Our application of materiality We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower
materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:
MATERIALITY
2024 £m 2023 £m Parent Association financial statements
Group financial statements
2024 £m
2023 £m
Materiality Basis for determining materiality
Total Assets - £27.5m Revenue - £11.0m
Total Assets - £25.7m Revenue - £10.9m
7.6
6.8
Total Assets - Based on 1.5% of Association total assets. Revenue - Based on 1.75% of Association revenue
Total Assets - Based on 1.5% of Group total assets. Revenue - Based on 1.75% of Group revenue
We considered this to be the area of financial statements with the greatest interest to the principal users and the area with the greatest impact on investor and lender decisions. 7% of adjusted operating surplus*
We considered this to be the area of financial statements with the greatest interest to the principal users and the area with the greatest impact on investor and lender decisions. 7% of adjusted operating surplus*
The materiality benchmark in the previous year was adjusted operating surplus. We have reflected on our approach to materiality and concluded that for housing associations key stakeholders are primarily focused on the value of the stable, rented asset portfolio, as their debt is secured on these assets. Total assets is therefore considered to be the appropriate benchmark for determining overall materiality. However, we also determined that for other classes of transactions and balances in income and expenditure
The materiality benchmark in the previous year was adjusted operating surplus. We have reflected on our approach to materiality and concluded that for housing associations key stakeholders are primarily focused on the value of the stable, rented asset portfolio, as their debt is secured on these assets. Total assets is therefore considered to be the appropriate benchmark for determining overall materiality. However, we also determined that for other classes of transactions and balances in income and expenditure
Rationale for the benchmark applied
recognised within the statement of comprehensive income that are used in covenant calculations and sector benchmarking metrics, as well as other financial statement areas such as property for sale stock that are subject to greater scrutiny by key stakeholders, a misstatement of less than materiality for the financial statements as a whole could influence the economic decisions of the users of the financial statements. As a result, we applied a specific materiality calculated using revenue as the benchmark to these balances and transactions.Revenue is considered to be a more stable metric to use for this purpose than adjusted operating surplus and is also more transparent to the users of the financial statements.
recognised within the statement of comprehensive income that are used in covenant calculations and sector benchmarking metrics, as well as other financial statement areas such as property for sale stock that are subject to greater scrutiny by key stakeholders, a misstatement of less than materiality for the financial statements as a whole could influence the economic decisions of the users of the financial statements. As a result, we applied a specific materiality calculated using revenue as the benchmark to these balances and transactions.Revenue is considered to be a more stable metric to use for this purpose than adjusted operating surplus and is also more transparent to the users of the financial statements.
Performance materiality Basis for determining performance materiality
Total Assets - £20.6m Revenue - £8.3m
Total Assets - £19.2m Revenue - £8.2m
5.7
5.1
75% (2023: 75%) of materiality This was considered appropriate based on audit knowledge of the control environment and historic misstatement levels.
75% (2023: 75%) of materiality This was considered appropriate based on audit knowledge of the control environment, historic misstatement levels, and given the principal activities of the Group are contained in the parent association and one other component which minimises the risk of additional unadjusted misstatements across a number of components.
*Operating surplus adjusted for depreciation, amortisation and the net profit/loss on non-outright sale properties in line with the terms defined within the entities’ lending covenants
60 Anchor Hanover Group Annual Report & Financial Statements 2024
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