitive terms of employment. What we see is that people are looking for inspiration and passion in their professional environment. They want an inspiring environment to work in and inspiring people around them. Our ambition is to be that kind of organisation. We address this in more detail on pages and 35. However, we also see that turnover among highly and well rated staff has increased in the past year. While this is partly due to the war for talent that is currently raging in the labour market, we also see this increasing level of turnover as a signal that we need to work harder at recruiting and retaining talent and that we need to continue to work on achieving the inspirational and motivating organisation that we aspire to be. Supporting our people in their physical and mental well-being We are keen to keep our people physically and mentally in good health throughout their careers. In consultation with the Works Council, we have launched a new wellness programme designed to help keep every employee healthy and inspired. An element of this programme is a digital tool with which staff, independently and anonymously, can monitor their well-being and health. They also have the option to call upon a digital coach to help bring about behavioural change in the areas of relaxation, sleeping, eating, drinking, smoking and exercising. We have also reintroduced the 4-yearly check-up programme, which is open to all staff. We added the Corporate athlete workshop last year as an option in the development programme for directors. This workshop is designed to address the physical condition of people working in a very demanding environment. We want to avoid staff burning out or falling ill because of the demands of the job. As and when this does happen, we look for a suitable solution together with the individual concerned. This can lead to demotion. This arrangement was agreed with the Works Council and came into effect on 1 September Our own people actively recruiting new colleagues We are making use of the PwC people s personal experiences in our recruitment campaigns. For a year now, a number of PwC people have been active on social media about their daily work experiences, and this is providing a natural and realistic view of PwC. We believe that real day-to-day experiences have much more impact on the target group than campaign slogans have. In addition to that, our people generally know very well what sort of qualities we are looking for and who might be a good and suitable candidate. Their contacts are therefore highly valuable when attracting new colleagues. PwC Annual Report Our strategy and achievements GRI 31

32 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC 2. Delivering the PwC Experience The PwC Experience represents the manner in which we strive to interact with clients and colleagues. The way we behave, forge relationships and communicate, based on trust and sincerity, is crucial to this. The PwC Experience represents a culture that is outward looking, in which people can be themselves while valuing the diversity that others bring and in which societal involvement is second nature. Our policies for diversity and corporate responsibility reinforce this concept of the PwC Experience. Staff satisfaction survey 2013/ /2013 I would recommend PwC as a great place to work. 74% 70% I am proud to be with PwC. 84% 81% I still expect to be working at PwC in 12 months time. 76% 74% I am very satisfied with PwC as an employer. 69% 67% 76% 73% What are we focussing on? Building strong relationships with clients and our own people Building towards a culture that is more outwardlooking and inclusive Increasing our societal impact through developing a clear vision in the markets and sectors in which we operate What have we achieved? Improvement in staff satisfaction survey results Client satisfaction stable at an 8 rating Number 1 position in the Brand Health survey retained Introduction of a new leadership model ( the PwC Professional ) to inspire and encourage staff More attention to the soft skills and keeping an open mind in learning and education Setting up the Chief Economist Office Refreshing our CR policies by shifting the focus to social enterprises What can we do better? Asking clients for feedback more frequently Getting well into the strategic agendas of our clients in terms of the impact of global megatrends (see also the section Taking the opportunities the market offers us ) Plan of action to reinforce culture and behaviour (see also Aiming for the highest levels of quality) Increased promotion of women and people with non-western backgrounds Better translating our public statements and thought leadership into our clients strategic agendas (see also under Taking the opportunities the market offers us ) The PwC Experience is a work in progress. We are happy with the strides we have made, and the results of the staff and client satisfaction surveys show that we are on the right track. We have refreshed our CR programme and we expect that this will boost the programme s impact both internally and externally. Where we do need to continue to work very hard is on developing and maintaining what we call an inclusive culture. People Engagement Index on the rise One of the measurements we use to determine whether we have been successful internally in bringing the PwC Experience to life is our annual staff satisfaction survey (the People Survey), in which all staff can indicate what they think PwC is doing well and where there is room for improvement. Last year 75% of our staff participated in the People Survey, a rate consistent with the prior year. For us, one of the most important deliverables from the survey is the People Engagement Index, which quantifies the relationship between PwC and its staff. The People Engagement Index (PEI) rose from 73% to 76% positive. Of the remaining respondents, 17% were neutral and 7% negative. PwC Annual Report Our strategy and achievements GRI 32

33 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Client feedback results Number Client satisfaction Recommendation 2013/ / / / / /2013 Assurance Tax & HRS Advisory and to conduct themselves in accordance with our standards and values. Our training offerings are therefore put together to cover the development of both hard and soft skills. As we set out in the previous paragraph (page 29), the softer side is getting more and more attention. Client ratings consistent with last year We measure progress on the external aspects of the PwC Experience, amongst other things, by asking feedback from our clients after engagements are completed. This process covers not only substance and technical quality but also the way in which our people have conducted themselves. We have increased the number of requests for feedback this past year. Top position in the Brand Health Index retained Every two years, PwC Global commissions an independent research agency to carry out a major brand health survey. This focusses on the perceptions that clients, potential clients and business contacts have of us and of our three immediate competitors. The conclusion of this survey was that we retained the number 1 position that we achieved two years ago. On a modest number of indicators (for instance, contribution to clients success and involvement of the right experts), we scored significantly better than our competitors did. On others (for instance, listening to the client or being easy to work with) we scored only slightly better or were rated equally. We provide more details of our distinctive quality on pages 37 and 40. Our new leadership model: the PwC Professional We have this year fine-tuned the competencies that our professionals need to deliver the PwC Experience and to play their part in implementing our strategy. We have combined behaviour, skills and competencies into a leadership model that focusses people development not only on technical skills but also on aspects such as innovative capacity, authenticity, self-awareness and the ability to work with others irrespective of physical restriction and cultural difference. It s not for nothing that whole leadership is an important cornerstone of this model. This new leadership model is not a checklist or a tool. Rather, its aim is to inspire and motivate our people as they develop. This change in the leadership model reflects the world changing around us, becoming more international. We need to be able to adjust to these changing circumstances and this links in to our ambition for resilience and agility. This new leadership model forms the basis of our HC policy. The competencies and behavioural characteristics that underlie this model will be attracting greater significance in our training programmes, evaluation processes and recruitment. We have taken the first steps during this past year. Learning and development Emphasising technical strength and personal development in training programmes As mandated by the professional requirements for permanent education for certain groups of our PwC professionals, we expect our partners and staff to stay up to date with all of the latest technical developments. We also expect them to maintain the skills necessary to invest in good relationships with clients and colleagues In addition to this, all staff have the opportunity to follow other training options, and a number of people are given the time to follow post-graduate research into a subject relevant to PwC. We have external requirements that need to be reflected in the development of our learning and education programmes. The Dutch Association of Tax Advisers (the NOB) has introduced a new system of permanent education this year that requires tax advisers Whole leadership I lead myself and others to make a difference and deliver results in a responsible, authentic, resiliant, inclusive and passionate manner. Business Acumen I bring business knowledge, innovation, and insight to create distinctive value for clients and PwC. Technical Capabilities I apply a range of technical capabilities to deliver quality and value for clients and PwC. Global Acumen I operate and collaborate effectively with a mindset that trancends geographic and cultural boundaries. Relationships I build relationships of high value which are genuine and rooted in trust. PwC Annual Report Our strategy and achievements GRI 33

34 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC to earn PE points on an annual basis. We are handling this, to the extent possible, within our current training budgets. The Netherlands Institute of Chartered Accountants (the NBA) also regularly issues specific training requirements. Last year this was the Tell what you see training specifically developed for PwC and provided as part of the drive to reinforce the professional scepticism of the auditor (see also page 29). We have invested a lot of effort this year in streamlining our training on an international basis. Jointly with the territories that are collaborating in PwC Europe (Germany, the Netherlands, Austria and Belgium), we are in the process of setting up a PwC Europe Academy, which will develop and deliver joint training modules. Number of participants in the management development programmes 2013/2014 Assistant managers 239 Managers 278 Senior managers 69 Female leadership 34 International PwC programmes 45 In previous years, we have reported the number of people who had participated in our Responsible Leadership programme. This programme does not exist as such any more, though elements of it have been incorporated into our other management development programmes. We believe that the number of participants in these MD programmes provides a better view of our opportunities for development. We will include comparative numbers as from next year. Traininghours (average per FTE) External study Internal study Total Male Female Total Partner Professional staff Support staff Total Female Internal study External study Total Male Internal study External study Total Training hours 2013/ /2013 Average per FTE External training* 182, ,035 Internal training 186, ,838 Development and presentation of training 38,015 37,825 * Of which 3,290 were spent on dissertation/post-graduate research in 2013/2014 (2012/2013: 2,851). The national learning and development programmes will of course continue, as each territory has its own regulatory requirements in this area. Training hours down Training hours have increased slightly in Tax & HRS and Advisory, and are down 14% on a per-fte basis in Assurance (including the time involved in development and presentation of training). One major reason for this is that we had fewer starters this year (and new starters involve a relatively higher number of training hours) and there were therefore fewer staff following the RA programme. There were also fewer training days at our Summer School this past year compared to 2012/2013 (two vs three days). The Tell what you see programme will be run in 2014/2015 and this will increase the training hours per FTE for 2014/2015. Another interesting aspect is the difference between the training hours of men and women in the support staff group. We believe that the reason for this is that our IT department is mainly staffed by men and IT staff are involved in relatively more training. PwC Annual Report Our strategy and achievements GRI 34

35 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Turnover (in %) 2013/ /2013 Male < 30 jaar jaar > 50 jaar Total Female < 30 jaar jaar > 50 jaar Total Part-time work 2013/ /2013 Percentage of men in part-time work Percentage of women in part-time work Parental leave Vrouw Man Number of employees who have right to parental leave Number of employees who have taken parental leave Percentage of employees who have returned after parental leave and are still with PwC after twelve months 63% 76% An inclusive culture Number of women in senior positions increasing, but still too low We strive for an inclusive culture in which everyone, irrespective of cultural background and sexual orientation, can feel comfortable and valued. It is very important to us to bind talented people to us. We strongly believe that the quality of our work improves when issues are handled by people coming from differing perspectives. We are striving for at a proportion of least 30% female. Our statistics indicate that we achieve this up to and including the level of manager. The number of women at senior levels is increasing, but it is still too low. This applies also to the number of female partners and directors. We offer our female talent a variety of options, including female leadership training for managers and senior managers (34 participants) and a number of coaching streams. We are looking closely at the promotion of women to more senior positions. Another key factor in an inclusive culture is consistency of evaluation between men and women and therefore also equal pay. Last year for the first time, we carried out a detailed analysis and concluded that the weighted average salary (excluding bonus) was virtually the same for men and women at each staff level, after reflecting the number of years experience within each level and direct entry starters. The only level that differed was the senior director level (on average 5.7% differential). This is because of the significant differences in years of experience. Partners were not covered in this comparative analysis. Welcoming diversity Other forms of diversity also warrant our attention, such as cultural background and sexual orientation. To make our culture more inclusive, our training programmes emphasise the need to welcome diversity. We take the view that diversity is an attitude of mind, determined individually by how a person sees the world and the preconceptions that result from this. The aim of our open mind training is to teach people to look at things from a different perspective, and we are in the process of integrating this methodology into our current training programmes and evaluation cycles. Keeping an open mind is also an important element of a new workshop, Multicultural Professionalism, which kicked off this past year with 103 participants. The reactions to these sessions have been so positive that we are now rolling Multicultural Expertise out on a broader scale. Increasing our societal impact Developing a vision for the markets and sectors we operate in Providing services with societal impact requires a clear vision on socially relevant questions. We communicate our own visions on a regular basis, for instance through position papers and research studies on subjects such as transparency, financial reporting and taxation. A number of examples are provided on pages 109 and 110. We also organise meetings to dialogue with civil organisations. We are members of networks and professional bodies, and we talk with policymakers and politicians and, of course, with our supervisory bodies. This enables us to make, and maintain, contact with society, and it gives us the opportunity to voice our opinions and get the benefit of input from others. Last year, we appointed PwC partner and professor, Jan Willem Velthuijsen, as Chief Economist. He is leading and coordinating research into the effects of global megatrends on markets and sectors. A couple of research papers, including one on the effect of these megatrends on the agricultural sector, have now been published. The Chief Economist Office also provides support in proposal processes and client programmes (see also page 9). PwC Annual Report Our strategy and achievements GRI 35

36 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Focussing our CR policies on social enterprises We have re-directed our corporate responsibility policies towards social enterprises, enterprises whose primary function is a societal one but that operate with a sound business model. Last year, PwC entered into a partnership with Social Enterprises NL, a platform that brings social enterprises together and represents their interests. It was set up by Willemijn Verloop, well known as the founder of War Child. This re-focus on social enterprises means a change to our CR policy. To date, this has been directed towards the professionalisation of the charitable sector, and we will continue to support this, for instance through the Transparency Prize, an award that we make jointly with the National Postcode Lottery to the organisation with the most understandable and informative annual report. Through a challenge selection process, we have also identified three starter social enterprises for our Social Impact Lab, in which the candidates receive coaching into how they can make a success of their organisation. The three also have access to PwC facilities and financing (see also page 54). Page 8 shows that the time spent by our people on CR projects has fallen. This is because we have ended a small number of partnerships that we had with civil society organisations, amongst other things in order to be able to invest in support for the Social Enterprise sector and our partnership with Social Enterprises NL. We believe that the rise of social entrepreneurship is an important development and we are using our knowledge and experience to help make this a success in the Netherlands. During this past year, we have organised quarterly master classes for social enterprises and carried out research into the financing opportunities for this type of entity. On a pro deo basis, we have also helped a number of these organisations with some of the issues they are facing, for instance in the areas of strategy, financing and taxation (see also page 53 for an example). PwC Annual Report Our strategy and achievements GRI 36

37 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC 3. Taking the opportunities the market offers us For the first time in a number of years, our revenue increased slightly this year and we were able to improve profitability. Our aim is to be an efficient and effective organisation (see page 41), and these results show that we are on the right track. We aim for profitable growth so that we can invest in quality - in What are we focussing on? Profitable growth to generate investment resources Strong client relationships Innovation What have we achieved? Stemming the fall in revenue Significant efforts in the PIE market, including proposals, as a result of legally mandated audit firm rotation Focus on efficiency in our headcount and business practices Focus on those clients and engagements where we can deliver the highest level of added value Set up of the Chief Economist Office to help us get insight into our clients strategic agendas Further development of innovative propositions other words, invest in talented people and in other areas such as technology to support our people in their work. Our purpose is to build trust and contribute to solving important problems, and if we are to live up to this we must generate room for investment. To do this, we need to differentiate ourselves in the market, firstly through building strong relationships with clients and secondly by creating innovative solutions for the issues the clients are facing. What can we do better? Investment in quality, including audit quality, and in efficiency (data analysis) Greater focus on comprehensive (multicompetency) solutions for client issues Translating our public statements and thought leadership better into our clients strategic agendas (see also the section Delivering the PwC Experience ) Improving the time to market for innovative propositions Investing in services in the area of digital transformation Years of contraction brought to an end Except for a small increase in 2011/2012, our revenues have been falling since the financial crisis broke in This year s net revenue of 672 million is 1.2% higher than prior year (2012/2013: 664 million). Advisory and Tax & HRS booked revenue increases, while Assurance was slightly lower. The number of hours remained virtually the same, while the average hourly rate realised was higher than prior year. This resulted from improved market conditions and also from the mix of hours. As we have outsourced more and more simple and routine work to delivery centres, the mix has moved more towards specialist services particularly in our tax practice. Revenue fluctuations varied per sector (see page 39). Continuing last year s profitability improvement Our financial results have been somewhat volatile in recent years. In the period 2009/2010 to 2011/2012, our operating results came under pressure as revenues fell following the financial crisis. Through changes in headcount and operating cost savings, we were subsequently able to bring our cost base down accordingly, and we started to see the profitability benefits of this in prior year. This improvement has continued this past year. Firstly, we have had the full year effect of the reduced headcount, secondly we have seen signs of modest recovery, mainly in Tax & HRS and Advisory, and finally our operating costs Cash flows and financing Liquidity at year-end amounted to 10 million (30 June 2013: 15 million) and our solvency to 43% (30 June 2013: 40%). The financial position of our company remains solid. We include partner contributions when assessing financing needs. At balance sheet date, this amounted to 153 million (30 June 2013: 132 million), or some 627,800 per partner (30 June 2013: 506,300). Financial instruments Our policy is to maintain foreign exchange, interest rate, credit and liquidity risks at acceptable levels. Financial instruments are used where necessary, mainly to cover foreign exchange risks arising primarily on positions and transactions in US dollars and pounds sterling. Significant positions are covered by hedge contracts. Interest rate risk, credit risk and liquidity risk are not covered by financial instruments but managed primarily through internal control processes and credit facilities. More details are provided in Other information in the financial statements (pages 74 and 85). PwC Annual Report Our strategy and achievements GRI 37

38 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC were lower, mainly due to lower occupancy, travel and insurance expenses. We are also seeing the effects of changes in service mix in our tax and other advisory practices. We are able to generate higher margins by focussing on the clients where we can deliver the greatest value through tailored solutions for specific issues. Profitability improvements firm-wide Operating profit increased nearly 25% to 113 million, and all Lines of Service contributed to this. In percentage terms, the highest increase in operating profit was in Advisory (about 40%). Turbulence in the PIE market We have had to deal with a turbulent market this past year, primarily as a result of the audit firm rotation now in full swing since last year following passage of the audit legislation that requires listed companies and financial institutions to change auditors at least once every eight years. Most PIEs have, or until recently have had, the same auditor for a longer period than this. The law includes a three-year transitional period, but we are seeing that most companies are not intending to wait. In addition to Assurance, Tax & HRS and Advisory have also had to deal with the effects of firm rotation. The new legislation also prohibits the combination of tax and other advice with the statutory audit at the same client - which means that, when we win an audit client, our other Lines of Service can no longer provide services to that entity. The other side of this, of course, is that the loss of an audit client opens up opportunities for advisory work. Financial effects of firm rotation very limited The number of proposals submitted in the PIE segment has increased significantly, and this places great pressure on the organisation and involves a significant investment of time. Because of the rotation process, we have had to end certain client relationships and we have welcomed new ones. The effect on our revenue and market share has been minimal this past year. Economic recovery still fragile The economy is recovering. We see this in the cautious optimism of our clients. At the same time, we see a great number of companies that are still struggling to deal with the effects of several years of recession. The effects of the cutbacks also continue to be felt in the public and semi-public sectors. Results of Assurance Drilling down into Assurance, we see that net revenue from external clients came out at 303 million, representing a modest decline of 0.9% compared to prior year. Operating profit improved significantly to 51 million (2012/2013: 39 million), as a result of greater involvement with clients and the resulting increase in chargeable hours per staff member. Total volumes have also increased compared to prior year. The slight fall in revenue was the result of reduced hourly rates. In addition to striving for high levels of quality, our efforts have also been directed at improving efficiency in the audit process. Our clients are looking for this and, in this vein during the past year, we have taken steps to make more use of supportive technology, to transfer routine work to delivery centres and to bring in a flexible workforce during the annual busy season (see also page 41). Results per Line of Service ( millions) Assurance / / / / / / Tax&HRS / / / / / /2013 Advisory / / / / / / Operating profit Net revenue from external clients PwC Annual Report Our strategy and achievements GRI 38

39 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC We have had to incur additional costs on the new audit engagements. A first year audit involves investment in time and resources. The services transferred to our Risk Assurance business unit (including the audit of nonfinancial information and systems) has picked up, after having earlier fallen behind expectations. This improvement has confirmed that our decision to invest in non-financial audit was a good one. Results of Tax & HRS Tax & HRS have had a good year, despite the none too easy market conditions. Net revenue from external clients increased 2.5% to 223 million. The volume of hours was down 1%, but the average hourly rate was up 2%. As with Assurance, we also had an increase in operating profit here by more than 12%, as a result of reduced headcount, higher productivity and a reduction in other direct costs. The trends we saw earlier in our Tax & HRS practice are continuing. At the larger companies, there is a shift in client demand away from corporate tax and more towards more specialist services, and we are seeing a fall-off in engagements from the small and medium-sized companies. Tax & HRS services are gradually being integrated into services delivered by Advisory, and we will continue to focus on this multicompetency service delivery in the coming years. We will also be investing more in other forms of innovative services, for instance around the role that big data can play in setting up so-called tax control frameworks. Results of Advisory Net revenue from external clients in Advisory grew more than 3% to 146 million. While the volume of hours fell by 2%, the average hourly rate was up by 5% in an advisory market that seems to be picking up. This growth in revenue came mainly from our practice area that provides support in crisis situations. Despite lower revenues in Consulting, this practice area was able to improve profitability through better utilisation and higher average hourly rates. We also see some cautious optimism at our clients, despite the ongoing difficult market situations, and this resulted in some big transformation projects last year. Ongoing developments also impact our approach to market, and we are focussing more and more on those sectors and issues where our solutions can deliver the most value, in both the public and the private sectors. Bringing the strategy consulting firm, Strategy&, into our global network should be seen in this context. A varying picture across the sectors Our Financial Services practice (FS), which includes the banking, insurance and pension fund sectors, has had a very good year following a number of large engagements regarding new legislation and regulation in that sector, including FATCA +18% and the move towards European banking supervision. Furthermore, banks and insurance companies are undertaking significant transformation processes as a result of governmental requirements. The Industrial Products (IP) group has had an excellent year, due to a number of large assignments in the areas of value chain +9% transformation and restructuring. -4% -10% Transport & Logistics (T&L) and Retail & Consumer (R&C) have lost revenue, partly due to the absence of significant advisory projects. Energy, Utilities & Mining (EU&M) lost revenue, partly due to the completion of a number of Advisory projects. The sector is very buoyant and the expectation is that -4% -6% -9% -11% the advisory market in this sector will pick up. The Utilities sector is doing particularly well; companies are increasingly starting to operate across borders and that leads to transactions and transformation programmes. Technology, Media and Telecom (TMT) is also a buoyant sector and one in which we have had many advisory engagements in recent years. However, revenues fell in this sector this year. It has been difficult to bring in new projects when companies are still working on cutting costs. In the Public Sector (PS), turnover continued to fall this year, an ongoing consequence of the cuts that government departments have been facing in recent years and increasing competition in this market. Our Private Equity group had more engagements this year but they were generally smaller in size. The level of activity is largely driven by transactions, which makes year on year comparison relatively volatile. PwC Annual Report Our strategy and achievements GRI 39

40 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC We have also decided to be more active in technological and digital developments and in incorporating these into our solutions for client issues. In this, we rely on the flexibility and mobility of our people, and we are investing in specialist technical expertise for this, for instance bringing in direct entry experts in these areas. Consistent with the other Lines of Service, Advisory s improvement in operating profitability (to 18 million) was the result of, among other things, headcount management and cost reductions. Regions Our regional offices focus on the more regionally oriented companies and institutions. Also here, we are seeing a trend towards internationalisation and a greater need for integrated client solutions. So we are focussing, also in the regions, on those clients to which we can provide the most value, and we are involving specialists more and more to do this. Seeking the role of sparring partner In the previous paragraph, we described in some detail the internal side of the PwC Experience, our change programme that addresses the development of trusted relationships and the maintenance of dialogue. The objective of this is that, where we maintain a certain level of behaviour internally, then we do the same externally. We are breathing new life into the focus on a more strategic discussion with clients and contacts. Their strategies and value creation models need to be the starting point of that dialogue. The logic behind this is that if we fully ascertain what the clients real issues are, then we can come up with the right solutions. In other words, if we really do want to add value, then we must know what keeps them awake at night. That means that we must be prepared to lay ourselves open to critical input and be open as to what drives us and what issues and uncertainties we are struggling with. It was clear from the feedback from clients and the stakeholder dialogue that this does not come naturally to us. Encouraging innovation from the bottom up By bringing innovation to our service delivery, we are working towards differentiating that service delivery. While we are initiating strategic innovation in anticipation of major, international and irreversible megatrends from above (topdown, see page 43), we are also looking to encourage innovative initiatives from the bottom up. To promote an innovative culture and to avoid good ideas from ending up in the proverbial bottom drawer because of lack of time, we make time available for coaching. That means that we free people up to move promising ideas forward, to test them and to help them eventually evolve into a new service (see page 92 for an example). To further encourage innovative ideas and to motivate people to innovate, we have organised a couple of Innovation Challenges. We have also initiated the foundation of a new innovation network currently consisting, in addition to ourselves, of some forty members (clients and contacts). The aim of this platform is to share ideas and experiences about innovation processes, and all participants have signed a statement of intent to do this. To date, this network has met four times. PwC Annual Report Our strategy and achievements GRI 40

41 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC 4. Transforming our organisation We continue to work towards making ours an efficient, resilient and agile organisation. We believe we need to do this as the world we operate in is changing more radically and at an ever faster pace as a result of the so-called megatrends and the opportunities and threats that they bring. A good example of this is the ongoing trend towards digitalisation. IT innovation is turning many sectors upside down, including ours. Many believe that we are currently seeing only the tip of the iceberg as regards the impact that What are we focussing on? Refocussing our entire organisation to the ongoing effects of digitalisation and internationalisation Increasing our mobility Standardising and outsourcing relatively routine work Wat hebben we gedaan? Participating in initiatives within our European collaboration arrangement and PwC Global, directed towards one way of working Reflecting the international dimension in our model for the PwC-professional and in our training programme (see also the section Delivering the PwC Experience ). Introducing the flexible workforce and transferring relatively routine work to delivery centres (see also the section Aiming for the highest levels of quality ) technological change is going to bring to the world our clients are operating in and to our own world. Having said that, technological change also brings great opportunity, and this enables us to increase the quality and efficiency of our service delivery - for instance the opportunities for substantive data analysis in audits and further reinforcement of our service delivery with new propositions in such areas as data reliability and security (cybersecurity). These are areas where we can make our contribution to resolving societal problems. On the other hand, technological advances represent a threat for our sector if we do not move with these changes on a timely basis. More technology-driven business models will blur the boundaries of our sectors and markets Wat moet beter? Streamlining our global network Increasing mobility through more direct management and through linking mobility to talent management Greater use of the flexible workforce in peak periods Investing in technology to further support quality and efficiency and attract new entrants, and we therefore need to be moving proactively with the advances in technology and investing in them. A number of initiatives are underway within the global PwC network in the area of business transformation, and we also have some initiatives in progress in the collaboration arrangements we have among the PwC member firms in Germany, the Netherlands, Austria and Belgium. By streamlining our systems and working methods and promoting international mobility, we can serve our international clients better. The flexible workforce concept introduced this year In early 2014, our Assurance practice ran a socalled flexible workforce pilot, to help manage the audit cycle s peak periods. During this busy season, we contracted in some 25 external people at senior associate level for a period of some sixteen weeks. This flexible workforce provided support to our people on a number of audit engagements. They were contracted in from two secondment agencies. To assure the necessary level of quality, these flexible PwC people went through a selection process and were given one-week s induction training before being deployed. The reactions to the pilot have been overwhelmingly positive, and we will be expanding this flexible workforce concept in the coming busy season. Outsourcing work to delivery centres In the Assurance practice, we are working to outsource routine audit work to so-called delivery centres. These are organisations within our global network that perform work, mainly routine work, efficiently and to a high standard of quality. In this past financial year, we outsourced some 6% of our audit work to delivery centres in the Netherlands, Germany, Poland and India. We aim to increase this to 10%. Aiming to further encourage mobility Mobility is an important element of our flexibility and versatility as an organisation, and this applies to all types of mobility: between business units, within PwC Europe and within our international network. It contributes to the development of our people and it teaches them new skills and offers new experiences, not only in terms of working methods but also in mind-set. Our experience is that people who have been what we call on secondment come back with positive experiences. We believe that the level of mobility within the PwC network is too low and we will be promoting greater mobility by proactively encouraging people to take on a mobility challenge as part of their career plan. An initiative is in progress within our European collaboration arrangement to increase the number of partners and staff on secondment, and we will be moving forward with this. PwC Annual Report Our strategy and achievements GRI 41

42 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Mobility within PwC Nederland (in people)* 2013/ /2013 Assurance Tax & HRS Advisory Firm Services Mobility within PwC Europe (in people)** 2013/ /2013 Assurance 14 5 Tax & HRS Advisory 9 9 Firm Services 1 3 We have taken steps towards further integration this year by harmonising the career development process through to directorship and partnership. This common process has been in place since 1 July In the end, it is the intention that the collaborating member firms have a common approach to clients, market expertise and client service delivery. Mobility internationally (in people)*** 2013/ /2013 Assurance Tax & HRS Advisory Firm Services 2 4 * Mobility between business units, including business units in other Lines of Service ** Incoming and outgoing secondments with Germany, Austria and Belgium *** Incoming and outgoing secondments with other territories (including Germany, Austria and Belgium) Page 33 describes our new model for the PwC Professional, which includes an important role for mobility and international experience. We will be managing mobility centrally and increasingly using it as part of our talent management. Continuing to build on our European collaboration arrangement Clearly the focus of the collaboration between the member firms in the Netherlands, Germany, Austria and Belgium is on international clients, but we are also working on back office synergies. We have moved forward with standardisation of processes within the group, from relatively small matters such as a mutual procurement system to the construction of a common IT infrastructure. PwC Annual Report Our strategy and achievements GRI 42

43 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC 5. Investing in strategic competencies To us, investment means primarily investment in people. This is not restricted only to the recruitment and development of starters. We also bring in direct-entry senior managers, directors and partners who have learned their profession elsewhere and can contribute to the development of potential growth markets, expertise and competencies with us. We described in the previous section how we encourage innovation from the bottom up (see page 40). In this paragraph, we talk about investment in innovative multi-competence services that play to global megatrends and about our investment in specialist (often highly specialist) expertise and competencies. We are proud to have brought Strategy& (formerly Booz & Company) into our worldwide network as of 1 April These new Strategy& colleagues increase our strategy competencies and they are complementary to the skills we have in strategy implementation. Together, we represent a unique proposition, a category of one in the area of support and advice for complex transformations - from beginning to end, from strategy to execution (see also page 15). What are we focussing on? Investing in growth areas in anticipation of our clients strategic agendas Investing in specialist services Progress in building strategic competencies What have we achieved? Bringing Strategy& into our global network. Investing in services in areas such as accounting, restructuring, operations and legal services Investing in multi-competency services Our experience is that the issues clients face as a result, for instance, of demographic or technological change need solutions that require several different competencies and perspectives. We are therefore investing in solutions that, where permitted by legislation and regulation, cover more than one line of service. A good example of this is Value Chain Transformation. This proposition includes specialist colleagues from across Assurance, Tax & HRS and Advisory who address the effects of changing circumstances on existing value chains, and they advise internationally operating clients on this subject. What can we do better? Investing in services in the area of digital transformation (see also the section Taking the opportunities the market offers us ) Investing in further multicompetence service delivery Investing further in specialist services in areas such as accounting, risk management, compliance, legislation and regulation, risk assurance, legal matters, Human Resources and restructuring Together, our colleagues manage change in terms of the location and structure of the value chain, the design and management of business processes and the related legal and fiscal structures. Another example is our service in the area of Digital Transformation. Digitalisation leads to different behaviours and different consumer demand, which means changes to business models and strategies, and they can change very quickly. It creates new opportunities such as the use of big data and new issues such as cybercrime. Issues around digitalisation therefore mean a need for a mix of competencies and specialisms on any one single engagement. Investing in specialist services We also continue to invest in specialist services in the areas of accounting, risk management, compliance and legislation and regulation amongst others. A key investment area for us is Risk Assurance, which provides assurance on non-financial information and on the operation of processes and systems. PwC Annual Report Our strategy and achievements GRI 43

44 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Risk factors In determining and implementing our strategy, we naturally take account of the risks most relevant to us. To do this effectively, we are constantly monitoring developments and trends as they evolve, both in society in general and in the environments in which we operate. We periodically evaluate what these developments and trends mean for us and, where necessary, we change course. The risks we have identified are linked to our strategic goals. This table summarises the most important risks and indicates whether we believe the risk has remained unchanged or has increased vis à vis prior year. Building on the quality of our service delivery Risk Trend The impact of the risk How we mitigate the risk Inadequate response to the concerns surrounding the audit profession Not delivering distinctive quality Reduced ability to recruit and retain talented people = Loss of social relevance and our raison d être Ongoing lack of trust Further regulation Reputational damage to PwC s name and brand Loss of clients Inability to carry out high quality (complex) audits and advisory services and make the impact we aspire to, including societal impact Loss of revenue and clients Proactive dialogue with stakeholders Proactive implementation of the proposals issued by the Future Accountancy Profession Working Group to improve the societal role of auditors and the current concerns relating thereto Aiming for the highest possible level of quality in our audit and advisory service delivery Focussing on continuous improvement in the quality of our assurance and assurance-related services Good policies for quality control and further investment in our framework for quality and risk management (design, implementation and operating effectiveness of the key controls identified) Focus on technical quality and behaviour in our training programme Tightening up of our policies relating Proactive recruitment policies, including participation in the right networks Investment in talent management Proactive response to the results of our annual people satisfaction survey Focus on increasing diversity and mobility = Unchanged Increased Decreased PwC Annual Report Risk factors GRI 44

45 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Delivering the PwC Experience Risk Trend The impact of the risk How we mitigate the risk Too inward-looking a culture Undesirable or unethical behaviour by PwC partners and staff = = Inadequate response to the signals coming from society Reputational damage to PwC s name and brand Negative publicity Loss of clients Less attractiveness as an employer Proactive dialogue with stakeholders Involvement of the Public Interest Committee Focus on society and clients Putting behaviour at the core of our training Keeping ethical and professional behaviour (in accordance with the PwC Code of Conduct and the PwC Experience) at the core of the training programmes Regular communication about the importance of ethical behaviour both with the client and with each other Taking the opportunities the market offers us Risk Trend The impact of the risk How we mitigate the risk Insufficient innovative capacity Lack of internal collaboration between specialists and competencies = = Lack of timely identification of, and response to, the opportunities to expand and/or deepen our service delivery, leading to a relative weakening of our competitive position Reduced attractiveness of PwC as an employer and reduced ability to retain and bind talent to us Lack of development of innovative propositions for complex issues Too little differentiation and therefore a weaker competitive position Constant attention to (new and ongoing) issues and the needs of clients Appointment of a Chief Economist to lead and coordinate thought leadership Participation in the PwC network, thereby ensuring investment and innovative capacity Development and encouragement of innovative initiatives Focus on the importance of collaboration in behavioural training programmes Sharing best practices Structured account management Poor management of the volume of new clients resulting from mandatory audit firm rotation = Inability to deliver the quality required Loss of market share in the PIE market segment Tougher procedures for client and engagement acceptance Higher organisational flexibility Increased mobility, including international mobility Structured account management = Unchanged Increased Decreased PwC Annual Report Risk factors GRI 45

46 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Transforming our organisation Risk Trend The impact of the risk How we mitigate the risk Lack of flexibility and manoeuvrability Falling behind in digital transformation Reduced globalisation and mobility = = Reduced operating efficiency and effectiveness Disadvantageous cost-base comparability vs competitors Less attractiveness as an employer Weaker competitiveness resulting from an inability to deliver new products and services (e.g. relating to big data) on a timely basis Obsolescence of our client delivery tools and methodologies Internal organisational inefficiency Less than satisfactory levels of service to internationally operating clients Lower profitability and therefore reduced investment capacity Less attractiveness as an employer Proactive participation in PwC network and PwC Europe initiatives to improve our service delivery infrastructure Investment in specialists Investment in technology and systems Active participation in PwC network initiatives Strengthening our global network, amongst other things by proactively promoting mobility and one way of working Strengthening our collaboration within PwC Europe Investing in strategic competencies Risk Trend The impact of the risk How we mitigate the risk Short-termism = Lack of timely response to new business opportunities and new risks Inadequate or untimely allocation of resources for the investments that are needed Loss of clients and revenue Regular and focussed assessment of opportunities and risks and how these are trending Effective monitoring of timely implementation of strategy = Unchanged Increased Decreased PwC Annual Report Risk factors GRI 46

47 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Governance and remuneration Quality standing paramount in our governance The responsibilities of the BoM include the determination and implementation of our values and ambitions, our strategy and the achievement thereof. Each of the six members of the BoM has been assigned specific areas of portfolio responsibility. One of these is the ultimate responsibility for quality control and risk management, including the leadership of the Quality & Risk Coordination Group. This group consists of representatives from Assurance, Tax & HRS and Advisory, supplemented with specialists in the areas of independence, legal affairs, legislation and regulation and compliance. All boards and business units have a partner responsible for the monitoring and continuous improvement of quality. Within the framework of our policies for quality and risk management and as required by the Law on the Supervision of Audit Firms, we have a Compliance Officer and an Independence Officer responsible not only for our audit practice but also for the entire PwC organisation. The Compliance and Independence Officers report to the BoM, the LOB or the LoS Boards, depending on the issue concerned. Public Interest Committee The Chairman of the BoM has the corporate responsibility and diversity policies in his portfolio. The allocation of responsibilities within the BoM is set out on pages Support for other strategic matters The BoM has staff support in the implementation of a number of particular strategic areas, such as corporate responsibility, diversity, innovation, the PwC Experience and business transformation. There is a partner or director involved in policy development and implementation in these Board of Management Assurance Tax & HRS Advisory BU General Meeting partners of PwC NL BU BU Local Oversight Board areas and they report directly to the portfolio holder in the BoM. As part of the business planning cycle, they submit an annual plan of their activities to the BoM and they report back thereon periodically. Layered governance structure Since 1 July 2013, our governance follows a layered structure, with three members of the BoM also being chair of one of the Line of Service boards (Assurance, Tax & HRS and Advisory). In addition to the chair, the LoS Boards also consist of a representative selection of business unit leaders from the applicable LoS. This better assures the exchange of expertise and information among and between all management levels. Page provides extensive details of our governance structure. Appointment of members of the Board of Management The current BoM took office at the beginning of this financial year. The Chair is appointed by the General Meeting and the Chair then appoints the members of his/her management team, both appointment levels being based on advisory proposals from the LOB. The members CVs are included on pages Candidates for board positions are always screened prior to appointment. The LOB ensures that each selected candidate has the necessary qualities (both personal and as required by legislation and regulation) and has sufficient support among the partners. They are also screened for conflicts of interest (independence compliance screening). For policymakers and co-policymakers in both the Assurance and PAIS (Pensions, Actuarial & Insurance Services) practices, there is also an external screening by the AFM. PwC Annual Report Governance and remuneration GRI 47

48 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Aiming for more diversity in our boards Quality, suitability and diversity are the guiding principles in the composition of our boards and we aim for a good male/female balance, as indicated in the Law on Supervision and Management. As of 1 July 2013, the BoM consisted of one woman and five men, and the LOB and the Assurance and Tax & HRS LoS Boards each included one woman. In recent years selection processes for our various management bodies, we have proactively been looking to place more women in management roles. One of the key aspects of our diversity policy is that there be more women moving into senior positions within our organisation and we will be continuing this policy in the coming years (see page 35). The Public Interest Committee Since the beginning of this year, the Public Interest Committee (see page 99) monitors our audit firm s assurance of the public interest in its auditor s reports. A report from the Committee can be found in our Transparency Report. Remuneration Quality of significant importance in partner and director remuneration Given the public importance of our work, our remuneration system for partners and directors is designed such that quality, independence, our Code of Conduct and compliance with internal and external rules and regulations have a significant impact on our remuneration. The evaluation and remuneration process for partners is reviewed annually by the LOB. Where a partner s level of quality falls short of what is required, this is reflected in his or her remuneration and this cannot be offset by commercial or other performance. The remuneration system also explicitly states that Assurance partners are not remunerated for cross selling at audit clients. Quality also has a significant impact on the remuneration of directors. Each LoS Board sets an annual salary range relative to the director s role and responsibilities. In addition, a variable remuneration is paid relating to the previous financial year s performance. Directors are evaluated by business unit leaders. Start of the financial year End of the financial year The remuneration methodology for partners runs as follows: Determination of the partner s role The Assurance Board submits a proposal to the Board of Management. The Board of Management determines the role/ responsibility of the partner for the coming year, based on a recommendation by the Remuneration Committee of the LOB. Evaluation An assessment is made at the end of the year of the extent to which the partner has met objectives in the areas of clients, people, and firm/strategy (including quality & risk management). On the basis of a self-evaluation prepared in advance (the partner report), this performance is evaluated during the partner/director evaluation meeting, the BMG&D (Evaluation, Mapping, Goal setting & Development) meeting. Mapping Following the recommendation by the Remuneration Committee, the Board of Management allocates the partner to a category and his/ her position is given a ranking within this category. Rating The evaluation leads to a rating (from 1 to 5) for performance in each of the areas of clients, people, and firm/strategy, and these ratings are then reflected in the remuneration for that year. The Line of Service Board makes a recommendation to the Board of Management, which then determines the rating of the partner following a recommendation by the Remuneration Committee of the LOB. Determination of objectives In consultation with the primary reviewing partner, the partner determines his/her personal objectives, including specific quality objectives, within the context of our organisation s strategy. Remuneration The outcome of this process results in a profit share in the form of a variable management fee that reflects the role, specific responsibilities and individual performance during the financial year. PwC Annual Report Governance and remuneration GRI 48

49 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Highest paid PwC employee (excluding partners) within the Netherlands relative to the median (excluding the highest paid) 2013/ /2013 Remuneration* Factor Ratio percentage increase in annual income * Based on annual income including bonuses and excluding non-financial elements of remuneration such as private use of mobile telephone, lease car and expense allowances Performance-based remuneration The aggregate remuneration of partners and directors fluctuates annually based on the financial results of PwC Netherlands. Partner remuneration is based on a points system, the Euro value of which is determined at the end of the year by dividing the distributable profit by the total number of points. Individual partners are allocated points at the beginning of each year, of which 50% is based on responsibility (mapping) and 50% is variable (rating). A regular good performance means full entitlement to the variable 50%. A positive or negative evaluation leads to an adjustment to the variable 50%. The variable portion is determined based on the partner s individual performance in the areas of clients (weighting: 50%), people (weighting: 25%) and firm/ strategy (weighting: 25%). Directors have a fixed salary and a variable element that is dependent on personal performance and on PwC Netherlands results. The methodology used to determine directors variable remuneration is similar to that used for partners. No additional remuneration for regular conduct The way in which partners and directors conduct themselves with clients, colleagues and other stakeholders can have a negative effect on remuneration. Regular conduct (i.e. the conduct that we can expect of everyone) attracts no additional remuneration. We refer to this as baseline expectations. Baseline expectations represent conduct in line with our Code of Conduct, complying with all applicable internal and external regulatory requirements, and with active engagement within PwC. Non-compliance with baseline expectations can negatively affect remuneration by up to 50%. Non-compliance with baseline expectations by one partner resulted in termination of the association agreement this year. Evaluating staff on the basis of performance and conduct The remuneration process for staff relies heavily on regular two-way feedback. Our remuneration system is based on two elements: performance and competency, each of which is rated on a scale of 5 to 1. Competency (which is the basis for salary increases) relates to the level at which the individual is working and his/her technical development. Performance (which is the basis for the bonus) relates to performance during the year, for instance in terms of commitment, flexibility, team spirit, proactivity and sense of responsibility both to colleagues and to PwC. In consultation with their performance coach and along the same lines as for the partners and directors, all staff set out their objectives for the coming year. Half way through the year based on appraisals and other feedback, they assess the progress to date, and at the end of the year they assess to what extent the objectives have been met. Staff evaluation is carried out by the individual s performance coach (his or her immediate superior). Staff also have access to a career coach with whom they can discuss their ambitions, motivational factors, and the support they need to achieve their goals. The Works Council is involved in establishing staff terms of employment. A Works Council committee, made up of representatives from all Lines of Service and a chair, negotiates with the Board on these conditions. Where pension arrangements are concerned, both the Works Council and our HC department often draw on the advice of specialists within the organisation, as was the case this year regarding the changes to the Law on Pensions and the related changes to the entitlement build up percentages. 2013/ /2013 Δ% Management fee, salaries and emoluments Available for distribution to partners ( millions) % Average partner management fee* ( 000) % Average financing per shareholder at the end of the year ( 000) % Staff bonuses ( millions) % Average salary cost per FTE ( 000) % Average bonus per FTE ( 000) % * Payments are made from the management fee relating to items such as goodwill rights, pension contributions, social security and disability contributions, life insurance premiums, etc. PwC Annual Report Governance and remuneration GRI 49

50 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Sanctions policy Under our policies for quality, any instances of non-compliance with external and internal requirements or unacceptable behaviour can ultimately result in sanctions. Depending on the severity of the case, these vary from a written warning or reprimand to suspension and dismissal. Our sanctions policy provides a summary of the sanctions available and the bodies to which infringements are to be referred. These bodies include the Complaints and Business Conduct (BCC) Committees (under the Code of Conduct see also pages 102) and the Independence Sanctions Committee. These committees do not raise sanctions themselves; they submit their proposals to the BoM. The BCC, the body that monitors potential suspicions of misconduct, received only one notification this past financial year, which was deemed inadmissible. The Complaints Committee, the body to which our people can submit complaints when they believe that they have been subjected to behaviour that they believe to be humiliating, discriminating or aggressive, did not receive any complaints this year. As stated on page 30, we have given particular attention this year to our Code of Conduct and to the related infrastructure for reporting complaints. During the past financial year based on the Independence Sanctions Committee s advice, 76 sanctions were imposed for independence infringements, of which 56 were written warnings and 20 were reprimands. The written warnings all related to non-registration or late registration of purchases or sales of financial interests. The reprimands related to the holding of restricted financial interests. PwC Annual Report Governance and remuneration GRI 50

51 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Expectations for the future Restoring public trust in the audit profession is our top priority. In September 2014 the Future Accountancy Profession Working Group (of the Netherlands Institute of Chartered Accountants, the NBA) published its plans, on behalf of the sector, for improvement in the quality and independence of the audit profession. This proposal includes measures in the areas of quality, governance (management and supervision) and communication. We are in the process of implementing these proposals. After years of crisis, the economy is now beginning to improve slowly. We see this in the cautious optimism of our clients, who are again beginning to think about growth and investment opportunities. We are responding to this by investing in people who can help our clients create value for their own clients and for their clients stakeholders. Given our liquidity situation, we expect to be able to finance these investments from the funds and facilities we currently have available. We do not expect much change in our headcount, other than regular turnover and recruitment appropriate to the nature and scope of our activities. Revenue expectations are dependent on the uncertain macro-economic situation and on client-specific developments in the sectors and segments in which they operate. Nevertheless, as detailed in this Annual Report, we are continuing to invest in audit quality with a view to restoring public trust and in innovation and technology to improve the quality of our service delivery and operating efficiency. This is not restricted to the Netherlands, but also as part of the ongoing development of our service delivery, systems and methodologies that we are a part of in our international network. Consequently, we expect that the results for the current financial year will be lower than this past year. PwC Annual Report Expectations for the future GRI 51

52 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Expectations for the future per strategic area Building on the quality of our service delivery - Quality as the top priority As part of our investment in the quality of the statutory audit, we have taken a very thorough look at our quality management system, and this has highlighted a number of areas for improvement and we have worked these into a plan of action focussed on both the substance of quality and the process surrounding it. The plan of action provides for improvement and expansion in quality reviews and in learning and education programmes, it includes measures relating to culture and behaviour and change management, and it reflects the results of the culture survey we carried out last summer. Delivering the PwC Experience Building further towards an open and inclusive culture We see building further towards an open and inclusive culture as a key precondition for further improvement in the quality of our service delivery. An outward-looking culture makes us more alert to the demands, wishes and needs of society, makes for better collaboration and knowledge sharing, and helps break down barriers, both physical and psychological, between countries and people. These elements are reflected in our updated training programmes for the coming year. Taking the opportunities the market offers us Together we stand strong Our firm consists of auditors, tax specialists and advisers. We are absolutely convinced that these disciplines reinforce each other. Many of the issues coming from our clients need a multi-disciplinary solution. It is precisely for this reason that we stand firmly behind close working relationships, naturally only to the extent permitted by legislation and regulation. We structure these working relationships through our sector groups and our account management, at all times led by the issues facing the sector and the strategic agendas of our clients that flow from these. Transforming our organisation A resilient and agile organisation operating internationally The challenge currently facing our organisation is that we need to be able to react quickly to the increasingly swift pace of change while, at the same time, constantly searching for opportunities to enhance our efficacy. We will be moving forward with our flexible workforce, standardisation of processes, outsourcing of routine work and ongoing digitalisation at the coal face. Our clients are operating more internationally than ever before and they expect the same from us. We will need to mobilise the international PwC network more and more in our clients best interests. This calls for a greater degree of international collaboration not only the one we have with PwC Europe but also further afield. International mobility and collaboration will stand high on the agenda for the coming years. Investing in strategic competencies Growth through investment in people Profitable growth is essential for continued progress in our innovative capacity and talent management. For us to be able to continue to play a leading role in our chosen markets, we need to generate resources for investment in new services and technologies. We see growth opportunities in areas such as risk management, accounting advice, HR advice, legal services, tax compliance, strategy, technology, consulting and transaction services. Investment in new services means investment in people. The challenge for us is to bring the best people in and then to retain them. We want to offer talented people not only decent terms of employment but (and perhaps much more importantly) also clear opportunities for personal and career development, a chance to realize their full potential. And this all needs profitable growth to sustain it. PwC Annual Report Expectations for the future GRI 52

53 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC We never contract in external expertise Rambler is a brand of street wear clothing designed by homeless young people with a wide variety of problems. Encouraging the creativity of these young people gives them the opportunity to widen their social perspective - and they earn 10% of the profits in the process. As part of its corporate responsibility policies, PwC is offering its services on a pro deo basis to Rambler and to other social enterprises (for-profit entities whose primary objective is a social one). PwC Annual Report 2013/2014 Interview Rambler GRI 53

54 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC A business meeting on the Zeedijk in Amsterdam, says senior tax consultant Annelies Koster, that s something very different from an office on the ring road. Rambler has set up its design studio in among the brown cafés and Asian eating houses of the Chinese quarter. Tim Dekker and fellow founder Carmen van der Vecht started this enterprise in After the first phase, we needed a sound report to get us started with some international expansion, says Tim. He wanted to pull together a description of what Rambler actually does, how it s set up and what the next steps are for growth, and he submitted a request to PwC s CR programme. The puzzle unravelled I was enthusiastic as soon as I read about this request on our internal web portal, says Annelies. I really wanted to put my expertise to good use for a social project, and this one fitted in well with my tax adviser and business administration background. Annelies got started together with colleagues from Tax and Advisory. Their main advice was to segregate Rambler s public and private elements from each other. Private entities are not keen on investing in a not for profit social enterprise and public entities are not interested in paying for a commercial activity. PwC unravelled that puzzle for us and we now have a foundation and a BV (limited company), continues Tim. Tim also said that the City of Amsterdam was particularly interested in the report because the city works with about forty different entities that combine social services with a commercial base. Still early days PwC also set out clearly how the provision of social services and the profit motive operate in tandem. Says Annelies: I have learned a lot in this area from my Advisory colleagues. And now I have some in depth knowledge of the fashion industry which I didn t have before. Was the engagement what she expected it to be? It was much more enjoyable than I thought it would be! Tim and Carmen were really appreciative, and it was very instructive for me to be given such responsibility in a relatively small environment. Usually we are working in a large client environment, each with their own small area to deal with. Tim tells us why they were so appreciative: We had never contracted in external expertise before, so the added value here is enormous. After three years as a start-up, we found ourselves right where we were when we started. Annelies showed us that the sort of tunnel vision we had was simply not enough. It s still very early days for the social enterprise sector and it is great that PwC has chosen to make expertise available to the sector. From the business analysis, it became clear how much Rambler needed an international linkage. Says Tim: A studio in Berlin is the least we should be aiming for to ensure that we have enough young people keen to work with us and a sufficiently sizeable market to sell into. Thereafter, maybe New York, London, Sao Paolo, Tokyo? Private entities are not keen on investing in a not for profit social enterprise and public entities are not interested in paying for a commercial activity. PwC unravelled that puzzle for us. Getting our Social Impact Lab up and running Since last summer, PwC has been providing guidance to three starter social enterprises. We selected these from about fifty applicants through a so-called challenge. The three are eligible for an intensive period of guidance for between one and two years, access to PwC facilities as needed and financing up to 50,000 as needed. The three social enterprises are: Amplino, an enterprise that plans to introduce a portable malaria tester in developing countries; OOPOEH (Grandads and Grandmas Looking After a Pet), an enterprise that tackles loneliness among older people by linking them to a pet in the area; and CTalents, an enterprise that advises companies on becoming more socially conscious by linking talented people with a handicap with suitable work (this last one originating from the expertise built up by Ctaste, a restaurant in which guests eat in the dark served by people with a visual handicap). PwC Annual Report 2013/2014 Interview Rambler GRI 54

55 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Financial statements PricewaterhouseCoopers B.V. PwC Annual Report 2013/2014 Financial statements GRI 55

56 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Contents 1 Consolidated financial statements Consolidated balance sheet as at 30 June 2014 (before appropriation of profit) Consolidated profit and loss account for the year ended 30 June Consolidated statement of cash flows for the year ended 30 June General notes Notes to the consolidated balance sheet as at 30 June Notes to the consolidated profit and loss account for the year ended 30 June Other notes Segment information 76 2 Company financial statements Company balance sheet as at 30 June 2014 (before appropriation of profit) Company profit and loss account for the year ended 30 June General notes Notes to the company balance sheet as at 30 June Other notes 85 3 Other information Provisions of the Articles of Association governing the appropriation of profit Proposed appropriation of profit Combined independent auditor s report and assurance report 86 PwC Annual Report Financial statements GRI 56

57 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC 1. Consolidated financial statements 1.1 Consolidated balance sheet as at 30 June 2014 (before appropriation of profit) (in 000) Fixed assets 30 June June 2013 Intangible fixed assets Goodwill [1] 1,978 2,778 1,978 2,778 Tangible fixed assets [2] Leasehold improvements 15,540 19,396 Fixtures and fittings 2,435 2,800 Other fixed assets 2,753 3,380 Fixed assets under construction ,765 25,599 Financial fixed assets Other financial interests [3] Current assets Work in progress [4] 26,187 27,057 Receivables Receivables from clients [5] 156, ,684 Receivable from shareholder [6] 116,450 81,130 Other receivables [7] 3,816 5,044 Prepayments and accrued income [8] 20,850 17, , ,376 Cash and cash equivalents [9] 10,358 15,003 Total 356, ,830 [..] The numbers in square brackets refer to the corresponding numbers in the notes. PwC Annual Report Financial statements GRI 57

58 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC 30 June June 2013 Equity and liability Group equity Shareholder s equity [10] 112,721 90,223 Non-controlling interests [11] ,776 90,278 Provisions [12] 31,802 33,354 Long-term liabilities Subordinated loans [13] 38,350 39,650 Accrued expenses and deferred income [14] 19,036 21,664 57,386 61,314 Current liabilities Subordinated loan [13] 2,113 2,275 Liabilities to suppliers [15] 19,137 15,856 Taxes and social security contributions [16] 37,995 38,939 Accrued expenses and deferred income [17] 15,846 16,188 Other liabilities [18] 79,669 72, , ,884 Total 356, ,830 [..] The numbers in square brackets refer to the corresponding numbers in the notes. <naam> PwC Annual Report Financial statements GRI 58

59 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC 1.2 Consolidated profit and loss account for the year ended 30 June 2014 (in 000) 2013/ /2013 Net revenue [19] 671, ,760 Cost of work contracted-out [20] 78,792 73,483 Salaries 225, ,248 Social security charges [21] 50,424 53,112 Amortisation and depreciation of fixed assets [1,2] 9,615 10,583 Other operating costs [22] 193, ,591 Total operating costs 558, ,017 Operating profit 113,085 90,743 Interest and similar income 284 1,046 Interest and similar expense [23] -3,216-4,962 Profit on ordinary activities before tax 110,153 86,827 Taxes [24] -2,498-1,670 Profit on ordinary activities after tax 107,655 85,157 Non-controlling interests [11] -5-5 Profit after tax 107,650 85,152 [..] The numbers in square brackets refer to the corresponding numbers in the notes. PwC Annual Report Financial statements GRI 59

60 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC 1.3 Consolidated statement of cash flows for the year ended 30 June 2014 (in 000) 2013/ /2013 Cash flow from operating activities Operating profit 113,085 90,743 Adjustments for: Amortisation and depreciation [1-2] 9,615 10,583 Movements in provisions [12] -1,552 1,400 Movements in accrued expenses and deferred income [14] -2,628-2,629 5,435 9,354 Changes in working capital Receivables [5-8] -37,050 1,533 Work in progress [4] 870 1,072 Current liabilities 10,074-1,515-26,106 1,090 Cash flow from business operations 92, ,187 Interest [23] -3,071-3,244 Taxes [24] -3,598-3,546-6,669-6,790 Cash flow from operating activities 85,745 94,397 Cash flow from investing activities Additions to tangible fixed assets [2] -4,320-2,634 Disposals of tangible fixed assets [2] Disposals of financial fixed assets [3] 7 - Additions to financial fixed assets [3] - - Cash flow from investing activities -3,974-2,634 PwC Annual Report Financial statements GRI 60

61 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC 2013/ /2013 Cash flow from financing activities Funds received from subordinated loans [13] 1,625 44,850 Repayment of subordinated loans [13] -3,087-58,731 Dividend distributions [32] -85,152-72,861 Cash flow from financing activities -86,614-86,742 Net cash flow -4,843 5,021 Cash and cash equivalents - opening 12,903 7,857 Net cash flow -4,843 5,021 Foreign currency exchange differences Net cash and cash equivalents - closing [9] 8,258 12,903 Cash and cash equivalents not freely available 2,100 2,100 Cash and cash equivalents - closing 10,358 15,003 [..] The numbers in square brackets refer to the corresponding numbers in the notes. PwC Annual Report Financial statements GRI 61

62 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC 1.4 General notes Activities PricewaterhouseCoopers B.V. has its registered office in Amsterdam. Its activities and those of its subsidiaries comprise Assurance, Tax & HRS and Advisory services. These activities are described elsewhere in the Annual Report. Group relationships PricewaterhouseCoopers B.V. is a wholly owned subsidiary of Holding PricewaterhouseCoopers Nederland B.V., Amsterdam. Coöperatie PricewaterhouseCoopers Nederland U.A. holds one priority share in Holding PricewaterhouseCoopers Nederland B.V. Coöperatie PricewaterhouseCoopers Nederland U.A. also holds an interest in Konsortium PwC Europe, registered in Frankfurt/Main, Germany. Konsortium PwC Europe is a consortium of the Dutch, German and Austrian partners and holds a 100% interest in PwC Europe AG Wirtschaftsprüfungsgesellschaft, registered in Frankfurt/Main, Germany (now called PwC Europe SE Wirtschaftsprüfungsgesellschaft). As of 26 June 2014 this consortium was extended to include the Belgian partners, and the PwC member Firm in Belgium was transferred to the afore-mentioned SE. Coöperatie PricewaterhouseCoopers Nederland U.A. s equity share in Konsortium PwC Europe was 32.4% as of 30 June 2014 (30 June 2013: 33.6 %). The interest in Konsortium PwC Europe is revised annually as of 1 July in proportion to the number of Dutch member firm professional practitioners relative to the total number of professional practitioners in the PwC Europe consortium of PwC member firms. The private limited companies owned by the professional practitioners (the partner BVs) have each concluded an association agreement with Coöperatie PricewaterhouseCoopers Nederland U.A. and Holding PricewaterhouseCoopers Nederland B.V., under which the partner BV makes the professional practitioner available to practise one of the professions described under Activities in return for a management fee. Basis of preparation The consolidated financial statements have been prepared in accordance with the requirements of Part 9, Book 2, of the Dutch Civil Code and with the Guidelines for Annual Reporting in the Netherlands as issued by the Dutch Accounting Standards Board. Where no specific accounting policy is mentioned, assets and liabilities are carried at the historical cost amounts at which they were acquired and incurred, respectively. The company profit and loss account is presented in abbreviated format in accordance with Article 402 of Book 2 of the Dutch Civil Code, as the company financial statements of PricewaterhouseCoopers B.V. are included in the consolidated financial statements. Principles of consolidation The consolidated financial statements include, on a fully consolidated basis, the financial statements of PricewaterhouseCoopers B.V. and of those group companies in which, directly or indirectly, it has a shareholding of more than one half of the voting rights or can otherwise exercise majority control. Together, these are referred to in the financial statements as the Group. Intercompany transactions and profits, and balances between group companies and other consolidated entities, are eliminated to the extent that the results have not yet been realised through transactions with third parties. Unrealised losses on intercompany transactions are also eliminated unless the loss qualifies as impairment. The entities included in the consolidation are as follows: PricewaterhouseCoopers Accountants N.V., Amsterdam (100%) PricewaterhouseCoopers Belastingadviseurs N.V., Amsterdam (100%) PricewaterhouseCoopers Advisory N.V., Amsterdam (100%) PricewaterhouseCoopers Compliance Services B.V., Amsterdam (100%) PricewaterhouseCoopers Pensions, Actuarial & Insurance Services B.V., Amsterdam (100%) PricewaterhouseCoopers Certification B.V., Amsterdam (100%) Executive Academy VOF, Amsterdam (99.7%). Fiscal unity Except for Executive Academy VOF, all of the abovementioned consolidated entities form a fiscal unity for value added tax purposes with PricewaterhouseCoopers B.V. and Holding PricewaterhouseCoopers Nederland B.V. All of the abovementioned consolidated entities form a fiscal unity for corporation tax purposes with PricewaterhouseCoopers B.V., Holding PricewaterhouseCoopers Nederland B.V., PricewaterhouseCoopers N.V. and PricewaterhouseCoopers Deelnemingen B.V. (including its wholly owned subsidiaries). PwC Annual Report Financial statements GRI 62

63 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Non-controlling interests Non-controlling interests in group equity and group result are disclosed separately. Acquisition of group companies Results and identifiable assets and liabilities of acquired entities are recognised in the consolidated financial statements from the date of acquisition, this being the date on which majority control is obtained. The purchase price is the monetary, or equivalent, amount agreed for the acquisition of the acquired entity increased by any costs directly attributable to the acquisition. Where the acquisition cost exceeds the net fair value of the identifiable assets and liabilities, the excess is recognised as goodwill under intangible assets. Estimates In applying accounting policies and financial reporting requirements, the Board of Management needs to make judgements and estimations that can be critical to the amounts reported in the financial statements. Where necessary to provide the insight required by Article 2:362, clause 1 of the Dutch Civil Code, the nature of these judgements and estimations and details of the underlying assumptions are provided in the note disclosure for the relevant balance sheet item. Related parties Related parties are defined as any legal entities that can be majority controlled, jointly controlled or significantly influenced by the company and any legal entities that can control the company, together with the statutory director and the authorised executive directors of the company and their close relatives. The nature and extent of transactions with related parties are disclosed, together with any other information necessary to provide sufficient insight. Accounting policies for assets and liabilities General Unless otherwise indicated, all amounts in the financial statements are reported in thousands of Euros ( 000). Changes in accounting policies In the interests of improved presentation, charges to group companies are now accounted for differently in net revenue, as a result of which the amounts of net revenue, cost of work-contracted out and other external costs, on an individual entity basis, have changed in the notes and in the segment information. This has had no effect on the consolidated amounts of revenue, profit or shareholder s equity reported in the consolidated financial statements. Comparison with prior year The Group s accounting year runs from 1 July to 30 June. Except for the change in presentation referred to in the previous note, the accounting policies applied in determining balance sheet and profit and loss account items are unchanged from prior year. In the interests of better presentation, there has also been some reclassification in the comparative amounts for salaries and other operating costs. Foreign currencies The financial statements are presented in Euros, which is both the functional and the presentation currency. Foreign currency transactions in the reporting period are translated at the exchange rates prevailing on the dates of the transactions. Monetary amounts denominated in foreign currencies are translated into the functional currency at exchange rates prevailing at the balance sheet date. Resulting exchange differences are taken to the profit and loss account, except where hedge accounting is applied. Non-monetary assets carried at acquisition cost in a foreign currency are translated using the exchange rates prevailing on the dates of the transactions. Financial instruments Financial instruments comprise other financial interests, receivables, cash and cash equivalents, subordinated loans, liabilities to suppliers and liabilities to related parties. The accounting policies for these items are set out individually below. Goodwill Goodwill is determined as the excess of acquisition cost over the fair value of identifiable assets and liabilities acquired, reduced by accumulated amortisation and impairment provisions. Goodwill is amortised on a straight-line basis over the estimated useful life. PwC Annual Report Financial statements GRI 63

64 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Tangible fixed assets Tangible fixed assets are carried at acquisition cost less accumulated depreciation determined on a straight-line basis over their estimated useful lives and on residual values. Assets under construction are not depreciated. Financial fixed assets Participating interests over which significant influence is exercised are carried at net asset value, determined based on the same accounting policies as used in these financial statements. Participating interests acquired are initially recognised at the fair value of the identifiable assets and liabilities on acquisition. Thereafter, the accounting policies used for these financial statements are applied using this initial value as a basis. Other financial interests are carried at the lower of acquisition cost and best estimate of future recoverable amounts. Impairment of fixed assets At each balance sheet date, the company assesses whether there is any indication of asset impairment. Where there are such indications, the recoverable amount of the asset is determined. An asset is deemed to be impaired if its carrying amount, or the carrying amount of the cash generating unit to which it belongs, exceeds its recoverable amount. Impairment is recognised as an expense in the profit and loss account. Work in progress Work in progress comprises services delivered but not yet invoiced and is carried at the amounts expected to be recovered from clients. Where the net amount of work performed, provisions and invoiced amounts on any individual project is negative, this net amount is recognised under other liabilities. Receivables Receivables are recognised initially at fair value and are subsequently measured at amortised cost, which for current receivables is the nominal amount net of provisions for doubtful debts. Cash and cash equivalents Cash and cash equivalents comprise cash at hand, bank balances and deposits with maturities of less than twelve months. Bank overdrafts are shown as payables to credit institutions in current liabilities. Cash and cash equivalents are carried at nominal amounts. Provisions Provisions are recognised for legally enforceable or constructive obligations which exist at the balance sheet date and of which the settlement is uncertain. Pension provisions relate to obligations under various non-activity schemes. Personnel provisions relate to long-term unemployment benefit top-ups, long-service entitlements and severance pay. The provisions for commitments under non-activity schemes and long-service entitlements are carried at present value using a discount rate of 4% (30 June 2013: 4%) and taking into account staff turnover probability. The provision for long-term unemployment benefit top-ups is carried at its present value using a discount rate of 4% (30 June 2013: 4%). The provision for severance pay and other provisions are carried at the nominal amounts of the expected cost of settlement. Other provisions include provisions for rental voids, delivery obligations at the end of rental contracts and professional liability matters. Delivery obligations at the end of rental contracts are provided evenly over the rental period. Subordinated loans Subordinated loans include amounts that mature after more than one year. Loans repayable within one year are recognised as current. The loans are initially recognised at fair value and are thereafter carried at amortised repayment value. PwC Annual Report Financial statements GRI 64

65 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Long-term accrued expenses and deferred income Long-term accrued expenses and deferred income include incentives received in connection with the rental of various office buildings. These amounts are of a long-term nature and are taken to income on a straight-line basis over the term of the rental contracts. Liabilities Liabilities are initially recognised at fair value increased by transaction costs directly attributable to the assumption of the liability, and thereafter at amortised cost. The difference between book value and ultimate repayment value is charged to income as interest expense over the term of the liability based on the effective interest rate. Bonus and untaken leave entitlements are carried at the amounts required for monetary settlement. Other assets and liabilities all mature within one year. Other assets and liabilities (current) Other assets and liabilities are carried at the amounts receivable and payable, respectively. Receivables are carried net of provisions needed for non-recoverability. Other assets and liabilities all have a remaining maturity period of less than one year. Operating leases Lease contracts under which the risks and rewards of ownership do not accrue to the Group are recognised as operating leases. Operating lease obligations are charged to profit and loss, net of any incentives received from the lessor, on a straight-line basis over the term of the contract. Accounting policies for the profit and loss account General Profit after tax is the difference between the proceeds of services rendered and the costs and other charges incurred during the year. Losses are recognised as and when they occur to the extent that they can be reliably estimated. Exchange differences Exchange differences arising on conversion or translation of monetary items in foreign currency are recognised in the profit and loss account in the year in which they arise, unless hedge accounting is applied. Net revenue Except for net revenue for work performed by Advisory on the basis of special arrangements, which is recognised on receipt, net revenue represents the amounts chargeable for services rendered during the year and these are recognised as and when it becomes likely that they will be realised, with due recognition of arrangements made with clients regarding services to be billed as the work progresses. Where it becomes likely that total project costs will exceed total project revenues, the losses are recognised immediately in the profit and loss account as cost of sales and the provision is included in the balance sheet as work in progress. Operating costs Operating costs are recognised under the historical cost convention and on the accruals basis. Amortisation and depreciation of intangible and tangible fixed assets Depreciation of tangible fixed assets is based on cost and is charged to the profit and loss account on a straight-line basis reflecting the estimated useful economic lives of the assets and their expected residual values. Intangible fixed assets, including goodwill, are amortised over their estimated economic lives from the date they are brought into use. Where there is a change in estimated useful economic lives, the effects are reflected prospectively in future amortisation charges. PwC Annual Report Financial statements GRI 65

66 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Salaries and social security charges Salaries (including bonuses and holiday allowances) and social security charges are expensed as and when they are due. Pensions The Group has a number of pension schemes. For most schemes, the premiums are based on salary for the year in question and are payable to insurance companies or pension funds. Premiums are recognised when they become payable. Under the schemes, the Group has no further legal or constructive obligation should a funding deficit arise at the insurance company or pension fund. The Group also has a so-called non-activity scheme. The annual cost of this scheme reflects the increase in the present value of the vested entitlements based on period of service, imputed interest and actuarial assumptions. Interest income and expense Interest income and expense are recognised evenly over the periods to which they relate based on the effective interest rate inherent in the applicable assets and liabilities and taking into account transaction costs relating to loans received. Dividends Dividends received from participating interests and holdings not accounted for on the net asset value basis are recognised at the time PricewaterhouseCoopers B.V. becomes entitled to receive them. Taxation The corporation tax charge is determined based on the results of the Group including Holding PricewaterhouseCoopers Nederland B.V. Holding PricewaterhouseCoopers Nederland B.V. pays a substantial part of the income it receives from PricewaterhouseCoopers B.V. to Coöperatie PricewaterhouseCoopers Nederland U.A. as management fee. This management fee payable by Holding PricewaterhouseCoopers Nederland B.V. to Coöperatie PricewaterhouseCoopers Nederland U.A., means that the taxable profit of the Group, including Holding PricewaterhouseCoopers Nederland B.V., is lower than the taxable profit of the Group. Consequently, the effective tax rate in the financial statements differs from the Dutch statutory rate. As a result of this, the tax burden lies primarily with the private limited companies of the members of Coöperatie PricewaterhouseCoopers Nederland U.A., as the ultimate recipients of this management fee. Basis of preparation of the consolidated statement of cash flows General The statement of cash flows is drawn up using the indirect method. Cash resources consist of cash and cash equivalents. Cash flows in foreign currencies are translated at the exchange rates ruling on the dates of settlement, and cash and cash equivalents in foreign currencies at the end of the financial year are translated at the exchange rates ruling on the balance sheet date. Cash inflows and outflows that relate to interest, dividends received and taxes on profits are reported under cash flow from operating activities. Dividends paid are reported under cash flow from financing activities. Working capital Working capital represents the net amount of receivables, work in progress and current liabilities excluding amounts owed to credit institutions and subordinated loans. PwC Annual Report Financial statements GRI 66

67 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC 1.5 Notes to the consolidated balance sheet as at 30 June 2014 (in 000) [1] Goodwill The movements were as follows: [2] Tangible fixed assets The movements were as follows: 2013/ /2013 Balance as at 1 July Cost 5,065 5,065 Accumulated amortisation -2,287-1,487 Carrying amount 2,778 3,578 Movements Additions - - Amortisation Leasehold improvements Fixtures and fittings Other fixed assets 2013/ /2013 Fixed assets under construction Total Total Balance as at 1 July Cost 56,940 14,449 24, ,810 94,093 Accumulated depreciation -37,544-11,649-21, ,211-61,345 Carrying amount 19,396 2,800 3, ,599 32,748 Balance as at 30 June Cost 5,065 5,065 Accumulated amortisation -3,087-2,287 Carrying amount 1,978 2,778 The goodwill arose on the acquisitions of TruEconomy Consulting Holding B.V. (TruEconomy) and BE(H)EER B.V. (Proxyon) on 1 December The goodwill on TruEconomy 3,976 is being amortised on a straight-line basis over five years. The goodwill on Proxyon 1,089 was written off in the year of acquisition. Movements Additions 1, , ,320 2,634 Disposals Accumulated depreciation on disposals Depreciation -5, , ,815-9,783-3, ,834-7,149 Balance as at 30 June Cost 58,151 14,825 26, ,369 95,810 Accumulated depreciation -42,611-12,390-23, ,604-70,211 Carrying amount 15,540 2,435 2, ,765 25,599 Depreciation percentages Other fixed assets relate primarily to computers with a book value at 30 June 2014 of 1.7 m (30 June 2013: 1.7 m) and related software with a book value at 30 June 2014 of 0.7 m (30 June 2013: 1.2 m). The fair value of tangible fixed assets does not differ materially from book value. Depreciation is based on the maximum remaining term of the rental contracts adjusted, where necessary, for any early termination of rental contracts. PwC Annual Report Financial statements GRI 67

68 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC [3] Other financial interests This relates to a participation in PricewaterhouseCoopers Eurofirms CVBA, a cooperative company with limited liability under Belgian law, over which no significant influence can be exercised. The movements during the year were as follows: 2013/ /2013 Balance as at 1 July Movements -7 - Balance as at 30 June [7] Other receivables Other receivables, all due within one year, were as follows: 30 June June 2013 Receivables from related parties 650 1,310 Receivables from personnel Other 2,631 3,518 Total 3,816 5,044 Receivables from related parties comprise receivables from a number of PwC entities that do not belong to the Group. [4] Work in progress Work in progress at 30 June 2014 is stated net of amounts billed totalling 67 m (30 June 2013: 73 m). [5] Receivables from clients These amounts are due within one year and are not interest bearing. A provision for doubtful debts of 9.8 m was carried at 30 June 2014 (30 June 2013: 11.2 m). [8] Prepayments and accrued income Prepayments and accrued income, all due within one year, were as follows: 30 June June 2013 Prepaid rental 6,778 7,439 Prepaid insurance premiums 3,877 4,993 Prepaid pension premiiums 6,681 3,241 Other 3,514 1,845 Total 20,850 17,518 [6] Receivable from shareholder The receivable from shareholder, Holding PricewaterhouseCoopers Nederland B.V., is due within one year and does not bear interest. [9] Cash and cash equivalents Of the cash and cash equivalents as at 30 June 2014, 2.1 m (30 June 2013: 2.1 m) was not freely available. PwC Annual Report Financial statements GRI 68

69 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC [10] Shareholder s equity Disclosures on shareholder s equity are provided in the notes to the company financial statements. A consolidated statement of shareholder s equity is not presented as there is no difference between the consolidated and company profits after tax (2012/2013: the same). [11] Non-controlling interests The Group holds an interest in the capital of Executive Academy VOF. In view of the majority control exercised, this interest is included in the consolidated financial statements on a fully consolidated basis. PricewaterhouseCoopers Deelnemingen B.V. holds the remaining interest in the capital of Executive Academy VOF. Movements during the year were as follows: 2013/ /2013 Balance as at 1 July Additions - - Less: Profit distribution -5-5 Add: Results of Executive Academy VOF 5 5 Balance as at 30 June [12] Provisions Movements in provisions were as follows: 2013/ /2013 Personnel Pensions Other Total Total Balance as at 1 July 4, ,490 33,354 31,954 Other movements Provisions utilised ,047-4,182-7,782 Provisions added ,709 2,630 9,437 Balance as at 30 June 4, ,152 31,802 33,354 Approximately 28 m (30 June 2013: approximately 29 m) of provisions is noncurrent. The personnel provisions include amounts for long-term unemployment benefit top-ups, long-service entitlements and redundancy schemes. Pension provisions include obligations under non-activity schemes. Other provisions include the provision for rental voids in respect of premises leased from third parties. This provision is based on the lease costs for the periods during which it is expected that the premises will not be fully occupied. Other provisions also include a provision for obligations for the restoration of leased premises at the end of the lease period; this provision is recognised evenly over the lease period. Other provisions also include the provision for professional liability claims relating to work performed up to and including the balance sheet date. All of the claims are disputed, and provisions are made to the extent of any loss still expected to be incurred by the Group on ongoing claims. While the outcome of these disputes cannot be predicted with certainty, legal advice and other information received indicate that they will have no significant effect the financial position of the Group. PwC Annual Report Financial statements GRI 69

70 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC [13] Subordinated loan The financial structure of the Group was changed on 1 July The subordinated loans were repaid to the partner BVs and replaced by a subordinated loan of 44,688 from Holding PricewaterhouseCoopers Nederland B.V. This loan changes as the number of professional practitioners made available by Coöperatie PricewaterhouseCoopers Nederland U.A. changes. The nominal amount of the loan per practitioner is 162,500. These loans bear interest at the rate of 7.75% (2012/2013: 8.25%) based on the 15-year external capital market rate increased by a risk surcharge. Movements in this subordinated loan were as follows: 2013/ /2013 Balance as at 1 July 41,925 55,806 Add: New agreements and funds added 1,625 44,850 Less: Agreements terminated and funds repaid -3,087-58,731 Balance as at 30 June 40,463 41,925 Current 2,113 2,275 Non-current From 1 to 5 years 4,062 3,900 > 5 years 34,288 35,750 Total non-current 38,350 39,650 The loan is subordinated to the creditors of Holding PricewaterhouseCoopers Nederland B.V. and PricewaterhouseCoopers B.V. and its group companies. [14] Accrued expenses and deferred income Accrued expenses and deferred income include incentives received under lease agreements for a number of office buildings. The portion that releases to the profit and loss account in 2014/2015 is included in accrued expenses and deferred income in current liabilities. Accrued expenses and deferred income are to be released to income as follows: 30 June June 2013 From 1 to 5 years 9,544 10,032 > 5 years 9,492 11,632 Carrying amount 19,036 21,664 [15] Liabilities to suppliers Liabilities to suppliers are all due within one year. [16] Taxes and social security charges Taxes and social security charges, all due within one year, are as follows: 30 June June 2013 VAT 27,207 28,529 Income tax and social security premiums 10,788 10,410 Total 37,995 38,939 PwC Annual Report Financial statements GRI 70

71 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC [17] Accrued expenses and deferred income (short-term) Accrued expenses and deferred income comprise a provision for invoices to be received and the current portion of incentives received under lease agreements for a number of office buildings. 30 June June 2013 Incentives received under lease agreements for office buildings 2,629 2,629 Invoices to be received 13,217 13,559 Total 15,846 16,188 [18] Other liabilities Other liabilities, all due within one year, are as follows: 30 June June 2013 Work in progress for which instalments billed exceed the actual project revenue earned 32,417 30,184 Bonusses payable 30,930 23,423 Accrued leave entitlements and holiday allowances 15,079 15,096 Amounts due to related parties 682 3,695 Other Total 79,669 72,626 Work in progress includes a prepayment of 1.9 m received on a project; it is not certain whether any or all of this amount will need to be repaid. Off-balance sheet assets and commitments PricewaterhouseCoopers B.V. stands surety for the annual Group profit-linked periodic benefit payments administered by Stichting Verrekenfonds to the beneficiaries of one of the legal predecessors of the legacy firm Coopers & Lybrand. For 2013/2014, the payments amounted to some 1.1 m (2012/2013: some 1.2 m). The payments are due for the lifetimes of the individual beneficiaries. All the companies that are included in the fiscal unities for corporate tax and VAT purposes are jointly and severally liable for the remittance of these taxes. As at 30 June 2014, guarantees provided in relation to lease and other obligations amounted to 3.6 m (30 June 2013: 3.6 m). The longest running guarantee expires on 30 August The Group has undertaken, in certain circumstances, to assume receivables of up to USD 14 m (30 June 2013: the same) on behalf of an entity in which PricewaterhouseCoopers Deelnemingen B.V. holds a 7.1% participating interest. As a result of current uncertainty regarding the definitive treatment of the acquisition of a 2.6% holding in PwC Strategy& Parent (UK) Ltd, the Group has recognised as an asset only the amount of the purchase price paid as of the balance sheet date. Based on the formal contractual arrangements, there is a remaining maximum obligation of some USD 17 m. It is expected that the actual amount of the remaining obligation in connection with this acquisition will be clarified during the course of the coming financial year As at 30 June 2014, the Group had made commitments for capital expenditure totalling 5.7 m (30 June 2013: 0.5 m) relating to the purchase of laptops and migration of the data centre. The Group has delivery obligations under lease contracts (being the restoration of leased premises at the end of the lease) amounting to 2.2 m (30 June 2013: 2.6 m). These obligations are recognised evenly over the lease period, and the provision at 30 June 2014 amounted to 1.1 m (30 June 2013: 1.4 m). The Group has long-term rental contracts and operating lease obligations totalling 233 m (30 June 2013: 258 m). These obligations mature as follows: (x millions) 30 June June 2013 < 1 year to 5 years > 5 years Total obligations PwC Annual Report Financial statements GRI 71

72 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC 1.6 Notes to the consolidated profit and loss account for the year ended 30 June 2014 (in 000) [19] Net revenue The net revenue of each segment (after eliminating internal revenue) was as follows: 2013/ /2013* Assurance 303, ,026 Tax & HRS 222, ,015 Advisory 145, ,719 Total 671, ,760 * These amounts are stated after the presentational changes referred to in the Comparison with prior year note. The amounts reported in prior year were Assurance: 300,509, Tax & HRS: 223,352 and Advisory: 139,899. Net revenue was earned primarily in the Netherlands. [20] Cost of work contracted-out and other external costs These relate to third-party services, including those from other members of the PwC Network, and out-of-pocket expenses directly attributable to engagements. [22] Other operating costs Other operating costs are as follows: 2013/ /2013 Management fee 48,930 52,338 Occupancy costs 36,216 42,469 Other personnel costs 31,214 30,468 Travel 31,033 34,586 Technology 14,407 15,215 Sales and business development 8,825 8,441 Insurances 7,312 10,014 External consultants fees 3,407 3,741 Other costs 12,559 12,319 Total 193, ,591 The management fee is the remuneration for the provision of professional practitioners services. This fee is not indexed. Technology expenses exclude staff costs and depreciation charges. Other expenses include membership contributions to PricewaterhouseCoopers International Ltd. and PricewaterhouseCoopers Eurofirms CVBA. [21] Social security charges Social security charges were as follows: 2013/ /2013 Social security premiums 30,036 30,618 Pension charges 20,388 22,494 Total 50,424 53,112 Pension charges are determined in accordance with the schemes agreed with staff. Qualifying staff members are provided with an annual premium, depending on age and income, for contribution to their pension plan. PwC Annual Report Financial statements GRI 72

73 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC [23] Interest and similar expense Interest and similar expense are as follows: 2013/ /2013 Interest compensation regarding the subordinated loan from Holding PricewaterhouseCoopers Nederland B.V. 3,153 3,585 Other interest and similar expense 63 1,377 Total 3,216 4,962 Interest paid, interest received and exchange differences are included in one aggregate net amount in the statement of cash flows. [24] Taxes Taxes are as follows: 2013/2014 Profit before tax 110,148 Results of other companies -108,646 Book/tax differences 8,530 Taxable profit 10,032 Corporate tax due 2,498 Taxes paid and taxes received are included in one aggregate net amount in the statement of cash flows. PwC Annual Report Financial statements GRI 73

74 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC 1.7 Other notes (in 000) Management agreement and other member costs Coöperatie PricewaterhouseCoopers Nederland U.A. charges a management fee to Holding PricewaterhouseCoopers Nederland B.V. for making available the professional practitioners who are associated with the members of Coöperatie PricewaterhouseCoopers Nederland U.A. Holding PricewaterhouseCoopers Nederland B.V. charges the management fee on to PricewaterhouseCoopers B.V. This management fee is included in other operating costs. PricewaterhouseCoopers B.V. pays its entire profit out as dividend to Holding PricewaterhouseCoopers Nederland B.V., which in turn pays a management fee to Coöperatie PricewaterhouseCoopers Nederland U.A. and pays its net profit out as dividend to its shareholder (PwC Europe SE). PwC Europe SE pays its entire net profit out to Konsortium PwC Europe, and the profit of Konsortium PwC Europe is then distributed to its participants, including Coöperatie PricewaterhouseCoopers Nederland U.A., in accordance with a predetermined formula. Coöperatie PricewaterhouseCoopers Nederland U.A. distributes its entire profit, after deduction of its own operating expenses, as management fee to its members. The total remuneration from the Dutch PwC entities to the members of Coöperatie PricewaterhouseCoopers Nederland U.A., after elimination of the effects of the Konsortium PwC Europe arrangements, was as follows: 2013/ /2013 Profit of PricewaterhouseCoopers B.V. 107,650 85,152 Management fee as disclosed in the financial statements 48,930 52,338 Profit of other entities in the Holding PricewaterhouseCoopers Nederland B.V. consolidation Management fee payable to retired professional practitioners Profit available for distribution 156, ,684 Average number of partners (FTE) Average management fee per partner In addition to their management fee, the members of Coöperatie PricewaterhouseCoopers Nederland U.A. also receive an expense allowance, aggregating 0.9 m (2012/2013: 0.9 m), and interest on their current accounts, aggregating 3.2 m (2012/2013: 3.6 m). This interest expense is not recognised in these financial statements but as part of the expenses of Coöperatie PricewaterhouseCoopers Nederland U.A. Operating leases The Group charged 42 m (2012/2013: 45 m) to the profit and loss account in operating lease costs during the year, relating to office space and the leased car fleet. Risk management surrounding financial instruments Foreign exchange risk The Group operates primarily within the European Union. Foreign exchange risks arise mainly on positions and transactions in US dollars and pounds sterling. The Board of Management s policy is to hedge foreign exchange positions and not to take speculative positions. For its hedging operations, the business uses both primary and derivative financial instruments. Foreign exchange risks related to cash flows from operating activities in foreign currencies are hedged by means of currency forward contracts, none of which extends beyond one year. Gains and losses on instruments used to hedge off-balance sheet positions are deferred until the gains and losses on the hedged positions are recognised. As at 30 June 2014, there were no contracts outstanding (30 June 2013: no contracts outstanding). At 30 June 2014, receivables in US dollars, pounds sterling and other currencies amounted to 2.1 m (30 June 2013: 1.7 m), 0.7 m (30 June 2013: 0.2 m) and 0.4 m (30 June 2013: 0.2 m), respectively. Liabilities in US dollars, pounds sterling and other currencies amounted to 3.6 m (30 June 2013: 2.9 m), 0.1 m (30 June 2013: 1.4 m) and 1.0 m (30 June 2013: 0.7 m), respectively. PwC Annual Report Financial statements GRI 74

75 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Interest rate risk Interest rate risks on financial fixed assets and liabilities are not hedged. Credit risk The Group is exposed to the risk of counterparty default, though this risk is limited due to the large number and diversity of the Group s receivables. There is concentration of credit risk only in that the limited geographic spread of receivables is concentrated in the Netherlands. Credit risks are further mitigated by the application of good client acceptance and credit control procedures. External auditor s fees The following fees were charged to the Group for the year by the auditor and the auditor s firm as defined in Section 1(1 a and e) of the Audit Firms Supervision Act: 2013/ /2013 Audit of the financial statements Other audit engagements Total Liquidity risk The liquidity risk is mitigated by the fact that the cash flow from operating activities generates sufficient liquidity to meet ongoing obligations. The Group had no lines of credit with credit institutions at 30 June 2014 (30 June 2013: None). Fair value The book value of financial instruments under receivables and liabilities carried at amortised cost does not differ significantly from fair value. PwC Annual Report Financial statements GRI 75

76 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC 1.8 Segment information (in 000) 2013/2014 Assurance Tax & HRS Advisory Other 1) Eliminations Total Net revenue from external clients 303, , , ,574 Net internal revenue 4,605 8,011 5, , ,504 - Total net revenue 307, , , , , ,574 Costs of work contracted-out and other external costs 33,875 27,121 26, ,244 78,792 Staff costs 105,889 71,843 53,474 44, ,179 Amortisation and depreciation ,815-9,615 Other operating costs 117,328 87,749 53,086 82, , ,903 Total operating costs 257, , , , , ,489 Operating profit 50,679 43,823 17, ,085 Net financial income and expense -1,411-1, ,932 Taxes -1, ,498 Non-controlling interest Profit after tax 48,182 41,765 16, ,650 Carrying amount of total assets 125,818 85,864 54,778 93,492-3, ,724 1) PricewaterhouseCoopers B.V. s own costs are charged to group companies and recognised in Other operating costs as internal revenue. People employed in FTEs 2) Assurance Tax & HRS Advisory Firm Services Average number in 2013/ Partners Other professionals 1, ,000 - Support staff 3) Total 1, ,047 2) FTEs (excluding trainees) means full-time equivalents. 3) During the year, the management assistants (227 FTEs) and the portfolio support teams (59 FTEs) were transferred to Firm Services and the costs thereof are charged on to the entity using the services based on a pre-determined formula. Total PwC Annual Report Financial statements GRI 76

77 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC 2012/2013 Assurance Tax & HRS Advisory Other 1) Eliminations Total Net revenue from external clients 306, , , ,760 Net internal revenue 8,449 14,972 5, , ,054 - Total net revenue 314, , , , , ,760 Costs of work contracted-out and other external costs 40,704 24,358 26,247 1,380-19,206 73,483 Staff costs 114,311 76,290 54,860 33, ,360 Amortisation and depreciation ,783-10,583 Other operating costs 120,680 92,309 52,089 63, , ,591 Total operating costs 275, , , , , ,017 Operating profit 38,780 39,030 12, ,743 Net financial income and expense -1,639-1, ,916 Taxes ,670 Non-controlling interest Profit after tax 36,413 37,084 11, ,152 Carrying amount of total assets 113,936 79,901 46,715 94,856-4, ,830 1) PricewaterhouseCoopers B.V. s own costs are charged to group companies and recognised in Other operating costs as internal revenue. People employed in FTEs 2) Assurance Tax & HRS Advisory Firm Services Average number in 2012/ Partners Other professionals 1, ,180 - Support staff Total 1,969 1, ,292 2) FTEs (excluding trainees) means full-time equivalents. Total Amounts originally reported for 2012/2013 3) Assurance Tax & HRS Advisory Other 1) Eliminations Total Net revenue from external clients 300, , , ,760 Net internal revenue 1,858 6,196 2, , ,848 - Costs of work contracted-out and other external costs 28,554 22,925 22, ,483 Staff costs 117,497 78,128 55,962 27, ,360 Other operating costs 117,536 89,465 50,517 70, , ,591 1) PricewaterhouseCoopers B.V. s own costs are charged to group companies and recognised in Other operating costs as internal revenue. 3) See Accounting policies for assets and liabilities Comparison with prior year. PwC Annual Report Financial statements GRI 77

78 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC 2. Company financial statements 2.1 Company balance sheet as at 30 June 2014 (before appropriation of profit) (in 000) 30 June June 2013 Fixed assets Tangible fixed assets [25] Leasehold improvements 15,540 19,396 Fixtures and fittings 2,435 2,800 Other fixed assets 2,753 3,380 Fixed assets under construction ,765 25,599 Financial fixed assets Participating interests [26] 118,134 96,503 Other financial interests [3] ,144 96,520 Current assets Receivables [27] Receivables from clients 5,653 5,218 Receivable from shareholder 39,379 36,798 Other receivables [28] 3,381 5,214 Prepayments and accrued income [29] 20,308 17,240 68,721 64,470 Cash and cash equivalents [30] 3,996 4,770 Total 211, ,359 [..] The numbers in square brackets refer to the corresponding numbers in the notes. PwC Annual Report Financial statements GRI 78

79 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC 30 June June 2013 Shareholder s equity and liabilities Shareholder s equity Issued capital [31] Share premium 5,053 5,053 Profit after tax [32] 107,650 85, ,721 90,223 Provisions [33] 15,913 15,941 Long-term liabilities Accrued expenses and deferred income [14] 19,036 21,664 19,036 21,664 Short-term liabilities Liabilities to suppliers 18,221 14,444 Taxes and social security conntributions [34] 29,091 30,085 Accrued expenses and deferred income [35] 10,275 10,953 Other liabilities [36] 6,369 8,049 63,956 63,531 Total 211, ,359 [..] The numbers in square brackets refer to the corresponding numbers in the notes. PwC Annual Report Financial statements GRI 79

80 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC 2.2 Company profit and loss account for the year ended 30 June 2014 (in 000) 2013/ /2013 Results of participating interests 108,136 86,505 Other income and expense after tax ,353 Profit after tax 107,650 85,152 PwC Annual Report Financial statements GRI 80

81 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC 2.3. General notes Group relationships PricewaterhouseCoopers B.V. is a wholly owned subsidiary of Holding PricewaterhouseCoopers Nederland B.V., Amsterdam. Coöperatie PricewaterhouseCoopers Nederland U.A. holds one priority share in Holding PricewaterhouseCoopers Nederland B.V. Coöperatie PricewaterhouseCoopers Nederland U.A. also holds an interest in Konsortium PwC Europe, registered in Frankfurt/Main, Germany. Konsortium PwC Europe is a consortium of the Dutch, German and Austrian partners and holds a 100% interest in PwC Europe AG Wirtschaftsprüfungsgesellschaft, registered in Frankfurt/Main, Germany (now called PwC Europe SE Wirtschaftsprüfungsgesellschaft). As of 26 June 2014 this consortium was extended to include the Belgian partners, and the PwC member Firm in Belgium was transferred to the afore-mentioned SE. Coöperatie PricewaterhouseCoopers Nederland U.A. s equity share in Konsortium PwC Europe was 32.4% as of 30 June 2014 (30 June 2013: 33.6 %). The interest in Konsortium PwC Europe is revised annually as of 1 July in proportion to the number of Dutch member firm professional practitioners relative to the total number of professional practitioners in the PwC Europe consortium PwC member firms. Basis of preparation The company financial statements have been prepared in accordance with Part 9 of Book 2 of the Dutch Civil Code and the Guidelines for Annual Reporting in the Netherlands as issued by the Dutch Accounting Standards Board. PricewaterhouseCoopers B.V. has the following direct or indirect participating interests: PricewaterhouseCoopers Accountants N.V., Amsterdam (100%) PricewaterhouseCoopers Belastingadviseurs N.V., Amsterdam (100%) PricewaterhouseCoopers Advisory N.V., Amsterdam (100%) PricewaterhouseCoopers Compliance Services B.V., Amsterdam (100%) PricewaterhouseCoopers Pensions, Actuarial & Insurance Services B.V., Amsterdam (100%) PricewaterhouseCoopers Certification B.V., Amsterdam (100%) Executive Academy VOF, Amsterdam (99.7%) PricewaterhouseCoopers B.V. has the following wholly owned subsidiaries for which depositary receipts have been issued: PricewaterhouseCoopers Compliance Services B.V.: All the A depositary receipts (50% of the total number of depositary receipts) are owned by PricewaterhouseCoopers Accountants N.V. and all the T depositary receipts (also 50% of the total number of depositary receipts) are owned by PricewaterhouseCoopers Belastingadviseurs N.V. PricewaterhouseCoopers Pensions & Actuarial Services B.V.: All the depositary receipts (100%) are owned by PricewaterhouseCoopers Belastingadviseurs N.V. PricewaterhouseCoopers Certification B.V.: All the depositary receipts (100%) are owned by PricewaterhouseCoopers Accountants N.V. As the company financial statements of PricewaterhouseCoopers B.V. are included in it consolidated financial statements, the company profit and loss account has been prepared in abridged form as permitted by Section 2:402 of the Netherlands Civil Code. Fiscal unity Except for Executive Academy VOF, all of the abovementioned consolidated entities form a fiscal unity for value added tax purposes with PricewaterhouseCoopers B.V. and Holding PricewaterhouseCoopers Nederland B.V. All of the abovementioned consolidated entities form a fiscal unity for corporation tax purposes with PricewaterhouseCoopers B.V., Holding PricewaterhouseCoopers Nederland B.V., PricewaterhouseCoopers N.V. and PricewaterhouseCoopers Deelnemingen B.V. (including its wholly owned subsidiaries). Accounting policies for assets and liabilities and for the profit and loss account General The accounting policies used for the company financial statements are the same as those used for the consolidated financial statements, as set out in the general notes to the consolidated financial statements. Participating interests over which significant influence or majority control can be exercised are carried at net asset value, determined in accordance with the accounting policies used for the consolidated financial statements. PwC Annual Report Financial statements GRI 81

82 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC 2.4 Notes to the company balance sheet as at 30 June 2014 (in 000) [25] Tangible fixed assets The movements in, and other disclosures regarding, tangible fixed assets are set out in note [2] to the consolidated financial statements. [26] Participating interests These consist of direct holdings in the following entities: PricewaterhouseCoopers Accountants N.V., Amsterdam (100%); PricewaterhouseCoopers Belastingadviseurs N.V., Amsterdam (100%); PricewaterhouseCoopers Advisory N.V., Amsterdam (100%); Executive Academy VOF, Amsterdam (99.7%). Movements during the year were as follows: 2013/ /2013 Balance as at 1 July 96,503 86,476 Less: Dividend distribution -86,505-76,478 Add: Results of participating interests 108,136 86,505 Balance as at 30 June 118,134 96,503 [27] Receivables These amounts are predominantly due within one year and do not bear interest. A provision for doubtful receivables from clients of 246 was carried at 30 June 2014 (30 June 2013: 85). [28] Other receivables Other receivables, all due within one year, were as follows: 30 June June 2013 Receivables from related parties 816 1,918 Receivables from personnel Other 2,536 3,281 Total 3,381 5,214 The receivables from related parties are from a number of PricewaterhouseCoopers entities that do not form part of the Group. [29] Prepayments and accrued income Prepayments and accrued income, all due within one year, were as follows: 30 June June 2013 Prepaid rental costs 6,727 7,627 Prepaid insurance premiums 3,877 4,993 Prepaid pension premiums 6,684 3,330 Other 3,020 1,290 Total 20,308 17,240 [30] Cash and cash equivalents Of the cash and cash equivalents as at 30 June 2014, 2.1 m (30 June 2013: 2.1 m) was not freely disposable. PwC Annual Report Financial statements GRI 82

83 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC [31] Issued capital As at 30 June 2014, the company s authorised capital amounted to 90 (30 June 2013: 90), divided into 90,000 shares of 1 each. The issued capital amounted to 18 (30 June 2013: 18). [32] Profit after tax 2013/ /2013 Balance as at 1 July 85,152 72,861 Less: Dividend distribution -85,152-72,861 Add: Profit for the current year 107,650 85,152 Balance as at 30 June 107,650 85,152 [33] Provisions Movements in provisions were as follows: 2013/ /2013 Personnel Pensions Other Total Total Balance as at 1 July ,973 15,941 10,785 Other movements Amounts utilised ,246-2,691-1,817 Amounts added ,880 2,443 7,211 Balance as at 30 June 1, ,607 15,913 15,941 Approximately 13 million (30 June 2013: approximately 13 million) of the provisions is long-term. The personnel provisions include amounts for supplementary unemployment benefit top ups, long-service entitlements and redundancy schemes. Other provisions include the provision for rental voids in respect of premises rented from third parties. This provision is based on the rental costs for periods during which it is expected that the premises will not be fully occupied. Also included are delivery obligations (being the restoration of rented premises) at the end of the rental period, which are provided for evenly over the rental period. [34] Taxes and social security charges Taxes and social security charges, all due within one year, were as follows: 30 June June 2013 VAT 27,258 28,628 Income tax and social security premiums 1,833 1,457 Total 29,091 30,085 [35] Accrued expenses and deferred income (short-term) Accrued expenses and deferred income comprise a provision for invoices to be received and the current portion of incentives received under lease agreements for a number of office buildings. 30 June June 2013 Incentives received under lease agreements for office buildings 2,629 2,629 Invoices to be received 7,646 8,324 Total 10,275 10,953 Pension provisions include provisions for commitments under non-activity schemes. PwC Annual Report Financial statements GRI 83

84 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC [36] Other liabilities Other liabilities, all due within one year, were as follows: 30 June June 2013 Amounts due to related parties 682 3,608 Bonusses payable 3,148 2,718 Accrued leave entitlements and holiday allowances 2,152 1,594 Other Total 6,369 8,049 Off-balance sheet assets and commitments PricewaterhouseCoopers B.V. stands surety for the annual Group profit-linked periodic benefit payments administered by Stichting Verrekenfonds to the beneficiaries of one of the legal predecessors of the legacy firm Coopers & Lybrand. For 2013/2014, the payments amounted to some 1.1 m (2012/2013: some 1.2 m). The payments are due for the lifetimes of the individual beneficiaries. Under the fiscal unity arrangements for corporate tax and VAT purposes, PricewaterhouseCoopers B.V. is jointly and severally liable for the remittance of these taxes. PricewaterhouseCoopers B.V. has accepted joint and several liability for certain debts of its participating interests. As at 30 June 2014, guarantees provided in relation to lease and other obligations amounted to 3.6 m (30 June 2013: 3.6 m). The longest running guarantee expires on 30 August PricewaterhouseCoopers B.V. has undertaken, in certain circumstances, to assume receivables of up to USD 14 m (30 June 2013: the same) on behalf of an entity in which PricewaterhouseCoopers Deelnemingen B.V. holds a 7.1% participating interest. As a result of current uncertainty regarding the definitive treatment of the acquisition of a 2.6% holding in PwC Strategy& Parent (UK) Ltd, PricewaterhouseCoopers B.V. has recognised as an asset only the amount of the purchase price paid as of the balance sheet date. Based on the formal contractual arrangements, there is a remaining maximum obligation of some USD 17 m. It is expected that the actual amount of the remaining obligation in connection with this acquisition will be clarified during the course of the coming financial year. As at 30 June 2014, PricewaterhouseCoopers B.V. had made commitments for capital expenditure totalling 5.7 m (30 June 2013: 0.5 m) relating to the purchase of laptops and migration of the data centre. PricewaterhouseCoopers B.V. has delivery obligations under lease contracts (being the restoration of leased premises at the end of the lease) amounting to 2.2 m (30 June 2013: 2.6 m). These obligations are recognised evenly over the lease period, and the provision at 30 June 2014 amounted to 1.1 m (30 June 2013: 1.4 m). PricewaterhouseCoopers B.V. has long-term rental contracts and operating lease obligations totalling 233 m (30 June 2013: 258 m). These obligations mature as follows: (x millions) 30 June June 2013 < 1 year to 5 years > 5 years Total obligations PwC Annual Report Financial statements GRI 84

85 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC 2.5 Other notes Risk management surrounding financial instruments Foreign exchange risk PricewaterhouseCoopers B.V. s subsidiaries operate primarily within the European Union. Foreign exchange risks arise mainly on positions and transactions in US dollars and pounds sterling. The Board of Management s policy is to hedge foreign exchange positions and not to take speculative positions. For its hedging operations, the business uses both primary and derivative financial instruments. Foreign exchange risks related to cash flows from operating activities in foreign currencies are hedged by means of currency forward contracts, none of which extends beyond one year. Gains and losses on instruments used to hedge off-balance sheet positions are deferred until the gains and losses on the hedged positions are recognised. As at 30 June 2014, there were no contracts outstanding (30 June 2013: No contracts outstanding). Interest rate risk Interest rate risks on financial fixed assets and liabilities are not hedged. Credit risk PricewaterhouseCoopers B.V. and its subsidiaries are exposed to the risk of counterparty default, though this risk is limited due to the large number and diversity of the Group s receivables. There is concentration of credit risk only in that the limited geographic spread of receivables is concentrated in the Netherlands. Credit risks are further mitigated by the application of good client acceptance and credit control procedures. Liquidity risk The liquidity risk is mitigated by the fact that the cash flow from operating activities generates sufficient liquidity to meet ongoing obligations. Remuneration of members of the Board of Management As PricewaterhouseCoopers B.V. had only one statutory director during 2013/2014 and disclosure of the aggregate remuneration would therefore be directly attributable to that single individual, this disclosure is not provided (2012/2013: the same). The aggregate remuneration of the full Board of Management, comprising the statutory director and the five authorised executive directors, for 2013/2014 was 6.3 million (2012/2013: one statutory director and three authorized executive directors: 3.8 million). In consultation with the LOB, the chairs of the Board of Management and the Assurance Board have decided to take a reduction in their income as a result of the AFM findings. This has been set at the same level as the average amount of the reduction applied to the income of the external auditors involved. Amsterdam, 13 October 2014 The Board of Management: Drs. P.J. van Mierlo RA (Statutory director) Drs. S.A. Boonstra * Prof. Mr. F.A. Engelen * Drs. A.H.M. van Gils RA * Drs. J.D. Lamse-Minderhoud RA * Drs. M. de Ridder RA * * Authorised Executive Director PwC Annual Report Financial statements GRI 85

86 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC 3. Other information 3.1 Provisions of the Articles of Association governing the appropriation of profit In accordance with Article 21 of the company s Articles of Association, the profit after tax is at the disposal of the shareholder in General Meeting. 3.2 Proposed appropriation of profit The proposal to the General Meeting is that the entire profit for the financial year, as reported under shareholder s equity, be distributed as dividend. 3.3 Combined Independent Auditor s and Assurance Report To: The General Meeting of Shareholders of PricewaterhouseCoopers B.V. Report on the Financial Statements and Assurance report on the Report of the Management Board Introduction The Management Board of PricewaterhouseCoopers B.V. (hereinafter PwC ) engaged us to audit the financial statements as contained on pages 57 to 86, and the following components of the annual report: The key indicators (p. 7 to 8), the Report of the Management Board (p. 18 to 50), Information about PwC (p. 95 to 108) and the appendices Five-year summary of financial performance (p. 112) and Scope of this annual report (p. 113 to 114), hereinafter jointly the Report. Independent auditor s report on the financial statements Assurance report on the Report Our opinions In our opinion, the financial statements give a true and fair view of the financial position of PwC as at 30 June 2014 and of its result for the period from 1 July 2013 to 30 June 2014 in accordance with Part 9 of Book 2 of the Dutch Civil Code. In our opinion, the information in the Report has in all material respects been prepared in accordance with Section 2:391 of the Netherlands Civil Code and the reporting criteria of PwC, which are based on the GRI G4 Guidelines as set out on page 19 of the Report. PwC Annual Report Financial statements GRI 86

87 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Independent auditor s report on the financial statements Assurance report on the Report Our engagements We audited the financial statements for the year ended 30 June 2014 of PwC in Amsterdam. The financial statements comprise the consolidated and separate balance sheet as at 30 June 2014 and the consolidated and separate profit and loss account for the period from 1 July 2013 to 30 June 2014 and the notes, comprising a summary of the accounting policies and other explanatory information. We audited the Report for the period from 1 July 2013 to 30 June 2014 of PwC in Amsterdam. This Report comprises both the management report as defined in Section 2:391 of the Netherlands Civil Code and a description of PwC s efforts and results in the area of corporate responsibility. We do not provide any assurance about the feasibility of the future information included in the Report, such as the objectives, expectations and ambitions of PwC. The basis for our opinions We performed our audit in accordance with Dutch law, including the Dutch Standards on Auditing and the Assurance Standards 3000 and 3810N. Our responsibilities under these standards are described in detail in the paragraph Our responsibilities for the audit of the financial statements and the Report. We are independent of the company as required in the Accountants Code of Conduct and Professional Practice Regulation (VGBA) and the Independence of Accountants in Assurance Engagements Regulation (ViO) and have fulfilled our responsibilities as stipulated in these rules. We believe that the audit evidence we obtained is sufficient and appropriate to provide a basis for our audit opinions. Materiality We set certain materiality thresholds. These helped us to determine the nature, timing and scope of our audit and to evaluate the effect of differences, both individually and on the financial statements and the Report as a whole. Based on our professional judgement, we set the materiality for the audit of the financial statements at EUR 5.1 million, which is approximately 5% of the profit before tax. We also take into account differences and/or potential differences that, in our opinion, could be material on qualitative grounds. We also reported to the Management Board all identified differences in the financial statements exceeding EUR 250,000 and any other differences that we consider relevant to the Management Board on qualitative grounds. For the audit of the Report, we also determine whether this contains the material issues. We review this based on the results of PwC s stakeholder consultations and the process for determining the material issues. To this end, we conducted a media investigation and a peer review in relation to PwC. Key audit matters The key audit matters are the matters that, in our professional judgement, were the most important during our audit of the financial statements and the Report. These matters are a selection of the issues we communicated with Management Board and the Local Oversight Board, but are not an exhaustive list of everything we discussed with them. Our audit procedures regarding these matters are set up in the context of our audit of the financial statements and the Report as a whole. We do not give a separate opinion on these individual matters. Our opinion on the financial statements and the Report has not been adjusted as a result of the key audit matters described below. PwC Annual Report Financial statements GRI 87

88 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Independent auditor s report on the financial statements The valuation of work in progress is complex and has a significant effect on the financial statements The valuation of work in progress is a key point for attention in our audit because it concerns a significant financial statements item requiring estimates that are complex and to some extent subjective, as well as based on assumptions. Assessing the valuation of work in progress as at balance sheet date requires professional judgement. This primarily concerns the assessibility of the applied assumptions. PwC s Internal Audit Department (IAD) tested the effectiveness of the process for valuing work in progress used by PwC on the basis of historical data, relevant correspondence and discussions with the partners responsible for a number of engagements. The IAD also conducted other audit procedures, such as sending out balance confirmations and analytical procedures. We reviewed the IAD s assessment of the internal control measures and its other audit procedures by means of file reviews, reperforming some of the procedures and interviews with staff of the financial accounts department. We also conducted additional analytical procedures. Lastly, we focused on the appropriateness of the information included; see points 4 and 18 of the notes to the financial statements. Sensitivities with respect to the valuation of some provisions The correctness and completeness of the provisions for professional liability, vacancy and receivables are key points for attention in our audit because they require estimates that are complex and to some extent subjective, are based on assumptions, and have a significant effect on the financial statements. Assessing the completeness of these provisions as at balance sheet date requires professional judgement. It primarily concerns the question whether the criteria for forming a provision have been satisfied. For the provision for professional liability, vacancy and receivables, we assessed the design, existence and the operating effectiveness of the internal control measures and spoke to staff of the financial accounts department. We also performed audit procedures, such as receiving and analysing the external lawyers letters, and evaluated the Management Board s assessment of the recognition of a provision, as well as the estimates of worst- and best-case scenarios, based on, among other things, business cases, historical experience and discussions with the aforementioned staff and the Management Board. Lastly, we focused on the appropriateness of the information disclosed in the notes; see point 12 of the notes to the financial statements. Assurance report on the Report Reviewing the completeness of the material issues is an essential component of the assurance procedures To ensure that the stakeholders of PwC can base their decisions on the information provided, this information should be a comprehensible reflection of PwC s policy, activities and achieved results. This means that all the material issues should be included in this Report. Material issues are defined as issues of which the omission can have a substantial impact on the decisions of stakeholders. To ascertain whether the Report contains all the material issues, we analysed the process used by PwC to determined material issues. In this context, we considered PwC s strategy and its operating environment. In addition, we also conduct an analysis to determine the material issues for PwC on our own. This includes, for instance, a media investigation and a review based on comparable reports. By comparing our analysis and that of PwC, we checked whether the Report contains the material issues. Focus on sufficient balance and level of detail in the presented information To offer the stakeholders of PwC sufficient background and enable them to rely on the information provided, the information in the Report should be sufficiently detailed and balanced. In this respect we consider, for example, how PwC strategically approaches the material issues, how progress on these issues is measured and whether the presentation of the results is sufficiently balanced. Stakeholders may expect that the information for material issues is detailed and, where possible, reported quantitatively by means of performance indicators. Furthermore, both successes and dilemmas have to be included. We audited the level of detail provided by the balance sheet and the information by, among other things, evaluating PwC s data collection and reporting in terms of the criteria applied and the process followed. To this end, we spoke to staff of the Corporate Responsibility and IAD departments, and reviewed their work through random sampling. The work was audited for completeness, accuracy and relevance in relation to the underlying process for data collection and reporting. Lastly, based on Section 2:391 of the Netherlands Civil Code and the GRI G4 Guidelines, we determined whether the information on the material indicators is reported in a sufficiently detailed and balanced manner. PwC Annual Report Financial statements GRI 88

89 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Independent auditor s report on the financial statements Assurance report on the Report Reliability and continuity of electronic data processing The company s ability to continue as a going concern depends to a large extent on its IT infrastructure In recent years, the company has invested considerable amounts in improving the IT hardware, systems and processes, aimed at increasing the effectiveness of the IT infrastructure and the reliability and continuity of the electronic data processing. We reviewed the reliability and continuity of the electronic data processing, for which we included specialised IT auditors in our audit team. Our procedures comprised reviewing the developments in the IT infrastructure and testing the internal control measures with respect to the IT systems and processes relevant to our audit. Our letter to the Management Board includes recommendations for further opportunities for improvement in this area. Going concern The financial statements of PwC have been prepared using the going concern basis of accounting which is also reflected in the Report. The use of this basis of accounting is appropriate unless the Management Board either intends to liquidate PwC or to cease operations, or has no realistic alternative but to do so. As part of our audit of the financial statements, we concur with the Management Board s use of the going concern basis of accounting in the preparation of PwC s financial statements. The Management Board has not identified a material uncertainty that may cast significant doubt on PwC s ability to continue as a going concern, and accordingly none is disclosed in neither the financial statements nor the Report of PwC. Based on our audit of the financial statements, we also have not identified such a material uncertainty. However, neither the Management Board nor the auditor can guarantee PwC s ability to continue as a going concern. Responsibility of the Management Board and the Local Oversight Board for the financial statements and the Report The Management Board is responsible for the preparation and fair presentation of these financial statements in accordance with Part 9 of Book 2 of the Netherlands Civil Code, and for the preparation of the Report in accordance with Section 2:391 of this Code and with the reporting criteria of PwC, which are based on the GRI G4 Guidelines. Furthermore, the Management Board is responsible for such internal control as it determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Local Oversight Board is responsible for supervising the PwC s financial reporting process. PwC Annual Report Financial statements GRI 89

90 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Independent auditor s report on the financial statements Assurance report on the Report Our responsibility for the audit of the financial statements and the Report The objective of our audit is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to express an opinion based on our audit. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Dutch Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with Dutch Standards on Auditing, we exercise professional judgment and maintain professional scepticism throughout the planning and performance of the audit. In addition, our audit comprises: Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions of transactions, misrepresentations, or the override of internal control. Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. These procedures are not conducted with a view to expressing an opinion on the effectiveness of PwC s internal control. Evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the Management Board and the related disclosures in the financial statements. Evaluating the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements fairly present the underlying transactions and events. Obtaining sufficient appropriate audit evidence regarding the financial information of PwC and business activities within PwC to express an opinion on the financial statements. The objective of our audit is to provide reasonable assurance on whether the information in the Report has in all material respects been prepared in accordance with Section 2:391 of the Netherlands Civil Code and the reporting criteria of PwC, which are set out on page 19 of the Report and based on the GRI G4 Guidelines. Reasonable assurance is a high degree of assurance, but does not guarantee that any material misstatements are always detected in an audit performed in accordance with the Dutch Assurance standards 3000 and 3810N. Our audit includes the following activities: A risk analysis as the basis for determining the completeness, level of detail and balanced presentation of the material issues and identifying and assessing the risks that the information in the Report contains material misstatements. This risk assessment forms the basis for the selection and performance of the audit procedures. Gaining an understanding of the internal control relevant to the audit by interviewing those responsible for delivering and analysing the information for the Report. Selecting and performing appropriate audit procedures based on the risk analysis and evaluation of the internal control, including random sampling of internal and external documents to ascertain whether the information in the Report is properly substantiated. Evaluating the information presented in the Report based on our sector-specific knowledge and experience. Reviewing and testing the work performed by the IAD. Reviewing the content of the Report in relation to the specific requirements as set out in Section 2:391 of the Netherlands Civil Code and GRI G4. During our audit, we discussed the necessary changes in the Report with PwC and we established that these changes have been adequately incorporated in the final version of the Report. PwC Annual Report Financial statements GRI 90

91 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Independent auditor s report on the financial statements Assurance report on the Report We are required to communicate with the Local Oversight Board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in the internal control that we identify during our audit. We are also required to provide the Local Oversight Board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Report on the Report of the Management Board and the other information Pursuant to the legal requirement under Part 9 of Book 2 of the Netherlands Civil Code regarding our responsibility to report on the Report of the Management Board and the other information, we report that: We have no deficiencies to report as a result of our examination whether the Report of the Management Board, to the extent we can assess, has been prepared in accordance with Part 9 of Book 2 of this Code, and whether the other information as required by Part 9 of Book 2 has been annexed; the Report of the Management Board, to the extent we can assess, is consistent with the financial statements as required by Section 2:391(4) of the Netherlands Civil Code. The Hague, 13 October 2014 KPMG Accountants N.V. R.J.J. Smeets RA PwC Annual Report Financial statements GRI 91

92 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC We have discovered what tremendous expertise we really have within this company. The best ideas originate not in boardrooms, but in the work place. So PwC, nationally and worldwide, is organising Innovation Challenges, at which staff can present their innovative ideas. Managers, Onno Nillesen and Michel Pater, working as sustainability adviser and auditor, respectively, went before the innovation jury with their New Perspective on Food and found that their business case could count on quite some support. Michel Pater (l.) and Onno Nillesen (r.) PwC Annual Report 2013/2014 Interview: A New Perspective on Food GRI 92

93 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Michel: We have seen a number of different scandals in the news about food safety in recent years, says Michel, EHEC and E. Coli, contaminated Chinese baby milk and, here in our own country, instances of horse meat in beef products. Companies in the food industry implement systemic measures in the area of hygiene, but they are sometimes not critical enough in their business strategies. There is always the pressure to sell meat more cheaply than the competition - but then you do need to figure out what risks this means for quality control. A New Perspective on Food. What is this new perspective? Onno explains: Our primary objective is to restore trust in the food production chain, and we do this by helping companies give greater Our primary objective is to restore trust in the food production chain, by helping companies give greater priority to the integrity and safety of their products. priority to the integrity and safety of their products. First of all, we developed our Food Safety and Quality Maturity Scan, which pulls together how food safety can be embedded in an organisation and how it links in to other strategic objectives. Secondly, we offer Supply Chain Value Mapping, which highlights clearly the risks in the chain and makes them manageable. For instance, how much does a company know about its suppliers suppliers? And, thirdly, we are working on our Food Safety Assurance Service, which will allow PwC to test and provide assurance as to whether the client has these things under control. We re still working on other aspects, such as a product tracing tool, so that we can offer a holistic approach. We said just now that the best ideas originate in the work place. How did that work with you two? Michel: We have been active in food industry security for many years now. When the scandals hit the news, I started to talk to our Retail & Consumer experts, and Onno did the same within the sustainability team. We then put together a core team of partners and presented our ideas to the Innovation Challenges. Onno: This was received positively and the partners were quickly able to get support from the highest echelons within PwC. We no longer needed to push - PwC pulled! And then we were able to get into the incubator programme. Michel: Along with six other propositions, we were given coaching into how we should put our business case together, how to present it internally and externally, how to generate support and, for instance, how to set our rates at a sensible level. It was all very instructive and enjoyable. Plenty of support from within PwC, then? Onno: Absolutely - and we discovered firsthand what tremendous expertise we really have within this company. We were able to get behavioural specialists involved and forensic experts to update us on fraud in the sector, data specialists who know how to pull the right data out of the chain and public sector advisers with their views on supervision and monitoring. Working together with all these competencies is really powerful. Michel: And we found that partners who were submitting proposals to potential new clients were enthusiastic about what we could contribute on this subject and our contributions were picked up and used in the market. Just as an accountant is responsible for presenting a healthy set of financial statements so I think that we, with our proposition, contribute to a healthier and safer food production chain, in both the private sector and the public sector. And that s fantastic, right? PwC Annual Report 2013/2014 Interview: A New Perspective on Food GRI 93

94 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Information about PwC PwC Annual Report 2013/2014 Information about PwC GRI 94

95 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Our legal structure Stichting Local Oversight Board Leden 100% Coöperatie PricewaterhouseCoopers Nederland U.A. 29,98% Konsortium PwC Europe Coöperatie PricewaterhouseCoopers Nederland U.A. and Holding PricewaterhouseCoopers Nederland B.V. have concluded association agreements with the private limited liability companies owned by the professional practitioners ( partner BVs ). Under these agreements, the professional practitioners are made available to practise one of the professions within our Lines of Service in return for a management fee. PricewaterhouseCoopers Deelnemingen B.V. PwC Strategy& Parent (UK) Ltd. Commissie Publiek Belang 2,6% 100% 100% 100% PricewaterhouseCoopers Accountants N.V. 1 Priority share Holding PricewaterhouseCoopers Nederland B.V. PricewaterhouseCoopers B.V. PricewaterhouseCoopers Belastingadviseurs N.V. 100% Ordinary shares 100% 100% 100% PwC Europe AG 100% PricewaterhouseCoopers Advisory N.V. PricewaterhouseCoopers B.V. has the following wholly-owned subsidiaries: PricewaterhouseCoopers Accountants N.V. ( Assurance ) PricewaterhouseCoopers Belastingadviseurs N.V. ( Tax & HRS ) PricewaterhouseCoopers Advisory N.V. ( Advisory ) PricewaterhouseCoopers Compliance Services B.V. PricewaterhouseCoopers Certification B.V. PricewaterhouseCoopers Pensions, Actuarial & Insurance Services B.V. PricewaterhouseCoopers Compliance Services B.V. ( CoS ) issues compilation reports. Our legal structure as at 30 June % 50% PricewaterhouseCoopers Certification B.V. 50% PricewaterhouseCoopers Compliance Services B.V. 100% PricewaterhouseCoopers Pensions, Actuarial & Insurance Services B.V. beneficial ownership legal ownership PricewaterhouseCoopers B.V. is a wholly owned subsidiary of Holding PricewaterhouseCoopers Nederland B.V., the entire ordinary share capital of which is held by the German company PwC Europe AG Wirtschaftsprüfungsgesellschaft. and the one priority share with controlling rights in which is owned by Coöperatie PricewaterhouseCoopers Nederland U.A. PricewaterhouseCoopers Certification B.V. handles assignments involving mandatory accreditation, such as assurance on CO 2 and NO x emissions, and the issue of ISO certificates on Information Security Management Systems (ISMS). PricewaterhouseCoopers Pensions, Actuarial & Insurance Services B.V. ( PAIS ) provides advice on, and intermediation in, pensions and insurance products and has a licence from the Netherlands Authority for the Financial Markets (AFM) for these. Executive Academy VOF (a 99.7% subsidiary) provides training programmes on technical subjects and organises seminars on topical business developments PwC Annual Report 2013/2014 Our legal structure GRI 95

96 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC PwC Europe Along with the member firms in Germany, Austria and Belgium, PwC Netherlands is a participant in the PwC Europe initiative. With the exception of one single priority share, Coöperatie PricewaterhouseCoopers Nederland U.A. has transferred all the shares it held in Holding PricewaterhouseCoopers Nederland B.V. to PwC Europe AG Wirtschaftsprüfungsgesellschaft ( PwC Europe ). Similar transfers were made by the top local holding entities of the PwC member firms in Germany, Austria and Belgium, and the partners in those four countries now largely own, indirectly, the PwC firms in their respective countries. The entire share capital of PwC Europe is held by Konsortium PwC Europe. This is a legal entity under German law that is transparent for regulatory purposes. The equity rights in Konsortium PwC Europe are held by Coöperatie PricewaterhouseCoopers Nederland U.A., the Konsortium PwC Deutschland & Österreich and PwC Belgium CVBA. Our international network PwC is a global network of separate and independent member firms operating locally in countries around the world. Coöperatie PricewaterhouseCoopers Nederland U.A., Holding PricewaterhouseCoopers Nederland B.V., PricewaterhouseCoopers B.V. and their subsidiaries are all part of this network. PwCIL has a coordinating role, including for example issuing standards in the areas of risk and quality management. PwCIL does not provide services to clients, but focuses solely on reinforcing and supporting the network in the areas of strategy, knowledge and expertise of the professionals and protection of the PwC brand. PwCIL does not own any of the member firms and the member firms do not own any of the other member firms, except in a number of very specific cases. All services are delivered by the individual member firms and their own account and risk. PwCIL is not responsible or liable for any actions or omissions of any of its member firms, it cannot exercise control over their professional opinions, and it cannot bind them in any way. Member firms may not act as agent for PwCIL or for any other member firm, and they are responsible solely for their own actions or omissions. Member firms may participate in regional affiliations. These are designed to encourage cooperation and the application of common strategies and risk and quality standards. The member firms that comprise the global PwC network are members of PricewaterhouseCoopers International Limited (PwCIL), a UK-based private company limited by guarantee. The PwC network is therefore not an international partnership and the member firms do not constitute any form of legal partnership or group of companies, except in a very limited number of cases that have been agreed for specific purposes. PwC Annual Report 2013/2014 Our legal structure GRI 96

97 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Corporate Governance The following bodies constitute the key elements of the governance structure of PwC Netherlands: General Meeting (GM) Local Oversight Board (LOB) Board of Management (BoM) Line of Service Boards (LoS Boards) Business units (BUs) Country Admissions Committee (CAD) Public Interest Committee (since 1 July 2013) Works Council General Meeting Each partner is a member of Coöperatie PricewaterhouseCoopers Nederland U.A. through his or her partner BV. This cooperative, with excluded liability of members, has a General Meeting, Board of Management and LOB, each with the powers and responsibilities as set out below. The GM has the customary powers of such a body: it approves the appointment and dismissal of the Chair of the Board; it adopts the annual financial statements, budget and strategy of Coöperatie PricewaterhouseCoopers Nederland U.A.; and it approves new association agreements. Local Oversight Board The role of supervisory body at PwC in the Netherlands is filled by the Local Oversight Board (LOB), which consists of six partners from the Lines of Service and an independent chair. The LOB members are appointed by the members of Coöperatie PricewaterhouseCoopers Nederland U.A. Under the Audit Firms Supervision Act, members of the LOB qualify as co-policymakers of PricewaterhouseCoopers Accountants N.V. and of Coöperatie PricewaterhouseCoopers Nederland U.A. Members of the LOB are appointed for a term of three years with eligibility for re-election for one more term. In addition to its supervisory role, the LOB also has an advisory and representative function. Its responsibilities include the supervision of the BoM, promotion of good business practices, provision of advice to the BoM on strategy and policy, facilitation of a broad consensus for decision making within the Cooperative and active involvement in matters that concern the partners. The Chair of the LOB is also Chair of the General Meeting. The LOB has the following committees: Audit Committee The Audit Committee s function is to monitor the quality of financial reporting, annual reporting, budgeting and other financial matters, such as the reports of the internal and external auditors and the appointment of the auditor. The Audit Committee also reviews the Finance and Tax Affairs portfolios with the Board of Management portfolio holder. The Committee consists of Hans Bod, George de Soeten and Pieter Veuger. Compliance Committee The Audit Committee s function is to monitor the quality of financial reporting, annual reporting, budgeting and other financial matters, such as the reports of the internal and external auditors and the appointment of the auditor. The Audit Committee also reviews the Finance and Tax Affairs portfolios with the Board of Management portfolio holder. The Committee consists of Hans Bod, George de Soeten and Pieter Veuger. Remuneration Committee DThe Remuneration Committee evaluates the performance of the Board of Management, determines the remuneration of the BoM s members and oversees the evaluation and remuneration of partners. The Committee consists of Janet Visbeen, Jan Maarten van der Meulen and Ruud Dekkers. Members of the LOB Ruud Dekkers, Chair Hans Bod (Assurance) Maarten van Ginkel (Assurance) Jan Maarten van der Meulen (Advisory) George de Soeten (Tax & HRS) Pieter Veuger (Assurance) Janet Visbeen (Tax & HRS) PwC Annual Report Corporate Governance GRI 97

98 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Board of Management Under the Audit Firms Supervision Act, members of the BoM qualify as co-policymakers of PricewaterhouseCoopers Accountants N.V. and of Coöperatie PricewaterhouseCoopers Nederland U.A. The BoM (also referred to as the Territory Leadership Team) is responsible for creating and maintaining an appropriate environment for the conduct of the company s business and is responsible for the achievement of PwC s objectives, strategy and policy. Since 1 July 2013, the Board has had six members, each of whom has been assigned specific areas of portfolio responsibility. The allocation of responsibilities among the members of the Board of Management reflects the BoM s need to manage and supervise both the various Lines of Service and market segments as well as functional tasks such as Finance, Human Capital, IT, Quality & Risk and Marketing & Knowledge Management. The Chair is the only statutory director (under the articles of association) and he/ she appoints the other members as authorised executive directors. The Assurance, Tax & HRS and Advisory representatives on the BoM are also the chairs of their individual LoS Board and of the board of their Line of Service operating company. Members of the BoM are appointed for a term of three years and are eligible for re-election for one more additional term of three years. Their CVs are included on page 100. Line of Service boards The members of the LoS Boards act as directors of their Line of Service operating company. The respective LoS Boards have operational responsibility for formulating and implementing their LoS strategy. This operational responsibility includes the day-to-day affairs and profitability of the LoS, the quality of the professional practice and client service, HC policy, risk management and the evaluation of partners and directors. Under the Audit Firms Supervision Act, the members of the Assurance Board qualify as policymakers of PricewaterhouseCoopers Accountants N.V. The members of the LoS Boards are elected for a maximum of two three-year terms. The member of the Board of Management representing an individual Line of Service is chair of that LoS Board and chair and only statutory director of the Line of Service operating company. The chair appoints the other members of the LoS Board as authorised executive members of the board. Members of the Assurance Board Michael de Ridder (Chair and statutory director of PricewaterhouseCoopers Accountants N.V.), Rogier van Adrichem Fernand Izeboud Peter Jongerius Ruud Kok and Agnes Koops-Aukes (authorised executive directors of PricewaterhouseCoopers Accountants N.V.) Members of the Tax & HRS Board Sytso Boonstra (Chair and statutory director of PricewaterhouseCoopers Belastingadviseurs N.V.) Jeroen Boonacker Henk van Cappelle Diederik van Dommelen Wanda Otto and Ron Unger (authorised executive directors of PricewaterhouseCoopers Belastingadviseurs N.V.). Members of the Advisory Board Ad van Gils (Chair and statutory director of PricewaterhouseCoopers Advisory N.V.), Martin Blokland Maarten van de Pol Johannes Boelens (authorised executive directors of PricewaterhouseCoopers Advisory N.V.). PwC Annual Report Corporate Governance GRI 98

99 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Businessunits Given the size of their organisation, the Lines of Service are structured operationally into businessunits. These BUs have the following responsibilities: Implementation of the applicable regulatory requirements for quality, risk management and conduct (Code of Conduct), the Business Unit Leader being assisted in this by the Quality Assurance Partner who is responsible for quality aspects such as the acceptance, continuance and execution of engagements including the statutory audits Operational management by objective in the areas of revenue, productivity and profitability Development and management of an effective infrastructure to manage staffing needs and resources, industry expertise and business unit planning Human capital management (with focus on client service) and people development (in terms of experience and conduct) Country Admissions Committee The CAD acts as an advisory body both for the BoM and for the LoS Boards regarding the appointment of new partners and directors. The CAD has a sub-committee for each LoS and an independent chair. The chair of the CAD is appointed by the BoM and the members are appointed by the LoS Boards, both for a maximum of two threeyear terms. The chair and members may hold no other management functions. The CAD focuses mainly on how the personal qualities of the professionals concerned match up to the profile developed for PwC partners and directors. The LoS Board appoints new directors only after concurring advice has been received from the CAD and these appointments are then ratified by the BoM. Proposals by the LoS Boards for the admission of new partners are presented by the BoM to the GM only after concurring advice has been received from the CAD. Public Interest Committee Since 1 July 2013, PricewaterhouseCoopers Accountants N.V. has had a Public Interest Committee, consisting of four external members together with the chair and one other member of the LOB. The Committee is a requirement of the Code for Audit Firms, which PricewaterhouseCoopers Accountants N.V. signed up to in June The Code, promulgated by the NBA, sets out principles governing how audit firms with a public interest entity audit licence should structure their management, quality control, risk management, internal supervision, independence and remuneration. The basic premise of the Code is to assure the public interest in audit engagements. Works Council PwC s Works Council has nineteen members, representing the various Lines of Service and support departments (seven from Assurance, three from Tax & HRS, three from Advisory, two from Compliance Services and four from Firm Services). The Works Council meets regularly with a representative of the Board of Management. Council members also sit on various sub-committees linked to individual Lines of Service and support departments. Their role is to represent the interests of everyone working in the LoS or support department and to bring topics forward for consideration by the Council and discussion with the BoM. The Council also has various specialist committees dealing with conditions of employment, employment law and regulation and pensions. The Public Interest Committee has the following external members: Nout Wellink (chair) was President of De Nederlandsche Bank (the Dutch Central Bank) until June He is currently Chair of the Board of Governors of the University of Leiden and a Non-executive Director of the Bank of China. Frits Oldenburg is of-counsel with FG Lawyers. Until recently, he was a member of the Board of Trustees of the International Bureau of Fiscal Documentation, partner with NautaDutilh and a notary specialising in company law. He was also, inter alia, a Member of the Board of Management of the Koninklijke Notariële Beroepsorganisatie (the Dutch professional body for notaries). Cees van Rijn was CFO and Member of the Board of Management of Nutreco for ten years. He is also, inter alia, a Member of the Board of Governors and Audit Committee of the Leids Universitair Medisch Centrum (Leiden University Medical Centre), a Supervisory Board Member and Chair of the Audit Committee of Detailresult Groep, FloraHolland and Plukon Royale, a Supervisory Director of Farm Frites and a member of Stichting Continuïteit van SBM Offshore. Yvonne van Rooy was, inter alia, Secretary of State for Economic Affairs, Member of Parliament (Second Chamber) and Chair of the Executive Board of the University of Utrecht. She is currently Chair of the Board of Management of the Nederlandse Vereniging van Ziekenhuizen (Dutch Association of Hospitals) and, inter alia, Chair of the Supervisory Board of Philips Electronics Nederland and a Member of the Supervisory Board of NN Group. PwC Annual Report Corporate Governance GRI 99

100 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC The Board of Management Peter van Mierlo (1963) joined one of the Legacy Firms of PwC as an auditor in 1987 and he has been a partner since Previously, he was a member and then Chair of the Assurance Board. He joined the Board of Management on 1 November 2009 and has been Chair since 1 July Portfolio: Chairman of the Board of Management, CEO Member of the Management Board of PwC Europe Member of the Strategy Council of the global PwC network Member of the Central Cluster Leadership Team Partner Affairs and Partner Development Diversity Corporate communication Corporate responsibility Date of appointment: 1 November 2009 Term of office ends: 30 June 2016, not eligible for reappointment Sytso Boonstra (1961) joined one of the Legacy Firms of PwC as a tax advisor in 1990 and he has been a partner since Among other positions, he has been a Business Unit Leader, CIPS Industry Leader and member of the Tax & HRS Board. Since 1 January 2010, he has been Chair of the Board of PricewaterhouseCoopers Belastingadviseurs N.V. and a member of the Board of Management. He has been an authorised executive director of PwC since 1 January Portfolio: Tax & HRS Member of the Tax & HRS Central Cluster Leadership Team Compliance Services Date of appointment: 1 January 2010 Term of office ends: 30 June 2016, not eligible for reappointment Frank Engelen (1971) joined one of the Legacy Firms of PwC as a tax advisor in 1996 and he has been a partner since He became an authorised executive director of PwC on 1 July He has been Professor of International Tax Law at Leiden University since Portfolio: Markets Marketing & Knowledge Management Date of appointment: 1 July 2013 Term of office ends: 30 June 2016, eligible for reappointment PwC Annual Report The Board of Management GRI 100

101 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Ad van Gils (1967) joined one of the Legacy Firms of PwC as an auditor in 1991 and became partner on 1 July From 2006 to 2009, he was Transaction Services Business Unit Leader and then managed the Deals & Forensics business unit until 1 July He joined the Advisory Board on 1 July 2012, and has been Chair of the Board of PricewaterhouseCoopers Advisory N.V. and authorised executive director of PwC since 1 July Portfolio: Advisory CFO Member of the Advisory Central Cluster Leadership Team Jolanda Lamse-Minderhoud (1969) joined one of the Legacy Firms of PwC as an auditor in 1992 and she has been a partner since She was appointed to the Assurance Board in 2010 and became an authorised executive director of the Board of Management on 1 July Portfolio: COO Human Capital Employer s representative on the Works Council Michael de Ridder (1963) started with one of the legacy firms of PwC in 1986 and he has been a partner since Before being appointed to the Assurance Board in 2008, he held various positions, including that of Business Unit Leader. He has been Chair of the Board of PricewaterhouseCoopers Accountants N.V. and an authorised executive director of the Board of Management since 1 July Portfolio: Assurance Quality & Risk Member of the Assurance Central Cluster Leadership Team Date of appointment: 1 July 2013 Term of office ends: 30 June 2016, eligible for reappointment Date of appointment: 1 July 2013 Term of office ends: 30 June 2016, eligible for reappointment Date of appointment: 1 July 2013 Term of office ends: 30 June 2016, eligible for reappointment PwC Annual Report The Board of Management GRI 101

102 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Code of conduct and complaints procedure In addition to having procedures covering many of the matters that affect our technical expertise, integrity and independence, we also have a global Code of Conduct that concisely and clearly sets out what we stand for and what is expected of us. We have adopted our Code of Conduct from that of the global PwC network. It provides guidance to our staff and partners as to how they should behave and conduct themselves in a variety of differing circumstances and situations. In practice, what this means is that we expect every PwC person to behave with respect, dignity, honesty and courtesy. We have deliberately framed our Code of Conduct in general terms, as guidelines cannot be devised for all situations and we believe that our people are very well placed to make their own decisions sensibly and to consult with colleagues where needed. It is not for nothing that our motto is: The worst mistake you can make is the mistake you make on your own. which specifically addresses the handling of dilemmas. The Code of Conduct is also covered in other training modules. The Complaints and Notifications Procedures The Code of Conduct provides for Complaints and Notifications Procedures. There cover procedures both for complaints in the personal arena and for suspicions of professional misconduct. Notifications in the personal arena cover, for instance, intimidation, aggressive behaviour or discrimination and complaints of this nature are dealt with by the Complaints Committee. The Business Conduct Committee (BCC) deals with notifications of suspected professional misconduct (for instance improper acceptance of gifts or deliberate mis-invoicing) and with any reported suspicions of an incident. Neither the Complaints Committee nor the BCC are empowered to levy sanctions. They submit recommendations to the Board of Management, which is the body responsible for the final decision on the matter. Depending on the seriousness of the offence, a sanction can take the form of a warning, written notification, suspension or dismissal. Those who have complaints in the personal arena or who suspect professional misconduct have access to any one of eighteen Confidential Counsellors within our organisation. These counsellors look into how issues arising in the work place can be resolved and they can provide guidance to those filing a complaint. Complaints from external parties Third and external parties can also file a complaint. Information on this is set out on our website. Compliance with the Code of Conduct is not voluntary. It is an integral part of the contract of employment signed by all partners and staff. By signing the letter of engagement, our clients also confirm through the terms and conditions that they will act ethically and we require major suppliers with contracts above 25,000 to agree to our supplier conditions which include a passage on ethical behaviour. Business related Business Conduct Committee Complaints and notifications procedures Confidential counsellors In the personal arena Complaints Committee The Code of Conduct is a mandatory element of our training and development programmes. Every new staff member is given e-learning Recommendations to the Board of Management Recommendations to the Board of Management PwC Annual Report Code of conduct and complaints procedure GRI 102

103 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Our framework for quality and risk management When we refer to the quality of professional services delivery, we mean two equally very important elements: (a) the extent to which the service and the results thereof comply with legislation, regulatory requirements and professional standards (which can generally be determined fairly objectively) and (b) the extent to which the service meets the expectations of our various stakeholders. Our policies for quality cover both aspects. As legislation, regulation and standards differ between the various forms of service delivery, Assurance, Tax & HRS and Advisory each have their own structure for managing this. Our quality control and risk management systems are embedded in our operational processes, from the acceptance of clients and engagements through to the delivery of the end product. The framework across the page applies to all our services and service delivery. Acceptance of clients and engagements Our acceptance procedures for new clients and engagements include such aspects as verifying the identity of the clients and their representatives. Does the reputation of the potential client match that of PwC? Who are the owners, and what is the management structure? Are there external and/or internal supervisory bodies? What is the financial position of the client? What exactly is the Client and engagement acceptance Client and engagement acceptance Risk and acceptance panels Independence check Conflict of interest check Wwft check (Anti-Money Laundering and Anti- Terrorist Financing) Authorisation of Services client looking for? Can we deliver what the client is looking for? Has the company/ organisation been in the news recently and in what context? Risk and acceptance panels are called for potential engagements where our risk or size criteria indicate that a wider assessment needs to be made regarding the acceptability of the engagement. A high-risk Carrying out the engagement Engagement Letter Planning memorandum File maintenance Global Data Protection Policy Wwft (Anti-Money Laundering and Anti-Terrorist Financing) Partner/director involvement Reviews during engagements Testing of the quality control system and of individual engagements PwC Risk Management Standards and Network Reviews Quality Management Review Engagement Compliance Reviews situation can arise, for instance, because of the client s profile, the complexity of the engagement or the nature and composition of the stakeholders. In addition to these mandatory situations, any engagement team may also voluntarily call for a panel to assess a potential engagement. In addition to the partners directly involved in the potential engagement, the risk panel also comprises the business unit s Quality & Risk partner, the Business Unit Leader, the Industry or Competency Leader and/or other partners with particularly relevant experience. In many cases, the Independence Office is also involved and, where necessary, also a member of the applicable LoS Board or the BoM. A risk panel can decide to impose additional requirements to address the risks identified, for instance a requirement to have two pairs of eyes involved by appointing a second partner to the engagement or adding a subject matter expert to the engagement team. Independence-check: For all audit engagements (and since 1 January 2014 in the Netherlands also for all other assurance engagements), PwC as an organisation and all its partners and directors must be independent of the clients for which they are performing engagements. This also means that PwC team members involved on the engagement may have no financial interests in the client and no close personal relationships with senior persons within the entity involved. Engagement and client acceptance procedures include an assessment as to which independence requirements apply to the particular client and as to whether the service is a permitted service under the applicable legislative and regulatory PwC Annual Report Our framework for quality and risk management GRI 103

104 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC requirements. Dutch law prescribes that an audit firm may not provide advisory services to clients for which it performs the statutory audit The PwC NL Compliance & Independence Offices select annually about one third of the partners and directors for testing of compliance with the personal independence requirements. The selection includes all imminent partner and director candidates together with any partner or director who received a written warning or reprimand the year previously. De Authorisation for Services-tool: This is a tool mandated by the global PwC network for listed companies and companies with overseas operations. The auditor responsible for the client must approve, in advance, all services that are proposed for that client irrespective of which PwC member firm wishes to provide the service. Absent this approval, the work may not begin and no time may be charged to the engagement until the AFS approval is given. Conflict of interest check: A potential conflict of interest can arise, for instance, where two or more PwC teams are acting for different potential buyers and/or sellers in a business acquisition. Where needed, we put so-called Chinese (or ethical) walls in place to prevent confidential information held by one team inadvertently becoming available to another team. In such situations, the teams are kept physically separate and increased confidentiality requirements are put in place. It is also possible in such situations that either we, or the client, turn the engagement down. The Anti-Money Laundering and Anti-Terrorist Financing Act (Wwft) requires that both the client and the Ultimate Beneficial Owner (UBO) be identified and that, where necessary, this identification be verified before an engagement can begin. This law also requires us to report any unusual transactions at or by a client (either actually effected or intended) to the Financial Intelligence Unit Nederland (previously the Unusual Transactions Reporting Hotline). Carrying out the engagement Engagement Letter: This the agreement with the client that sets out exactly what services are to be provided and what work is to be done, the fee therefor and the terms and conditions relating thereto. The engagement partner (the partner ultimately responsible for the engagement) and the client both sign this agreement. To the extent possible, this helps avoid issues arising later as to what was agreed. Planning memorandum: This is an internal document that sets out how the engagement is to be undertaken, who is responsible for what and what competencies need to be called upon. File maintenance: For every professional engagement, it is crucial that our people maintain their files on a complete and comprehensible basis. There must be sufficient documentation on file of the work done to support the service that was agreed in the Engagement Letter. PwC Global Data Protection Policy: In connection with personal privacy, it is of the utmost importance that the confidentiality of information (of both client and individual) be protected in any exchange of information. In this regard, the PwC network has put together a Global Data Protection Policy, which in the Netherlands we have supplemented with the more extensive Dutch requirements regarding the protection of personal information (the Dutch Data Protection Act - Wet bescherming persoonsgegevens). Involvement of partners, directors and senior managers in the engagement: The engagement leader (who is always a partner, senior director or director) is responsible for the adequacy and quality of the engagement, and sufficient involvement of partners, senior directors and directors in the performance of the engagement is essential to this responsibility. Review van work done: Work done is always reviewed by someone more senior in the team. Hot reviews: These are reviews carried out (in Assurance) as the engagement is in progress, which means that, where necessary, the approach can be changed as it proceeds. PwC Annual Report Our framework for quality and risk management GRI 104

105 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Testing of the quality control systems and individual engagements PwC Network Risk Management Standards: Specialists from the network review annually the self-assessments performed regarding compliance with our fifteen risk management standards. In addition to this, a Business Review (Network Review) takes place every three years that focusses mainly on the Network Risk Management Standards. Quality Management (System) Review (QMR): In Assurance, Global Risk & Quality reviews annually the Assurance Quality Management System (QMS) including proper application of any updates thereto. Engagement Compliance Reviews (ECRs): These reviews of selected engagements, carried out by partners, directors and managers independent of the engagement team, are performed in all Lines of Service. The purpose is to test engagement performance quality and compliance with the various PwC requirements, to identify potential areas for improvement and to determine that PwC has not been exposed to unacceptable risks. Ad hoc reviews: These are carried out as dictated by specific circumstances or as follow up to the outcome of earlier internal and external reviews. Reviews by the Internal Audit Department (IAD) and the PwC NL Compliance & Independence Offices. LoS-specific policies for quality While each Line of Service has its own way of working, quality of the service delivery is always paramount. Assurance, Tax & HRS and Advisory carry out their own periodic reviews and have their own extensive monitoring programmes to assure quality in service delivery and, where necessary, to push through improvements where shortcomings are noted. Assurance The services provided by Assurance are regulated by extensive legislation and regulation. Statutory audits fall under the supervision of the AFM. The AFM reviews our quality control systems regularly and tests, on a sample basis, the quality of the statutory audits we have performed. In Assurance, the National Office (NO) provides support to the practice in a number of different ways. It develops and supports the implementation of policies and procedures in the areas of accounting, audit and risk management, and this plays a key role in ensuring our compliance with legislative and regulatory requirements. A detailed description of Assurance s quality control system is provided in the Transparency Report. Tax & HRS Tax & HRS has a knowledge centre that keeps our tax advisers continuously up to date on current developments in the fiscal and legal arenas. Partners and staff are required to consult the Tax Opinion Committee on complex issues. This committee includes specialist partners and staff, including a number of university professors. We have implemented a Tax Code of Conduct covering the provision of tax advice throughout our global network and this code is the framework within which we provide advice to clients. As from this year, Tax & HRS also has a committee that, upon referral, assesses whether our response to the particular referred tax issue is in line with this Tax Code of Conduct. Advisory Advisory is ISO 9001:2008-certified for its quality management system, ISO certified for the quality of market research we do for clients and CQ Index-accredited for the measurement, analysis and reporting of patient experiences in the healthcare sector. External audits are carried out regularly into Advisory s policies for quality in connection with this certification/accreditation. Other measures We have described above how all clients and potential clients are covered by our acceptance procedures, and we have a wide range of key controls in place to avoid instances of conflicts of interest or independence. We have also put measures in place within our organisation for the prevention of fraud and corruption. These include regular IAD testing of all expense claims on a random sample basis. The IAD also tests our financial systems and has a procedure for monitoring conflicts of interest with suppliers that covers all our staff and all suppliers. PwC Annual Report Our framework for quality and risk management GRI 105

106 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Our sustainability policies Care for the environment is embedded in our operating methods and we have again this year taken further steps to be more economical with resources and restrict our CO 2 emissions. Since the beginning of the 2012/2013 financial year, we no longer compensate our CO 2 emissions through a third party. We felt that this compensation policy was too much of a buy off policy that did not encourage behavioural change and awareness. Instead, we have now committed to a policy that is designed to reduce our environmental impact and increase our innovative capacity. We have seen that this leads to better collaboration between our corporate responsibility, facilities management, procurement and fleet management people. We also involve our suppliers in our environmental policies so that we can make use of their expertise and experience. We are currently evaluating our office buildings in terms of the BREEAM-In-Use sustainability standards. BREEAM assesses to a sustainable building standard and provides a performance rating for the building evaluated. The objective is to analyse and improve buildings with the ultimate objective of meeting the applicable sustainability standard. We have also joined Platform 31, a group of companies that exchange expertise and experiences, amongst other things in the field of sustainable buildings. Online meeting tool introduced One of the most important measures has been the roll out of an online meeting tool throughout our global network. This enables us to meet, share documents and brainstorm with each other and with our clients online and without having to travel. We expect that this will contribute to a reduction in the number of kilometres travelled, both in the Netherlands and abroad, and a consequent reduction in CO 2 emissions. Measures to reduce electricity usage Our CO 2 emissions from electricity usage have fallen by 10% (including green electricity), partially because we have replaced some of our lighting with LED. We have also further increased the efficiency of the on-off switching of our installations and we are using much less office space. We had bought in green electricity during the previous year, so we can now use green electricity (generated from wind energy) for the offices where we are the energy buyer and can therefore select our own supplier. We are also aiming to reduce electricity usage by combining our servers. We have a project currently ongoing that will transfer virtually all of our production systems to one data centre at PwC in Frankfurt. The purchase of energy-saving printers in prior year seems to have had a positive influence on our paper usage, and the purchase of paper has fallen by 21%. Pilot for further segregation of waste We have run a pilot this year in our Rotterdam office involving further segregation of waste. The results were positive. Rotterdam collected 35.4% less waste, with residual waste falling the most (by 60%). We will be rolling this waste segregation pilot out to other offices in the coming year. We ran a campaign in all offices promoting the segregation of plastic coffee cups for re-cycling. Catering more sustainable Together with our caterer, we have achieved a substantial sustainability step forward in our catering. This has focussed on the health of our staff, reduction of CO2 emissions, encouragement to local entrepreneurs by buying in locally, use of fair trade and organic foodstuffs as much as possible and further reductions in (and recycling of) waste. We are aiming for a minimum of 40% sustainability in our company restaurants. The lunch offerings for meetings have been 80% sustainable since this financial year, PwC Annual Report Our sustainability policies GRI 106

107 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Sustainability in our chain Care for the environment is a standard feature of our requests for proposal. We take the view that cooperation in the chain provides opportunities not only for efficiency but also for building a sustainable society. That is why a Code of Conduct for suppliers forms part of our terms and conditions of purchase. Getting started with electric mobility For many years now, we have had a climate-neutral lease scheme of with bonuses and penalties that encourages the ordering and driving of fuel-efficient cars. We are also running the Electric Transport pilot in which we have provided an electric car to twenty of our staff. The response has been positive, and we have decided to continue the pilot with a wider group of people. We have installed electric charging stations at several of our offices, and more have been added in 2014 to cope with the demand. Where taxis are concerned, the policy in our Amsterdam office is to select a company that uses electrical cars. Need to clarify what we do Neither the visibility of, nor the appreciation for, the measures we have taken in the area of sustainability is high among our staff. Our People Survey indicated that only 50% of our staff feels that PwC does enough to reduce the effect of its environmental footprint. That is less than last year, which causes us believe that we need to communicate better about what we are doing in this area and what we have planned. We will be rolling out a communication plan in 2014/2015. Environmental impact 2013/ /2013 Renewable electricity consumption (%) Paper (in kg per FTE) Purchased printer and copier paper Recycled paper, cardboard and printing Car usage * Business kilometres driven (per FTE) 13,988 13,301 Average standard consumption (litres per 100 km) Average actual consumption (litres per 100 km) ** Number of bonuses awarded under the climate-neutral scheme** Number of penalties issued under the climate-neutral scheme** Air travel Number of kilometres flown (per FTE) 6,039 5,900 Train Number of business kilometres travelled (per FTE) Number of journeys (per FTE) CO 2 emissions (in metric tons) 17,271 17,893 Cars 9,401 9,557 Air travel 4,964 5,244 Train Electricity *** 1,190 1,262 Gas *** 1,138 1,196 District heating *** Carbon offset (in metric tons) **** - 22,612 *) Excluding partners. **) Based on calendar years. ***) Extrapolated from actual measurements. ****) CO 2 emissions no longer offset as from 2013/2014. Internal impact of our CR policies 2013/ /2013 PwC takes adequate steps to offset the effects of its business activities on the environment. 50% 51% PwC is a socially responsible company. 72% 72% The people I work for recognise and value staff involvement in CR activities. 53% 52% PwC Annual Report Our sustainability policies GRI 107

108 Contents Foreword Key Kerncijfers statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Breakdown of our organisation (in number of people) Number of people (as at 30 June 2014) LoS Sex Level Permanent contract Contract Temporary contract Contracted in Assurance Male Partner Professional Staff 1, ,062 Support Staff Male total 1, ,164 Female Partner Professional Staff Support Staff Female total Assurance total 1, ,713 Tax & HRS Male Partner Professional Staff Support Staff Male total Female Partner Professional Staff Support Staff Female total Tax & HRS total ,029 Advisory Male Partner Professional Staff Male total Female Partner 2 2 Professional Staff Support Staff Female total Advisory total Firm Services Total Male Professional Staff 1 1 Support Staff Male total Female Support Staff Female total Firm Services total Total 4, ,335 Number of people (as at 30 June 2014) LoS Sex Level Full-time/Part-time Permanent contract Temporary contract Contracted in Assurance Male Partner Professional Staff ,062 Support Staff 4 4 Male total 1, ,164 Female Partner Professional Staff Support Staff Female total Assurance total 1, ,713 Tax & HRS Male Partner Professional Staff Support Staff Male total Female Partner Professional Staff Support Staff Female total Tax & HRS total ,029 Advisory Male Partner Professional Staff Male total Female Partner Professional Staff Support Staff Female total Advisory total Firm Services Total Male Professional Staff 1 1 Support Staff Male total Female Support Staff Female total Firm Services total Total 3,185 1, ,335 PwC Annual Report Breakdown of our organisation (in number of people) GRI 108

109 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Sharing expertise in matters relevant to society PwC shares knowledge and contributes to the public debate by regularly publishing position papers and reports on themes that are relevant to our service delivery. Here are only three examples of such publications during the past year. New auditor s report used at nearly 50% of listed companies Auditors of Dutch listed entities used the more informative auditor s report on 45% of the 2013 published financial statements. That was the conclusion of Plain speaking, a PwC survey into the published AEX and AMX financial statements. In the new-style auditor s reports, the auditor provides greater insight into the audit work performed. The survey report provides details of the companies and auditors involved and the nature of the auditor s report provided. The new auditor s report is based on a draft issued by the international standards setter, the IAASB, and differs from the current report in a number of respects. The auditor is required to describe the key matters arising from the audit and explicitly concur with management s conclusions as to going concern. The format is not yet mandatory, but a number of auditors have already started to work with the new report, ahead of the obligation that applies to all Dutch listed companies as from next year. We welcome the new form of auditor s report. The current report is outdated and its boilerplate text is no longer relevant in today s age of transparency. A simple agreed and approved is nowhere near enough. It gives the user of the financial statements little comfort and provides no insight for the wider public into the process leading up to an unqualified auditor s report. Compare it to an annual car service, where people also want to know what work the mechanic did. Knowing that gives a greater degree of comfort and also gives the mechanic a greater degree of credit in his work. It is a wrong to assume that it is only the relevance of the audit profession that benefits from this. In addition to the user, also the preparer of the financial statements is the big winner because of the assurance that its stakeholders obtain from the information reported. And they want plain speaking! PwC Annual Report 2013/2014 Sharing expertise in matters relevant to society GRI 109

110 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Cyber governance is on the boardroom agenda but is it high enough on the agenda? Recent incidents have made clear that cyber threats are very real in all sectors and not only for organisations that deal with financial or personal information. The upshot is that cyber security is now seen as a strategic issue and not simply an IT department issue. Despite this, the Cyber Governance survey published by PwC in July (with support from the National Cyber Security Centre) indicates that a significant number of board members have only a limited or very basic understanding of cyber threats and weaknesses within their own organisation - and therefore also only a limited understanding of the impact that a digital attack can have. Those who responded (primarily managing and supervisory directors) also acknowledged that managing and supervisory boards have little of the expertise now needed to manage innovation and risk in the digital environment. None felt themselves well prepared for the digital age. Another noteworthy conclusion was that almost none of them had had any cyber security training in the past 12 months. The PwC researchers believe that cyber security deserves much greater attention from the board. They see the digital world changing at a rapid pace, while many organisations are still sticking to traditional approaches to security and very many companies are simply unaware of the new risks arising when they share information with others. Which of your suppliers have access to information and data? And are your agreements with them up to date as regards what they do with this data? The publication, Paying Taxes, compares the tax regimes of 189 countries PwC publishes an annual report, jointly with the World Bank, entitled Paying Taxes. This report compares the tax burden and tax systems of 189 different countries from the perspective of the business taxpayer. This PwC survey compares not only the tax burden on business, but also the time that it costs businesses to comply with all of the related requirements and the number of times in a year that returns need to be filed with the tax authorities. The tax burden covered by the survey is not only the tax on profits, but also employer taxes and social charges, indirect taxation and levies such as real estate and environmental taxes. One of the conclusions the report draws is that the Netherlands is lagging behind other European countries when it comes to simplifying our tax regime and making it more effective. The Dutch tax burden came out of the report at 39.3% in 2012, businesses lost an average of some 123 hours each year to compliance and they paid tax at nine different points in time. PwC in the Netherlands has regularly called for greater simplification of the tax regime and, at the same time, for the reform necessary to reflect the increasing globalisation and digitalisation of the economy. PwC Annual Report 2013/2014 Sharing expertise in matters relevant to society GRI 110

111 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC PwC Annual Report 2013/2014 GRI 111

112 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Five-year summary of financial results 2013/ / / / /2010 Revenue Net revenue ( millions) Increase/decrease +1.2% -4.3% +4.3% -3.1% -9.4% Net revenue per person ( 000) Increase/decrease +7.2% -0.4% -0.3% +1.2% -5.6% External revenue per Line of Service ( millions) Assurance Tax & HRS Advisory Total / / / / /2010 Results Operating profit ( millions) Increase/decrease +24.7% +13.9% -20.2% -14.4% +3.8% Profit after tax ( millions) Increase/decrease +26.4% +16.9% -21.9% -14.9% +2.8% Operating profit per Line of Service ( millions) Assurance 50,7 38,8 37,4 51,8 59,3 Tax & HRS 43,8 39,0 34,5 37,1 42,6 Advisory 17,9 12,6 10,3 11,9 17,4 2013/ / / / /2010 Management fee, salary and emoluments Available for distribution to partners ( millions) Average partner management fee* ( 000) Average financing per shareholder at year-end ( 000) Staff bonuses ( millions) Average salary cost per FTE ( 000) Average bonus per FTE ( 000) ** * Payments are made from the management fee relating to items such as goodwill rights, pension contributions, social security and disability contributions and life insurance premiums. ** Following a partial switch from variable to fixed remuneration, the years 2011/2012 and thereafter are not wholly comparable with the previous years. PwC Annual Report Five-year summary of financial results GRI 112

113 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Scope of this Annual Report The information in this Annual Report relates to PwC the Netherlands. In other words, all information about our policy, strategy, procedures and systems, and about the associated indicators, relates to our own organisation. The indicators, therefore, also relate to PwC the Netherlands, except for the information relating to equal pay for men and women and the remuneration ratio, which relate only to the professional staff group and not to support staff. The indicators for client satisfaction relate, by definition, only to the professional staff group, and all HR indicators exclude trainees. Our PwC policies also impact third parties, and we have set these impacts out in our value creation process on page 20, though we have not yet measured them quantitatively. We are in the process of developing indicators, but are not yet in a position to be able to report on these (see also page 19). Basis of our integrated report Quality Integrity Independence Participation in the public debate Impact of our services on society Scope of the report PwC aims to differentiate itself through the high quality of its service. We alone are responsible for the quality we deliver. Our policies here are not limited to PwC, but also to third parties that we do business with. We have procedures in place for acceptance of new clients and for acceptance of engagements at existing clients, amongst other things to reject clients and engagements that involve (for instance) integrity risk. We request our larger suppliers to sign an undertaking that they do business in a manner that corresponds with ours. Although our integrity policies affect external parties, these policies are solely our responsibility. Auditors provide assurance on clients financial and non-financial information, so independence is critical for our practice. Our own policies for quality and risk management are vital to this and, to safeguard our independence, we are selective in who we work for. PwC aims to differentiate itself by delivering services with a social impact. This requires us to have a vision that we communicate through participation, in various different ways, in the public debate. For example, we actively and proactively communicate our views to the media and make information freely available by publishing reports. We expect our services to enhance the quality of financial and non-financial information generally and to help our clients to work more efficiently and effectively and improve their business processes by using our expertise and skills. This is how we aim to make our contribution to building trust in the markets (financial and otherwise). The tax burden of multinationals is also a key theme as regards the impact of our services on society as our advice affects the way our clients handle this. The pro bono services we offer to social enterprises and charitable organisations also has a direct impact on society. The social impact that we aim to achieve is entirely dependent on the quality we deliver. PwC Annual Report Scope of this Annual Report GRI 113

114 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Diversity Talent management Transparency Client satisfaction Innovation Physical and mental well-being Financial results We are convinced that our quality increases the more we are able to address issues, including societal issues, from different perspectives, so diversity is important PwC. Equal pay for men and women is a key theme within diversity and it is important to our organisation that men and women are rewarded only on the basis of their performance and competencies. The reporting here relates to PwC, though the impact on wider society is also significant. We see ourselves as a sort of educational institute that offers added value to society as people move into new careers. Although imposed to some extent by legislation and regulation this is also a choice that we have made ourselves in dialogue with our stakeholders. By setting the right example, we aim to emphasise the importance we place on transparency. After all, reporting is our core business. Client satisfaction is critical to our very existence, and we achieve this through the quality of our service delivery. Innovation is important to PwC. Our innovative capacity determines how far we are able to adapt our services to continue meeting the requirements of our clients and of society. Well-being has a significant effect on PwC and on our people. We want our people to be healthy, happy, at ease and feeling confident in themselves, both physically and mentally. We are treating well-being as a crucial element of our policies for quality. This refers to our own commercial and financial results. PwC Annual Report Reikwijdte van dit jaarbericht GRI 114

115 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC GRI table 4.0 NR ENG - GRI description Page Aspect Not included Scope* External Assurance General aspects covered by PwC s reporting, in accordance with the GRI 4.0 requirements G4-1 Statement from the most senior decision-maker about the relevance of sustainability to the organization and the organization s strategy for addressing sustainability. G4-2 Provide a description of key impacts, risks and opportunities. Strategy & analysis 4 Foreword from our Chairman 38, 41, 44, 51 Our strategy and achievements ('Taking the opportunities the market offers us' and 'Transforming our organisation'), Risk factors, Expectations for the future Organisatieprofiel G4-3 Report the name of the organization. 95 Legal structure of PwC the Netherlands G4-4 Report the primary brands, products, and services. 18, 20 PwC in the Netherlands, How we create value G4-5 Report the location of the organization s headquarters. 124 Acknowledgements G4-6 Report the number of countries where the organization operates, and names of countries where either the organization has significant operations or that are specifically relevant to the sustainability topics covered in the report. 18, 95 PwC in the Netherlands, Our legal structure G4-7 Report the nature of ownership and legal form. 95 Our legal structure G4-8 Report the markets served (including geographic breakdown, sectors served, and types of customers and beneficiaries). 18, 95 G4-9 Report the scale of the organisation. 7, 18, 108 PwC in the Netherlands, Our legal structure Key statistics, PwC in the Netherlands, Breakdown of our organisation 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 orkers and by gender. d. Report the total workforce by region and gender. e. Report whether a substantial portion of the organization s work is performed by workers who are legally recognized as self-employed, or by individuals other 108 Breakdown of our organisation 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). G4-11 Report the percentage of total employees covered by collective bargaining agreements. 0% G4-12 Describe the organization s supply chain. 20, 106 How we create value, Our sustainability policies G4-13 G4-14 Report any significant changes during the reporting period regarding the organization s size, structure, ownership, or it s supply chain. Report whether and how the precautionary approach or principle is addressed by the organization. Within scope Partially within scope Outside scope 19, 95 About the Report of the Board of Management, Our legal structure Not Applicable *All indicators relate to PwC NL, unless otherwise indicated in this table. PwC Annual Report GRI table 4.0 GRI 115

116 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC NR ENG - GRI description Page Aspect Not included Scope* External Assurance G4-15 G4-16 G4-17 G4-18 List externally developed economic, environmental and social charters, principles, or other initiatives to which the organization subscribes or which it endorses. List memberships of associations (such as industry associations) and national or international advocacy organization. a. List all entities included in the organization s consolidated financial statements or equivalent documents. b. Report whether any entity included in the organization s consolidated financial statements or equivalent documents is not covered by the report. a. Explain the process for defining the report content and the Aspect Boundaries. b. Explain how the organization has implemented the Reporting Principles for Defining Report Content Identified Material Aspects and Boundaries 62 19, 21-23, About the Report of the Board of Management Our strategy and achievements, ( Delivering the PwC Experience ) General notes to the financial statements About the Report of the Board of Management, Stakeholders and materiality, Scope of this Annual Report G4-19 List all the material Aspects identified in the process for defining report content Stakeholders and materiality G4-20 For each material Aspect, report the Aspect Boundary within the organization Scope of this Annual Report G4-21 For each material Aspect, report the Aspect Boundary outside the organization Scope of this Annual Report G4-22 G4-23 Report the effect of any restatements of information provided in previous reports, and the reasons for such restatements. Report significant changes from previous reporting periods in the Scope and Aspect Boundaries. 34, 107, Our strategy and achievements, Our sustainability policies, Five-year summary of financial results About the Report of the Board of Management Stakeholder Egagement G4-24 Provide a list of stakeholder groups engaged by the organization Stakeholders and materiality G4-25 Report the basis for identification and selection of stakeholders with whom to engage Stakeholders and materiality G4-26 Report the organization s approach to stakeholder engagement, including frequency of engagement by type and by stakeholder group, and an indication of whether any of the Stakeholders and materiality engagement was undertaken specifically as part of the report preparation process. G4-27 Report key topics and concerns that have been raised through stakeholder engagement, and how the organization 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 Stakeholders and materiality Reporting profile G4-28 Reporting period (such as fiscal or calendar year) for information provided. 19 About the Report of the Board of Management G4-29 Date of most recent previous report (if any). Not Applicable G4-30 Reporting cycle (such as annual, biennial). 19 About the Report of the Board of Management G4-31 Provide the contact point for questions regarding the report or its contents. 124 Acknowledgements G4-32 a. Report the in accordance option the organization has chosen. b. Report the GRI Content Index for the chosen option (see tables below). 19, 115 About the Report of the Board of Management, GRI table 4.0. Within scope Partially within scope Outside scope *All indicators relate to PwC NL, unless otherwise indicated in this table. PwC Annual Report GRI table 4.0 GRI 116

117 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC NR ENG - GRI description Page Aspect Not included Scope* External Assurance G4-33 a. Report the organization s policy and current practice with regard to seeking external assurance for the report. b. If not included in the assurance report accompanying the sustainability report, report the scope and basis of any external assurance provided. c. Report the relationship between the organization and the assurance providers. d. Report whether the highest governance body or senior executives are involved in seeking assurance for the organization s sustainability report. 19, 86-91, 97 About the Report of the Board of Management, Other information, Corporate governance G4-34 G4-35 G4-36 G4-37 Report the governance structure of the organization, including committees of the highest governance body. Identify any committees responsible for decision-making on economic, environmental and social impacts. Report the process for delegating authority for economic, environmental and social topics from the highest governance body to senior executives and other employees. Report whether the organization has appointed an executive-level position or positions with responsibility for economic, environmental and social topics, and whether post holders report directly to the highest governance body. Report processes for consultation between stakeholders and the highest governance body on economic, environmental and social topics. If consultation is delegated, describe to whom and any feedback processes to the highest governance body. G4-38 Report the composition of the highest governance body and its committees. G4-39 G4-40 G4-41 G4-42 G4-43 G4-44 G4-45 Report whether the Chair of the highest governance body is also an executive officer (and, if so, his or her function within the organization s management and the reasons for this arrangement). Report the nomination and selection processes for the highest governance body and its committees, and the criteria used for nominating and selecting highest governance body members. 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. Report the highest governance body s and senior executives roles in the development, approval, and updating of the organization s purpose, value or mission statements, strategies, policies, and goals related to economic, environmental and social impacts. Report the measures taken to develop and enhance the highest governance body s collective knowledge of economic, environmental and social topics. a. 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. b. 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 organizational practice. a. 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. b. 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. 47, 97 Governance Governance and remuneration, Corporate governance 47 Governance and remuneration 47 Governance and remuneration 21-23, 47 98, Stakeholders and materiality, Governance and remuneration Corporate governance 98, 100 Corporate governance Governance en beloning 47, , 98 Governance and remuneration, Our framework for quality and risk management Governance en beloning, Corporate Governance 47 Governance and remuneration 48, 97 23, 44, 105 Governance and remuneration, Corporate Governance Stakeholders and materiality, Risk factors, Our framework for quality and risk management Within scope Partially within scope Outside scope *All indicators relate to PwC NL, unless otherwise indicated in this table. PwC Annual Report GRI table 4.0 GRI 117

118 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC NR ENG - GRI description Page Aspect Not included Scope* External Assurance G4-46 G4-47 G4-48 Report the highest governance body s role in reviewing the effectiveness of the organization s risk management processes for economic, environmental and social topics. Report the frequency of the highest governance body s review of economic, environmental and social impacts, risks, and opportunities. Report the highest committee or position that formally reviews and approves the organization s sustainability report and ensures that all material aspects are covered. 23, 44, , 44, 105 G4-49 Report the process for communicating critical concerns to the highest governance body. 23, 47 G4-50 G4-51 G4-52 G4-53 G4-54 G4-55 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. a. Report the remuneration policies for the highest governance body and senior executives. b. Report how performance criteria in the remuneration policy relate to the highest governance body s and senior executives economic, environmental and social objectives. Report the process for determining remuneration. Report whether remuneration consultants are involved in determining remuneration and whether they are independent of management. Report any other relationships which the remuneration consultants have with the organization. Report how stakeholders views are sought and taken into account regarding remuneration, including the results of votes on remuneration policies and proposals, if applicable. Report the ratio of the annual total compensation for the organization 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. Report the ratio of percentage increase in annual total compensation for the organization s highestpaid 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. Stakeholders and materiality, Risk factors, Our framework for quality and risk management Stakeholders and materiality, Risk factors, Our framework for quality and risk management 97 Corporate governance Stakeholders and materiality, Governance and remuneration Stakeholders and materiality 48 Governance and remuneration Governance and remuneration 49 Governance and remuneration 49 Governance and remuneration 49 Governance and remuneration Only professional staff, not support or temporary staff and excluding partners as they are not employees. Only professional staff, not support or temporary staff and excluding partners as they are not employees. G4-56 G4-57 G4-58 Describe the organization s values, principles, standards and norms of behavior such as codes of conduct and codes of ethics. Report the internal and external mechanisms for seeking advice on ethical and lawful behavior, and matters related to organizational integrity, such as helplines or advice lines. Report the internal and external mechanisms for reporting concerns about unethical or unlawful behavior, and matters related to organizational integrity, such as escalation through line management, whistleblowing mechanisms or hotlines. Ethics and Integrity 20, 24-25, 30, 45, 49, , , 102 How we create value, Stakeholders and materiality, Our strategy and achievements ('Building on the quality of our service delivery'), Governance and remuneration, Risk factors, Code of Conduct and complaints procedure Governance and remuneration, Code of Conduct and complaints procedure Governance and remuneration, Code of Conduct and complaints procedure Within scope Partially within scope Outside scope *All indicators relate to PwC NL, unless otherwise indicated in this table. PwC Annual Report GRI table 4.0 GRI 118

119 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC NR ENG - GRI description Page Aspect Not included Scope* External Assurance Material Aspects covered more extensively by PwC s reporting in order to continue to monitor progress, in accordance with GRI 4.0 Disclosures on Management Approach (DMA) Economic performance DMA G4-EC1 G4-EC2 G4-EC3 G4-EC4 a. Report why the Aspect is material. Report the impacts that make this Aspect material. b. Report how the organization manages the material Aspect or its impacts. c. Report the evaluation of the management approach. Report the direct economic value generated and distributed Report risks and opportunities posed by climate change that have the potential to generate substantive changes in operations, revenue or expenditure. Where the plan s liabilities are met by the organization s general resources, report the estimated value of those liabilities. Report the total monetary value of financial assistance received by the organization from governments during the reporting period , 25, 37-38, 45, 114 7, 37-40, 112 Stakeholders and materiality (see also dilemmas), Our strategy and achievements ('Taking the opportunities the market offers us'); Risk factors, Scope of this Annual Report Key statistics, Our strategy and achievements ('Taking the opportunities the market offers us'), Five-year summary of financial results 69 Financial statements Not material Not applicable DMA G4-LA5 G4-LA6 a. Report why the Aspect is material. Report the impacts that make this Aspect material. b. Report how the organization manages the material Aspect or its impacts. c. Report the evaluation of the management approach. Percentage of total workforce represented in formal joint management-worker health and safety committees that help monitor and advise on occupational health and safety programs. Type of injury and rates injury, occupational diseases, lost days and absenteeism and total number of work-related fatalities, by region and by gender. Occupational Health 21-23, 31, Stakeholders and materiality; Our strategy and achievements ( Building on the quality of our service delivery ), Scope of this Annual Report Our strategy and achievements ( Building on the quality of our service delivery ) Not applicable G4-LA7 Workers with high incidence or high risk of diseases related tot their occupation. Not material G4-LA8 Health and safety topics covered in formal agreements with trade unions. Not applicable DMA a. Report why the Aspect is material. Report the impacts that make this Aspect material. b. Report how the organization manages the material Aspect or its impacts. c. Report the evaluation of the management approach. Training and Education 21-23, 33-34, 44, 114 G4-LA9 Average hours of training per year per employee by gender, and by employee category. 8, 34 G4-LA10 G4-LA11 Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings. Percentage of employees receiving regular performance and career development reviews, by gender and by employee category. Within scope Partially within scope Outside scope 31, 34 Stakeholders and materiality, Our strategy and achievements (Delivering PwC Experience'), Risk factors, Scope of this Annual Report Key statistics, Our strategy and achievements ('Delivering the PwC Experience') Our strategy and achievements ('Building on the quality of our service delivery' and ''Delivering the PwC Experience' 49 Governance and remuneration PwC NL - excluding trainees PwC NL - excluding trainees PwC NL - excluding trainees *All indicators relate to PwC NL, unless otherwise indicated in this table. PwC Annual Report GRI table 4.0 GRI 119

120 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC NR ENG - GRI description Page Aspect Not included Scope* External Assurance Diversity and Equal Opportunity DMA G4-LA12 a. Report why the Aspect is material. Report the impacts that make this Aspect material. b. Report how the organization manages the material Aspect or its impacts. c. Report the evaluation of the management approach. Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership, and other indicators of diversity , 35, 48, 114 7, 48, Stakeholders and materiality, Our strategy and achievements ('Delivering the PwC Experience '), Governance and remuneration, Scope of this Annual Report Key statistics, Governance and remuneration, Corporate governance PwC NL - excluding trainees DMA G4-LA13 a. Report why the Aspect is material. Report the impacts that make this Aspect material. b. Report how the organization manages the material Aspect or its impacts. c. Report the evaluation of the management approach. Ratio of basic salary and remuneration of women to men by employee category, by significant locations of operation. Equal Remuneration for Women and Men 21-23, 35, Stakeholders and materiality (part of Diversity), Our strategy and achievements ('Delivering the PwC Experience'), Scope of this Annual Report (part of Diversity) Our strategy and achievements ('Delivering the PwC Experience' Only professional staff, not support or temporary staff and excluding partners as they are not employees. Bonuses not included in this calculation. DMA G4-SO3 a. Report why the Aspect is material. Report the impacts that make this Aspect material. b. Report how the organization manages the material Aspect or its impacts. c. Report the evaluation of the management approach. Total number and percentage of operations assessed for risks related to corruption and the significant risks identified. Anti-Corruption 21-23, 29-30, 45, 49, , 113 G4-SO4 Communication and training on anti-corruption policies and procedures. 30, 102 G4-SO5 Confirmed incidents of corruption and actions taken. 50, Stakeholders and materiality (part of Integrity), Our strategy and achievements 'Building on the quality of our service delivery'), Risk factors, Governance and remuneration, Our framework for quality and risk management (see also under 'Other measures ), Scope of this Annual Report (part of Integrity) Our framework for quality and risk management Our strategy and achievements ('Building on the quality of our service delivery'), Code of Conduct and complaints procedure Governance and remuneration, Code of Conduct and complaints procedure Product and Service Labeling DMA G4-PR3 a. Report why the Aspect is material. Report the impacts that make this Aspect material. b. Report how the organization manages the material Aspect or its impacts. c. Report the evaluation of the management approach. Type of product and service information required by the organization s procedures for product and service information and labeling, and percentage of significant product and service categories subject to such information equirements , 33, 45-46, 114 Stakeholders and materiality (part of Client satisfaction), Our strategy and achievements ( Delivering the PwC Experience), Risk factors, Scope of this Annual Report (part of Client satisfaction) Not material Within scope Partially within scope Outside scope *All indicators relate to PwC NL, unless otherwise indicated in this table. PwC Annual Report GRI table 4.0 GRI 120

121 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC NR ENG - GRI description Page Aspect Not included Scope* External Assurance 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. G4-PR5 Results of surveys measuring customer satisfaction. 7, 33 Key statistics, Our strategy and achievements ( Delivering the PwC Experience ) Not material Professional Services DMA G4-PR9 a. Report why the Aspect is material. Report the impacts that make this Aspect material. b. Report how the organization manages the material Aspect or its impacts. c. Report the evaluation of the management approach. Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services , 27-28, 45, 49, , Compliance Stakeholders and materiality (part of Quality and Integrity), Our strategy ('Building on the quality of our service delivery' ), Risk factors, Governance and remuneration, Our framework for quality and risk management, Scope of this Annual Report (part of Quality and Integrity) Our strategy and achievements ('Building on the quality of our service delivery') Aspects that are less material, but regarding which PwC voluntarily reports a number of GRI indicators in order to continue to monitor progress G4-LA1 G4-LA2 Total number and rates of new employee hires and employee turnover by age group, gender and region. Benefits provided to full-time employees that are not provided to temporary or part- time employees, by significant locations of operation. 8, 18, 30, 35, 108 G4-LA3 Return to work and retention rates after parental leave, by gender. 35 Employment Key statistics, PwC in the Netherlands, Our strategy and achievements ( Building on the quality of our service delivery and Delivering the PwC Experience ), Breakdown of our organisation Our strategy and achievements ( Delivering the PwC Experience ) Not applicable Local Communities G4-SO1 Percentage of operations with implemented local community engagement, impact assesments and development programs. 8, 36, Key statistics, Our strategy and achievements ( Delivering the PwC Experience ), Interview: We never contract in external expertise No percentage - qualitative description Privacy G4-PR8 Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data. 28 Our strategy and achievements ( Building on the quality of our service delivery ) Energy G4-EN3 Energy consumption within the organization Our sustainability policies PwC NL - All offices G4-EN6 Reduction of energy consumption Our sustainability policies PwC NL - All offices Emissions G4-EN15 Direct greenhouse gas (GHG) emissions (Scope 1). 107 Our sustainability policies Within scope Partially within scope Outside scope PwC NL - All offices: Air travel (PwC NL - all), Cars (all who have a lease car, excluding partners), Train travel (all) *All indicators relate to PwC NL, unless otherwise indicated in this table. PwC Annual Report GRI table 4.0 GRI 121

122 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC NR ENG - GRI description Page Aspect Not included Scope* External Assurance G4-EN16 Energy indirect greenhouse gas (GHG) emissions (Scope 2). 107 Our sustainability policies G4-EN17 Other indirect greenhouse gas (GHG) emissions (Scope 3). 107 We report no Scope 3 emissions PwC NL - All offices: Air travel (PwC NL - all), Cars (all who have a lease car, excluding partners), Train travel (all) G4-EN19 Reduction of greenhouse gas (GHG) emissions. 107 Our sustainability policies PwC NL - All offices G4-EN23 Total weight of waste by type and disposal method. 107 Our sustainability policies (only paper) PwC NL - All offices Transport G4-EN30 Significant environmental impacts of transporting products and other goods and materials for the organization s operations, and transporting members of the workforce Our sustainability policies PwC NL - All offices: Air travel (PwC NL - all), Cars (all who have a lease car, excluding partners), Train travel (all) Not applicable Not applicable Not applicable Not applicable Other material aspects that PwC reports which are not part of the GRI-standard Number of files reviewed 27 Our strategy and achievements ('Building on the quality of our service delivery') Mobility numbers 42 Our strategy and achievements ('Transforming our organisation') Results of the People Survey 8, 32 Key statistics, Our strategy and achievements ('Delivering the PwC Experience) Participants in the management development programmes 32 Our strategy and achievements ('Delivering the PwC Experience) Professional Services Professional Services PwC NL From manager level Within scope Partially within scope Outside scope *All indicators relate to PwC NL, unless otherwise indicated in this table. PwC Annual Report GRI table 4.0 GRI 122

123 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Glossary AFM BCC BMG&D BU The Netherlands Authority for the Financial Markets Business Conduct Committee Evaluation, Mapping, Goal setting & Development Business unit L&D LOB LoS MVO Learning & Development Local Oversight Board Line of Service Responsible Business Conduct (Maatschappelijk Verantwoord Ondernemen ) CAD CEO CFO Client selectivity Code of Conduct COO Compliance Compliance Officer CR CQ Index Country Admissions Committee Chief Executive Officer Chief Financial Officer Acceptance and continuance of client relationships and engagements The code of conduct adopted by PwC Chief Operating Officer Compliance with the applicable requirements Officer responsible for the supervision and monitoring of compliance with the applicable requirements Corporate responsibility Accreditation for the measurement, analysis and reporting of patient experiences in the healthcare sector NBA The Netherlands Institute of Chartered Accountants ( Nederlandse Beroepsorganisatie van Accountants ) PIE Public Interest Entity ( OOB - Organisatie van Openbaar Belang ) PAIS Pensions, Actuarial & Insurance Services B.V. PC Private Companies PE Private equity PS Public Sector PwC PricewaterhouseCoopers PwC Europe Collaboration arrangement between the PwC member firms in Germany, the Netherlands, Austria and Belgium PwCIL PricewaterhouseCoopers International Limited EU&M ECR FS Energy, Utilities & Mining Engagement Compliance Review Financial Services Q&R R&C BoM Quality & Risk Retail & Consumers Board of management ( Rvb - Raad van bestuur ) GRI HC HRS IAD IIRC IP KPI Global Reporting Initiative Human Capital Human Resource Services Internal Audit Department International Integrated Reporting Council Industrial products Key Performance Indicator Stakeholder Stakeholder Sustainability Sustainability T&L Transport & Logistics TMT Technology, Media and Telecom Wft The Act on Financial Supervision ( Wet op het financieel toezicht ) Wta The Audit Firms Supervision Act ( Wet toezicht accountantsorganisaties ) PwC Annual Report Glossary GRI 123

124 Contents Foreword Key statistics Report of the LOB Report of the Board of Management Financial statements Information about PwC Acknowledgements PwC Annual Report 2013/2014 Board of Management Thomas R. Malthusstraat JR Amsterdam Editorial address Concept, design and production Photography For more information PricewaterhouseCoopers B.V. Marketing department PO box 90351, 1006 BJ Amsterdam +31 (0) feiten-en-cijfers.jhtml Marketing department Global brandsite PwC Bastiaan Heus Meint Waterlander Spokesperson for the Board of Management +31 (0) [email protected] 2014 PricewaterhouseCoopers B.V. (KvK ). All rights reserved PwC refers to the Dutch firm and can sometimes refer to the PwC network. Each affiliated firm is a separate legal entity. For more information, go to The original Annual Report was prepared in the Dutch language. This documentation is a translation of the original Annual Report. If there are differences between the English and the Dutch versions, the latter shall prevail. PwC Annual Report 2013/2014 Acknowledgements GRI 124