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"value": "1 General information J Sainsbury plc is a public limited company (the \u2018Company\u2019) incorporated in the United Kingdom, whose shares are publicly traded on the London Stock Exchange. The Company is domiciled in the United Kingdom and its registered address is 33 Holborn, London EC1N 2HT, United Kingdom. The financial year represents the 52 weeks to 4 March 2023 (prior financial year: 52 weeks to 5 March 2022). The consolidated financial statements for the 52 weeks to 4 March 2023 comprise the financial statements of the Company and its subsidiaries (the \u2018Group\u2019) and the Group\u2019s share of the post-tax results of its joint ventures and associates. The Group\u2019s principal activities are Food, General Merchandise and Clothing retailing and Financial Services. ",
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"value": "1 General information J Sainsbury plc is a public limited company (the \u2018Company\u2019) incorporated in the United Kingdom, whose shares are publicly traded on the London Stock Exchange. The Company is domiciled in the United Kingdom and its registered address is 33 Holborn, London EC1N 2HT, United Kingdom. The financial year represents the 52 weeks to 4 March 2023 (prior financial year: 52 weeks to 5 March 2022). The consolidated financial statements for the 52 weeks to 4 March 2023 comprise the financial statements of the Company and its subsidiaries (the \u2018Group\u2019) and the Group\u2019s share of the post-tax results of its joint ventures and associates. The Group\u2019s principal activities are Food, General Merchandise and Clothing retailing and Financial Services. 2 Significant accounting policies 2.1 Basis of preparation The Group\u2019s financial statements have been prepared in accordance with UK-adopted international accounting standards. The financial statements are presented in pound sterling, rounded to the nearest million (\u2018\u00a3m\u2019) unless otherwise stated. They have been prepared under the historical cost convention, except for derivative financial instruments, defined benefit pension scheme assets and financial assets at fair value through other comprehensive income. Sainsbury\u2019s Bank plc and its subsidiaries have been consolidated for the twelve months to 28 February 2023 being the Bank\u2019s year-end date (prior financial year: 28 February 2022). There have been no significant transactions or events that occurred between this date and the Group\u2019s balance sheet date, and therefore no adjustments have been made to reflect the difference in year-end dates. Significant accounting policies have been included in the relevant notes to which the policies relate, and those relating to the financial statements as a whole can be read further below. Unless otherwise stated, significant accounting policies have been applied consistently to all periods presented in the financial statements. Impairment of financial assets disclosure In accordance with IAS 1 Presentation of Financial Statements, Impairment loss on financial assets has been separately disclosed within the Consolidated income statement. Previously, this amount was included within Cost of sales, which has therefore been restated from \u00a327,538 million to \u00a327,523 million before non-underlying items; and from \u00a327,529 million to \u00a327,514 million in total. There is no impact to Gross profit, Operating profit or Profit before tax. Climate change considerations In preparing the Group\u2019s financial statements, consideration has been given to the impact of both physical and transition climate change risks, as described within the Task Force on Climate-Related Financial Disclosures section on page 18, and how these impact the financial statements. The Group has implemented processes to identify, assess and manage these risks, including scenario analysis and stress testing to understand the potential financial impact on our operations and assets. We have also considered the potential impact of policy, technology and market changes that are being developed in response to climate change, and their interdependence on each other. While it is not believed that these climate change risks have a material impact on the Group\u2019s financial statements, we recognise that the uncertainty and complexity of these issues may make it challenging to fully capture their potential impact. Our ongoing assessment of these risks will be included in future financial statements as they become clearer, taking into account the requirements of UK adopted international accounting standards. We also continue to monitor and assess the regulatory environment and any new standards that may be developed in the future. Further narrative disclosure has been provided in the following disclosure notes: \u2014 Going Concern \u2013 note 2.2 \u2014 Significant accounting judgements, estimates and assumptions \u2013 note 4 \u2014 Property, plant and equipment \u2013 note 14 \u2014 Impairment of non-financial assets \u2013 note 17 \u2014 Provisions \u2013 note 25 \u2014 Retirement benefit obligations \u2013 note 35 The policy, technology and market changes in response to climate change are still developing, and these are interdependent upon each other, and consequently the financial statements cannot capture all possible future outcomes as these are not yet known. The degree of certainty of these changes may also mean that they cannot be taken into account when determining asset and liability valuations and the timing of future cash flows under the requirements of UK adopted international accounting standards. 2.2 Going concern The Directors are satisfied that the Group has sufficient resources to continue in operation for a period of at least 12 months from the date of approval. Accordingly, they continue to adopt the going concern basis in preparing the financial statements. The assessment period for the purposes of considering going concern is the 12 months to 26 April 2024. In assessing the Group\u2019s ability to continue as a going concern, the Directors have considered the Group\u2019s most recent corporate planning and budgeting processes. This includes an annual review which considers profitability, the Group\u2019s cash flows, committed funding and liquidity positions and forecasted future funding requirements over three years, with a further two years of indicative movements. The Group manages its financing by diversifying funding sources, structuring core borrowings with phased maturities to manage refinancing risk and maintaining sufficient levels of standby liquidity via the Revolving Credit Facility. This seeks to minimise liquidity risk by maintaining a suitable level of undrawn additional funding capacity. The Group successfully reduced net debt over the past year as part of the continued focus on deleveraging. Furthermore, the committed Revolving Credit Facility, which enables the Group to maintain sufficient levels of contingent funding, has been successfully refinanced and right-sized during the year with a new \u00a31,000 million facility comprising two \u00a3500 million tranches. Tranche A has a final maturity of December 2026 and Tranche B has a final maturity of December 2027. As at 4 March 2023, the Revolving Credit Facility was undrawn. In addition, the Group successfully arranged a \u00a3575 million committed term loan facility with maturity of March 2026 in order to part fund the acquisition of a property portfolio (refer note 33). In assessing going concern, scenarios in relation to the Group\u2019s principal risks have been considered in line with those disclosed in the viability statement on page 58 by overlaying them into the corporate plan and assessing the impact on cash flows, net debt, funding headroom and financial covenants. These severe but plausible scenarios included modelling inflationary pressures on both food margins and general recession-related risks, the impact of any regulatory fines, and the failure to deliver planned cost savings. In performing the above analysis, the Directors have made certain assumptions around the availability and effectiveness of the mitigating actions available to the Group. These include reducing any non-essential capital expenditure and operating expenditure on projects, bonuses and dividend payments. The Group\u2019s most recent corporate planning and budgeting processes includes assumed cashflows to address climate change risks, including costs associated with initiatives in place as part of the Plan for Better commitment which include reducing environmental impacts and meeting customer expectations in this area, notably through reducing packaging and reducing energy usage across the estate. Climate-related risks do not result in any material uncertainties affecting the Group\u2019s ability to continue as a going concern. As a consequence of the work performed, the Directors considered it appropriate to adopt the going concern basis in preparing the Financial Statements with no material uncertainties to disclose. Notes to the consolidated financial statements 2.3 Basis of consolidation a) Subsidiaries Subsidiaries are all entities, including structured entities (see below) over which the Group has control. This is when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The results of subsidiaries are included in the income statement from the date of acquisition or, in the case of disposals, up to the effective date of disposal. Intercompany transactions and balances between Group companies are eliminated upon consolidation. Sainsbury\u2019s Property Scottish Partnership, Sainsbury\u2019s Property Scottish Limited Partnership, Sainsbury\u2019s Thistle Scottish Limited Partnership and Nectar 360 Services LLP, are partnerships which are fully consolidated into these Group accounts. The Group has taken advantage of the exemption conferred by Regulation 7 of the Partnerships (\u2018Accounts\u2019) Regulations 2008 and has therefore not appended the accounts of these qualifying partnerships to these accounts. Significant judgement \u2013 Consolidation of structured entities Sainsbury\u2019s Thistle Scottish Limited Partnership (\u201cthe Partnership\u201d) is a structured entity which the Group fully consolidates. A structured entity is one in which the Group does not hold the majority interest but for which management has concluded that voting rights are not the dominant factor in deciding who controls the entity. The Partnership, in which both the Group and Pension Scheme Trustee hold an interest, was established following the 2018 triennial valuation of the Group\u2019s defined benefit scheme. The Group has determined that the relevant activities of the Partnership are the funding of the Scheme and whether the funding targets have been met. Furthermore, a general partner wholly owned by the Group has exclusive responsibility for the management and control of the Partnership and sole authority to exercise the Partnership\u2019s rights. This includes the ability to make additional contributions to the Scheme such that the funding targets are met. As the Group can direct the Partnership\u2019s relevant activities and affect its returns (through reaching the Scheme\u2019s funding targets), it has been concluded that the Group controls the Partnership, despite not having a majority interest. It is therefore consolidated in the Group accounts. Further information is included in note 35. b) Joint ventures and associates The Group applies IFRS 11 to all joint arrangements. Under IFRS 11, investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Group has assessed the nature of its joint arrangements and determined them to be joint ventures. Associates are entities over which the Group has significant influence but not control. Investments in joint ventures and associates are carried in the Group balance sheet at historical cost plus post-acquisition changes in the Group\u2019s share of net assets of the entity, less any provision for impairment. Where the Group transacts with a joint venture or associate, profits and losses are eliminated to the extent of the Group\u2019s interest in the joint venture or associate. A full list of the Group\u2019s joint ventures is included in note 41. Joint ventures with a different year-end date to the Group are reported to include the results up to 28 February 2023, the nearest month-end to the Group\u2019s year-end. Adjustments are made for the effects of significant transactions or events that occurred between 28 February and the Group\u2019s balance sheet date. No joint venture arrangements are considered significant to the Group. c) Foreign currencies The consolidated financial statements are presented in pound sterling, which is the ultimate parent company\u2019s functional currency. Foreign operations The Group has operations in Asia that source and purchase certain general merchandise and clothing inventory. In addition the Group has a trading entity in Ireland. On consolidation, assets and liabilities of foreign operations are translated into pound sterling at year-end exchange rates. The results of foreign operations are translated into pound sterling at average rates of exchange for the year. Exchange differences arising are recognised in the Group statement of comprehensive income/(loss) and are included in the Group\u2019s translation reserve. Foreign currency transactions Transactions denominated in foreign currencies are translated at the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. 2.4 Amendments to published standards Effective for the Group and Company in these financial statements: The Group has considered the following amendments to published standards that are effective for the Group for the financial year beginning 6 March 2022 and concluded that they are either not relevant to the Group or that they do not have a significant impact on the Group\u2019s financial statements other than disclosures. \u2014 Amendments to IFRS 3 \u2018Business Combinations\u2019 \u2013 Reference to the Conceptual Framework \u2014 Amendments to IAS 16 \u2018Property, Plant and Equipment\u2019 \u2013 Proceeds before Intended Use \u2014 Amendments to IAS 37 \u2018Provisions, Contingent Assets and Contingent Liabilities\u2019 \u2013 Onerous Contracts \u2013 Costs of Fulfilling a Contract \u2014 Amendments to IFRS 1 \u2018First-time Adoption of International Financial Reporting Standards\u2019 \u2013 Subsidiary as a first-time adopter \u2014 Amendments to IFRS 9 \u2018Financial Instruments\u2019 \u2013 Fees in the \u201910 per cent\u2019 test for derecognition of financial liabilities \u2014 Amendments to IAS 41 \u2018Agriculture\u2019 \u2013 Taxation in fair value measurements The accounting policies have remained unchanged from those disclosed in the Annual Report for the year ended 5 March 2022. Standards and revisions effective for future periods: The following standards and revisions will be effective for future periods: \u2014 Amendments to IAS 1 \u2018Presentation of Financial Statements\u2019 on the classification of liabilities as current or non-current \u2014 Amendments to IAS 1 \u2018Presentation of Financial Statements\u2019 and IFRS Practice Statement 2 \u2018Making Materiality Judgements\u2019 on the disclosure of accounting policies \u2014 Amendments to IAS 8 \u2018Accounting Policies, Changes in Accounting Estimates and Errors\u2019 on the definition of accounting estimates \u2014 Amendments to IAS 12 \u2018Income Taxes\u2019 on Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction \u2014 IFRS 17 \u2018Insurance Contracts\u2019 \u2014 Amendments to IFRS 16 \u2018Leases\u2019 on Lease Liability in a Sale and Leaseback \u2014 Amendments to IAS 1 \u2018Presentation of Financial Statements\u2019 on Non-current Liabilities with Covenants The Group has considered the impact of the remaining above standards and revisions and have concluded that they will not have a significant impact on the Group\u2019s financial statements. 2 Significant accounting policies continued 3 Alternative Performance Measures (APMs) In the reporting of financial information, the Directors use various APMs. These APMs should be considered in addition to, and are not intended to be a substitute for, IFRS measurements. As they are not defined by International Financial Reporting Standards, they may not be directly comparable with other companies\u2019 APMs. The Directors believe that these APMs provide additional useful information for understanding the financial performance and health of the Group. They are also used to enhance the comparability of information between reporting periods (such as like-for-like sales and underlying profit) by adjusting for non-recurring factors which affect IFRS measures, and to aid users in understanding the Group\u2019s performance. Consequently, APMs are used by the Directors and management for performance analysis, planning, reporting and incentive setting purposes. The APMs used by the Group are detailed on pages 219 to 223 of this report. This includes further information on the definition, purpose and reconciliation to the closest IFRS measure. All APMs relate to the current and comparative periods and are consistent with those used previously. There have been no changes to APMs in the year. 4 Significant accounting judgements, estimates and assumptions The preparation of financial statements requires the use of judgements, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Those which are significant to the Group are discussed separately below: Judgements In the process of applying the Group\u2019s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the consolidated financial statements: \u2014 Consolidation of structured entities \u2013 refer to note 2.3 \u2014 Non-underlying items \u2013 refer to note 5 \u2014 Aggregation of operating segments \u2013 refer to note 7 \u2014 Lease term \u2013 refer to note 15 Sources of estimation uncertainty The areas where estimates and assumptions are significant to the financial statements are as listed below. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. \u2014 Nectar accounting (breakage estimates) \u2013 refer to note 6 \u2014 Lease liabilities (derivation of discount rates) \u2013 refer to note 15 \u2014 Impairment of non-financial assets \u2013 refer to note 17 \u2014 Provisions \u2013 refer to note 25 \u2014 Impairment of financial assets \u2013 refer to note 28 \u2014 Post-employment benefits (assets and liabilities) \u2013 refer to note 35 In assessing the Group\u2019s judgements and sources of estimation uncertainty, consideration has been given to the impact of climate change risk on these. Aside from impairment of non-financial assets (refer to note 17) and post-employment benefits (refer to note 35), climate change risks do not have any impacts on the Group\u2019s judgements or sources of estimation uncertainty. 5 Profit before non-underlying items In order to provide shareholders with additional insight into the year-on-year performance of the business, an adjusted measure of profit (underlying profit before tax) is provided to supplement the reported IFRS numbers, which reflects how the business measures performance internally. This adjusted measure excludes items recognised in reported profit or loss before tax which, if included, could distort comparability between periods. Determining which items are to be adjusted requires judgement, in which the Group considers items which are significant either by virtue of their size and/or nature, or that are non-recurring. The same assessment is applied consistently to any reversals of prior non-underlying items. Underlying profit is not an IFRS measure and therefore not directly comparable to other companies. Below highlights the grouping in which non-underlying items have been allocated and provides further detail on why such items have been recognised within non-underlying items. Cost of sales \u00a3m Administrative expenses \u00a3m Other income \u00a3m Net finance income/ (costs) \u00a3m Total adjustments before tax \u00a3m Tax \u00a3m Total adjustments \u00a3m Income recognised in relation to legal disputes \u2013 \u2013 30 \u2013 30 (6) 24 Restructuring and impairment Restructuring programmes (103) (14) 11 \u2013 (106) 7 (99) Impairment of non-financial assets (281) \u2013 \u2013 \u2013 (281) 38 (243) Total restructuring and impairment (384) (14) 11 \u2013 (387) 45 (342) Property, finance, pension and acquisition adjustments ATM business rates reimbursement 3 \u2013 \u2013 \u2013 3 (1) 2 Property related transactions (3) (3) (3) \u2013 (9) 2 (7) Non-underlying finance and fair value movements (29) \u2013 \u2013 (9) (38) 7 (31) IAS 19 pension income \u2013 2 \u2013 56 58 (11) 47 Acquisition adjustments \u2013 (20) \u2013 \u2013 (20) 4 (16) Total property, finance, pension and acquisition adjustments (29) (21) (3) 47 (6) 1 (5) Tax adjustments Over provision in prior years \u2013 \u2013 \u2013 \u2013 \u2013 2 2 Difference due to change in applicable rate of deferred tax \u2013 \u2013 \u2013 \u2013 \u2013 (5) (5) Total adjustments (413) (35) 38 47 (363) 37 (326) Income recognised in relation to legal disputes In the prior year, agreements were reached in relation to overcharges from payment card processing fees, which largely reflect inter-bank \u201cinterchange fees\u201d. This led to net income of \u00a3167 million being recognised. During the current period a further agreement has been reached resulting in net income of \u00a330 million being recognised. Net cash of \u00a330 million was received during the year. Restructuring programmes In the year ended 6 March 2021, the Group announced a restructuring programme to accelerate the structural integration of Sainsbury\u2019s and Argos and further simplify the Argos business; create a new supply chain and logistics operating model, moving to a single integrated supply chain and logistics network across Sainsbury\u2019s and Argos; and further rationalise/repurpose the Group\u2019s supermarkets and convenience estate. The programme also considered the Group\u2019s Store Support Centre ways of working. The programme is a multi-year activity and has continued into the current year. Total cumulative costs to 4 March 2023 are \u00a3(746) million split between \u00a3(640) million in the prior years and \u00a3(106) million in the current period as detailed in the table below. Total expected costs are still in the range of \u00a3900 million to \u00a31 billion to March 2024, with the majority in the period to March 2024. (Costs)/gains recognised in the current year are as follows: 52 weeks to 4 March 2023 \u00a3m 52 weeks to 5 March 2022 \u00a3m Write downs of property, plant and equipment (a) (8) (6) Write downs of leased assets (a) (21) (3) Write downs of intangible assets (5) \u2013 Closure provisions (b) 1 (24) Accelerated depreciation of assets (c) (20) (33) Redundancy provisions (d) (54) (40) Consultancy costs (12) (18) Gain on lease terminations (e) 2 9 Property profits (f) 11 12 Recognition of sub lease debtor \u2013 11 Total restructuring costs (106) (92) a) Write down of assets associated with Argos stores and IT assets as a result of the overall restructuring programme to accelerate the structural integration of Sainsbury\u2019s and Argos and further simplify the Argos business. b) Closure provisions relate to onerous contract costs, dilapidations and strip out costs on leased sites that have been identified for closure. Upon initial recognition of closure provisions, management uses its best estimates of the relevant costs to be incurred as well as expected closure dates. Business rates on leased property where the Group no longer operates from are recognised in the period they are incurred. The current year includes amounts reversed in relation to sites no longer being exited as part of the programme. c) The remaining useful economic lives of corresponding sites have been reassessed to align with closure dates, resulting in an acceleration in depreciation of these assets. The existing depreciation of these assets (depreciation that would have been recognised absent of a closure decision) is recognised within underlying expenses, whereas accelerated depreciation above this is recognised within non-underlying expenses. d) Redundancy costs are recognised as the plan is announced and a valid expectation raised with the affected colleagues. The current year charge relates to redundancies announced as part of Argos store closures, depot closures, and the exit of operations in Ireland. e) Gains on lease terminations relate to sites impaired in the prior year for which it has been negotiated to exit the leases before the contractual end date. This includes the release of any lease liabilities, as well as any closure provisions previously recognised. f) Property profits relate to profits recognised in the period as sites previously impaired as part of the restructuring programmes have been sold. As the costs incurred facilitate future underlying cost savings, it was considered whether it was appropriate to report these costs within underlying profit. Whilst they arise from changes in the Group\u2019s underlying operations, they can be separately identified, are material in size and do not relate to ordinary in-year trading activity. In addition, the areas being closed or restructured no longer relate to the Group\u2019s remaining underlying operations and their exclusion provides meaningful comparison between financial years. Impairment of non-financial assets In addition to the above, in line with IAS 36 \u2018Impairment of Non-financial Assets\u2019, the Group is required to assess whether there is any indication that an asset (or cash-generating unit (CGU)) may be impaired. Management considered whether the level of uncertainty within the wider macroeconomic environment, including sustained increases in the Bank of England gilt rates, represented an indicator of impairment at the reporting date. It was determined that the increase in discount rates was a significant impairment indicator and therefore a full impairment review was undertaken. A non-cash impairment charge of \u00a3281 million has been recognised in the period and comprises the below amounts, and has all been recognised within the Retail segment. Further details of the impairment charge are included within note 17. \u00a3m Write downs of property, plant and equipment (141) Write downs of leased assets (122) Write downs of intangible assets (18) Impairment of non-financial assets (281) 5 Profit before non-underlying items continued Property, finance, pension and acquisition adjustments \u2014 A further \u00a33 million of ATM rates reimbursement income is due to be received from the Valuation Office following the Supreme Court\u2019s ruling that ATMs outside stores should not be assessed for additional business rates on top of normal store rates. The total cumulative amount recognised to 4 March 2023 is \u00a345 million. \u2014 Property related transactions relate to the loss on disposal of non-trading properties, which comprised of \u00a3(3) million in the financial period, and \u00a3(6) million of costs relating to a property transaction. These are excluded from underlying profit as such profit is not related to the ongoing operating activities of the Group. \u2014 Non-underlying finance movements for the financial period comprised \u00a3(38) million for the Group. These include fair value remeasurements on derivatives not in a hedging relationship and lease interest on impaired non-trading sites, including site closures. The fair value movements are driven by external market factors and can significantly fluctuate year-on-year. They are therefore excluded to ensure consistency between periods. Lease interest on impaired, non-trading sites is excluded as they do not contribute to the operating activities of the Group. Included within cost of sales is \u00a3(29) million in relation to unfavourable movements on long-term, fixed price power purchase arrangements (PPAs) with independent producers. These are accounted for as derivative financial instruments, however are not designated in hedging relationships, therefore gains and losses are recognised in the income statement. Decreases in electricity forward prices in the year have led to losses on the related derivative financial instruments. Non-underlying finance and fair value movements also includes lease interest on impaired non-trading sites, including site closures. Lease interest on impaired, non-trading sites is excluded as they do not contribute to the operating activities of the Group. The remaining movements of \u00a3(9) million within finance income and costs are analysed further in note 10. \u2014 Defined benefit pension interest and expenses comprises pension finance income of \u00a357 million, settlement credit of \u00a38 million and scheme expenses of \u00a3(6) million (see note 35). Although a recurring item, the Group has chosen to exclude net retirement benefit income and costs from underlying profit as, following closure of the defined benefit scheme to future accrual, it is not part of the ongoing operating activities of the Group and its exclusion is consistent with how the Directors assess the performance of the business. \u2014 Acquisition adjustments of \u00a3(20) million reflect the unwind of non-cash fair value adjustments arising from Home Retail Group and Nectar UK acquisitions. The Group would not normally recognise these as assets outside of a business combination. Therefore the unwinds are classified as non-underlying and are recognised as follows: 52 weeks to 4 March 2023 52 weeks to 5 March 2022 Argos \u00a3m Nectar \u00a3m Total Group \u00a3m Argos \u00a3m Nectar \u00a3m Total Group \u00a3m Cost of sales 1 \u2013 1 \u2013 \u2013 \u2013 Depreciation 1 \u2013 1 3 \u2013 3 Amortisation (18) (4) (22) (18) (5) (23) (16) (4) (20) (15) (5) (20) Comparative information Cost of sales \u00a3m Administrative expenses \u00a3m Other income \u00a3m Net finance income/ (costs) \u00a3m Total adjustments before tax \u00a3m Tax \u00a3m Total adjustments \u00a3m Income recognised in relation to legal disputes \u2013 13 167 \u2013 180 (35) 145 Restructuring and integration Restructuring programmes (69) (35) 12 \u2013 (92) 17 (75) Financial Services transition and other \u2013 (11) \u2013 \u2013 (11) 2 (9) Total restructuring and integration (69) (46) 12 \u2013 (103) 19 (84) Software as a service accounting adjustment \u2013 (21) \u2013 \u2013 (21) 4 (17) Property, finance, pension and acquisition adjustments ATM business rates reimbursement 2 \u2013 \u2013 \u2013 2 \u2013 2 Profit on disposal of properties \u2013 \u2013 7 \u2013 7 \u2013 7 Non-underlying finance and fair value movements 76 \u2013 \u2013 (8) 68 (13) 55 IAS 19 pension expenses \u2013 (4) \u2013 15 11 (2) 9 Acquisition adjustments \u2013 (20) \u2013 \u2013 (20) 4 (16) Total property, finance, pension and acquisition adjustments 78 (24) 7 7 68 (11) 57 Tax adjustments Over provision in prior years \u2013 \u2013 \u2013 \u2013 \u2013 (2) (2) Difference due to change in applicable rate of deferred tax \u2013 \u2013 \u2013 \u2013 \u2013 9 9 Other tax adjustments \u2013 \u2013 \u2013 \u2013 \u2013 (7) (7) Total adjustments 9 (78) 186 7 124 (23) 101 5 Profit before non-underlying items continued Cash flow statement The table below shows the impact of non-underlying items on the Group cash flow statement: 52 weeks to 4 March 2023 \u00a3m 52 weeks to 5 March 2022 \u00a3m Cash flows from operating activities IAS 19 pension expenses (7) (7) Financial Services transition and other \u2013 (13) Restructuring programmes (50) (114) Income recognised in relation to legal disputes 30 93 ATM rates reimbursement 3 14 Property related transactions (6) \u2013 Cash used in operating activities (30) (27) Cash flows from investing activities Proceeds from property disposals 1 29 46 Cash generated from investing activities 29 46 Net cash flows (1) 19 1. \u00a326 million of the current period proceeds from property disposals are a result of restructuring programmes (2022: \u00a319 million). 6 Revenue Accounting policies Revenue is income arising from the sale of goods and services in the course of the Group\u2019s ordinary activities, net of returns, related discounts and excluding Value Added Tax (VAT) and, in the case of Financial Services, interest receivable, fees and commissions. Revenue is recognised when the Group has a contract with a customer and a performance obligation has been satisfied, at the transaction price allocated to that performance obligation. Retail sales a) Sale of goods Revenue from the sale of goods is recognised at point of sale or, where later, upon collection by, or delivery to, the customer as this is the point in which control has passed. Where consideration has been received in advance of the performance obligation being satisfied, a contract liability is recognised. b) Other revenue items Other revenue items comprise income from commissions and concessions, and wholesale sales made directly to third-party customers. Commission revenue relates to the sale of third-party products where it has been determined that the Group is acting as an agent. When assessing whether the Group should recognise revenue as a principal, or as an agent, management will assess whether there is control of the related goods prior to sale to the end consumer. Sales commission from third-parties is recognised when the related goods or services are sold as the net amount to be retained. The Group\u2019s relevant contracts are not complex and therefore the level of judgement involved is not considered significant to the Group. Wholesale revenue is recognised when the goods are delivered to the customer. c) Nectar points The issuance of Nectar points within the Group creates a separate performance obligation and therefore a portion of the transaction price is allocated to the loyalty programme using the relative standalone selling price of points issued, and the corresponding revenue deferred. The deferral is treated as a deduction from revenue and recognised as a contract liability within deferred income (see note 23). The fair value of the points awarded is determined with reference to the value per point to a customer and considers expected redemption rates (breakage) and the money off that each point entitles a customer to. The revenue deferred is subsequently recognised when the Nectar points are redeemed by the customer. Significant estimate \u2013 Fair value of Nectar points The Group estimates the fair value of points awarded under the Nectar programme by reference to the value per point to a customer, multiplied by expected breakage assumptions. Breakage represents management\u2019s estimate of points issued that will never be redeemed and is therefore subject to uncertainty. Breakage is estimated by management based on the terms and conditions of membership and historical accumulation and redemption patterns. As at the year-end, if the breakage estimate used in determining the deferred revenue for the Group had been 1.0 per cent lower, the deferred points liability would have been \u00a350 million higher. If the breakage estimate had been 1.0 per cent higher, the deferred points liability would have been \u00a351 million lower. 5 Profit before non-underlying items continued Financial Services Financial services revenue consists of interest, fees and commission income from the provision of retail banking and insurance related activities. a) Interest income Interest income is recognised in the income statement for all instruments measured at amortised cost using the effective interest method. The effective interest rate of a financial asset is calculated on initial recognition and is applied to the gross carrying amount of the asset. For financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset net of impairment. If the asset is no longer credit impaired, then the calculation of interest income reverts to the gross basis. In calculating the effective interest rate of a financial instrument the Group takes into account all amounts that are integral to the yield of a financial instrument as well as incremental transaction costs. b) Fees and commission income Fees and commissions that are not integral to the effective interest rate calculation relate primarily to certain credit card and storecard fees, ATM interchange fees, insurance introduction commission and warranty commission receivable. These are recognised in the income statement on an accruals basis as performance obligations are satisfied. Where in the case of insurance commissions the income comprises an initial commission and profit share, both are recognised on completion of the service to the extent reliably measurable. Where there is a risk of potential clawback, an appropriate element of the commission receivable is deferred and amortised over the clawback period. These are recognised in the income statement on an accruals basis as performance obligations are satisfied in accordance with IFRS 15. Margin from the sale of travel money, representing the difference between the cost price and the selling price, is recognised when the sale to the customer takes place. Other income Other income generally consists of profits and losses on disposal of assets. Disaggregated revenue recognised 52 weeks to 4 March 2023 \u00a3m 52 weeks to 5 March 2022 \u00a3m Grocery and General Merchandise & Clothing (GM&C) 25,993 25,440 Fuel 4,967 4,023 Total retail sales 30,960 29,463 Financial Services interest receivable 394 322 Financial Services fees and commission 137 110 Total Financial Services income 531 432 Total revenue 31,491 29,895 7 Segment reporting Background The Group\u2019s operating segments have been determined based on the information regularly provided to the Chief Operating Decision Maker (CODM), which has been determined to be the Group Operating Board, which is used to make optimal decisions on the allocation of resources and assess performance. Significant judgement \u2013 aggregation of operating segments The CODM is presented information for the following operating segments: \u2014 Retail \u2013 Food \u2014 Retail \u2013 General Merchandise and Clothing \u2014 Financial Services In determining the Group\u2019s reportable segments, management have considered the economic characteristics, in particular average gross margin, similarity of products, production processes, customers, sales methods and regulatory environment of its two Retail segments. In doing so it has been concluded that they should be aggregated into one \u2018Retail\u2019 segment within the financial statements given the similar economic characteristics between the two. This aggregated information provides users the financial information needed to evaluate the business and the environment in which it operates. Operating segments The Group\u2019s reportable operating segments have therefore been identified as follows: \u2014 Retail; comprising the sale of food, household, general merchandise, clothing and fuel primarily through store and online channels. \u2014 Financial Services; comprising banking and insurance services through Sainsbury\u2019s Bank and Argos Financial Services. The CODM uses underlying profit before tax as the key measure of segmental performance as it represents the ongoing trading performance with additional insight into year-on-year performance that is more comparable over time. The use of underlying profit before tax aims to provide parity and transparency between users of the financial statements and the CODM in assessing the core performance of the business and performance of management. This is further disclosed in note 3 and within the glossary on page 224. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period. Segment revenue presents a disaggregation of revenue from customers consistent with the Group\u2019s primary revenue streams. 6 Revenue continued Income statement and balance sheet 52 weeks to 4 March 2023 Retail \u00a3m Financial Services \u00a3m Group \u00a3m Segment revenue Retail sales to external customers 30,960 \u2013 30,960 Financial Services to external customers \u2013 531 531 Revenue 30,960 531 31,491 Underlying operating profit 926 46 972 Underlying finance income 18 \u2013 18 Underlying finance costs (300) \u2013 (300) Underlying profit before tax 644 46 690 Non-underlying expense (note 5) (363) Profit before tax 327 Income tax expense (note 11) (120) Profit for the financial year 207 Assets 18,925 7,231 26,156 Investment in joint ventures and associates 2 \u2013 2 Segment assets 18,927 7,231 26,158 Segment liabilities (12,584) (6,321) (18,905) Other segment items Additions to non-current assets Property, plant and equipment 532 2 534 Intangible assets 194 19 213 Right-of-use assets 398 \u2013 398 Depreciation expense 1 Property, plant and equipment 565 1 566 Right-of-use assets 469 1 470 Amortisation expense 2 Intangible assets 141 31 172 Impairment of non-financial assets 315 \u2013 315 Impairment loss on financial assets 2 76 78 Share based payments 54 5 59 1. Depreciation within the Retail segment includes a \u00a3(1) million credit in relation to the unwind of fair value adjustments recognised on acquisition of HRG. 2. Amortisation within the Retail segment includes a \u00a322 million charge in relation to the unwind of fair value adjustments recognised on acquisition of HRG and Nectar UK. 7 Segment reporting continued 52 weeks to 5 March 2022 Retail \u00a3m Financial Services \u00a3m Group \u00a3m Segment revenue Retail sales to external customers 29,463 \u2013 29,463 Financial Services to external customers \u2013 432 432 Revenue 29,463 432 29,895 Underlying operating profit 1,001 38 1,039 Underlying finance income 3 \u2013 3 Underlying finance costs (312) \u2013 (312) Underlying profit before tax 692 38 730 Non-underlying expense 124 Profit before tax 854 Income tax expense (177) Profit for the financial year 677 Assets 20,368 6,541 26,909 Investment in joint ventures and associates 3 \u2013 3 Segment assets 20,371 6,541 26,912 Segment liabilities (12,870) (5,619) (18,489) Other segment items Additions to non-current assets Property, plant and equipment 417 \u2013 417 Intangible assets 229 49 278 Right-of-use assets 1,294 \u2013 1,294 Depreciation expense 1 Property, plant and equipment 590 1 591 Right-of-use assets 477 1 478 Amortisation expense 2 Intangible assets 130 21 151 Impairment of non-financial assets 8 1 9 Impairment (reversal)/loss on financial assets (4) 19 15 Share based payments 53 5 58 1. Depreciation within the Retail segment includes a \u00a3(3) million credit in relation to the unwind of fair value adjustments recognised on acquisition of HRG. 2. Amortisation within the Retail segment includes a \u00a323 million charge in relation to the unwind of fair value adjustments recognised on acquisition of HRG and Nectar UK. Geographical segments The Group trades predominantly in the UK and the Republic of Ireland and consequently the majority of revenues, capital expenditure and segment net assets arise there. The profits, turnover and assets of the businesses in the Republic of Ireland are not material to the Group. 7 Segment reporting continued Cash flow 52 weeks to 4 March 2023 52 weeks to 5 March 2022 APM reference Retail \u00a3m Financial Services \u00a3m Group \u00a3m Retail \u00a3m Financial Services \u00a3m Group \u00a3m Profit before tax 284 43 327 833 21 854 Net finance costs 235 \u2013 235 304 (2) 302 Operating profit 519 43 562 1,137 19 1,156 Adjustments for: Depreciation and amortisation expense 1,175 33 1,208 1,197 23 1,220 Net impairment charge on property, plant and equipment, right-of-use assets and intangible assets 315 \u2013 315 8 1 9 Financial Services movement in loss allowance for loans and advances to customers \u2013 76 76 \u2013 19 19 Profit on sale of non-current assets and early termination of leases (15) \u2013 (15) (6) \u2013 (6) Non-underlying fair value movements 29 \u2013 29 (76) \u2013 (76) Share-based payments expense 54 5 59 53 5 58 Non-cash defined benefit scheme expenses (2) \u2013 (2) 4 \u2013 4 Cash contributions to defined benefit scheme (44) \u2013 (44) (71) \u2013 (71) Operating cash flows before changes in working capital 2,031 157 2,188 2,246 67 2,313 Changes in working capital Movements in working capital 185 231 416 (306) (646) (952) Cash generated from operations 2,216 388 2,604 1,940 (579) 1,361 Interest paid a (307) (9) (316) (319) (10) (329) Corporation tax paid (99) (4) (103) (23) \u2013 (23) Net cash generated from/(used in) operating activities 1,810 375 2,185 1,598 (589) 1,009 Cash flows from investing activities Purchase of property, plant and equipment (523) (2) (525) (416) \u2013 (416) Initial direct costs on new leases (16) \u2013 (16) (3) \u2013 (3) Purchase of intangible assets (194) (19) (213) (229) (49) (278) Proceeds from disposal of property, plant and equipment 29 \u2013 29 46 \u2013 46 Dividends and distributions received/(paid) e 51 (50) 1 2 \u2013 2 Net cash used in investing activities (653) (71) (724) (600) (49) (649) Cash flows from financing activities Proceeds from issuance of ordinary shares d 13 \u2013 13 21 \u2013 21 Repayment of borrowings c (40) (55) (95) (248) \u2013 (248) Repayment of perpetual capital securities c \u2013 \u2013 \u2013 (8) \u2013 (8) Purchase of own shares d (45) \u2013 (45) (48) \u2013 (48) Capital repayment of lease obligations b (512) (2) (514) (491) (2) (493) Dividends paid on ordinary shares (319) \u2013 (319) (238) \u2013 (238) Dividends paid on perpetual securities a \u2013 \u2013 \u2013 (4) \u2013 (4) Net cash used in financing activities (903) (57) (960) (1,016) (2) (1,018) Net increase/(decrease) in cash and cash equivalents 254 247 501 (18) (640) (658) 7 Segment reporting continued 8 Supplier arrangements Supplier incentives, rebates and discounts, collectively known as \u2018supplier arrangements\u2019, represent a material deduction to cost of sales and directly affect the Group\u2019s reported margin. Income is recognised when earned by the Group when all obligations per the terms of the contract have been satisfied. Any supplier arrangements which are linked to inventory purchases are included within the cost of the related inventory, and therefore recognised within cost of sales once the inventory is sold. Unpaid amounts relating to supplier arrangements are recognised within trade and other receivables, unless there is a legal right of offset, in which case it is recognised within trade and other payables. Amounts which have been invoiced at the balance sheet date are categorised as supplier arrangements due and those not yet invoiced are categorised as accrued supplier arrangements. The types of supplier arrangements applicable to the Group are as follows: \u2014 Discounts and supplier incentives \u2013 these represent the majority of all supplier arrangements and are linked to individual unit sales. The incentive is typically based on an agreed sum per item sold on promotion for a period and therefore is considered part of the purchase price of that product. \u2014 Fixed amounts \u2013 these are agreed with suppliers primarily to support in-store activity including promotions, such as utilising specific space. \u2014 Supplier rebates \u2013 these are typically agreed on an annual basis, aligned with the Group\u2019s financial year. The rebate amount is linked to pre-agreed targets such as sales volumes. \u2014 Marketing and advertising income \u2013 advertising income from suppliers through the Group\u2019s subsidiary Nectar 360 Services LLP and online marketing and advertising campaigns within Argos. Amounts recognised in the income statement during the year for fixed amounts, volume-based rebates and marketing and advertising income are shown below. Discounts and supplier incentives are not shown as they are deemed to be part of the cost price of inventory. 52 weeks to 4 March 2023 \u00a3m 52 weeks to 5 March 2022 \u00a3m Fixed amounts 192 208 Supplier rebates 94 94 Marketing and advertising income 97 79 Total supplier arrangements 383 381 Of the above amounts, the following was outstanding and held on the balance sheet at the period-end: 4 March 2023 \u00a3m 5 March 2022 \u00a3m Within inventory (4) (4) Within current trade receivables Supplier arrangements due 45 39 Accrued supplier arrangements 43 37 Within current trade payables Supplier arrangements due 49 47 Accrued supplier arrangements 2 2 Total supplier arrangements 135 121 9 Operating profit Accounting policies Cost of sales Cost of sales consists of all costs that are directly attributable to the point of sale including warehouse, transportation costs and all the costs of operating retail outlets. In the case of Financial Services, cost of sales includes interest expense on operating activities, calculated using the effective interest method. Operating profit is stated after charging/(crediting) the following items: 52 weeks to 4 March 2023 \u00a3m 52 weeks to 5 March 2022 \u00a3m Employee costs (note 34) 3,578 3,600 Depreciation expense 1 (note 14 and 15) 1,036 1,069 Amortisation expense 2 (note 16) 172 151 Profit on disposal of non-current assets 3 (note 31) (15) (6) Foreign exchange gains (18) (19) Impairment of non-financial assets (note 17) 315 9 1. Depreciation expense includes \u00a3(1) million credit (2022: \u00a3(3) million credit) in relation to the unwind of acquisition adjustments. 2. Amortisation expense includes \u00a322 million charge (2022: \u00a323 million) in relation to the unwind of fair value adjustments recognised on acquisition of HRG and Nectar UK. 3. Includes \u00a3(8) million in relation to disposals of property, plant and equipment (2022: \u00a3(19) million), gain on disposals of intangible assets of \u00a3(1) million (2022: loss of \u00a34 million), gains on lease terminations of \u00a3(6) million (2022: \u00a3(12) million) and adjustments in relation to software as a service accounting of \u00a3nil (2022: \u00a321 million). 52 weeks to 4 March 2023 \u00a3m 52 weeks to 5 March 2022 \u00a3m Auditor\u2019s remuneration Fees payable to the Company\u2019s auditor for the audit of the parent company and consolidated financial statements 1.2 1.1 Fees payable to the Company\u2019s auditor for other services: The audit of the Company\u2019s subsidiaries 2.6 2.4 Audit related assurance services 0.2 0.1 Non-audit services 0.1 0.9 Total fees 4.1 4.5 Non-audit services relate to services provided by the Group\u2019s auditor in relation to issuance of Sainsbury\u2019s Bank Tier 2 Capital in September 2022 (refer to note 33). In the prior year, non-audit services related to services provided by the Group\u2019s auditor in the capacity of reporting accountant. 10 Finance income and finance costs Accounting policies Finance income and costs, excluding those arising from Financial Services, are recognised in the income statement for financial assets and liabilities measured at amortised cost using the effective interest method. For Financial Services, finance income and finance costs are recognised in revenue and cost of sales. Fair value remeasurements relate to net fair value movements on derivative financial instruments not designated in a hedging relationship. 52 weeks to 4 March 2023 52 weeks to 5 March 2022 Underlying \u00a3m Non- underlying \u00a3m Total \u00a3m Underlying \u00a3m Non-underlying \u00a3m Total \u00a3m Interest on bank deposits and other financial assets 16 \u2013 16 1 \u2013 1 Fair value measurements \u2013 \u2013 \u2013 \u2013 2 2 IAS 19 pension financing income \u2013 56 56 \u2013 15 15 Finance income on net investment in leases 2 \u2013 2 2 \u2013 2 Finance Income 18 56 74 3 17 20 Secured borrowings (41) \u2013 (41) (40) \u2013 (40) Unsecured borrowings (2) \u2013 (2) (2) \u2013 (2) Lease liabilities (258) (9) (267) (271) (10) (281) Provisions \u2013 amortisation of discount \u2013 \u2013 \u2013 (1) \u2013 (1) Interest capitalised \u2013 qualifying assets 1 \u2013 1 2 \u2013 2 Finance costs (300) (9) (309) (312) (10) (322) 11 Taxation Accounting policies Current tax Current tax is accounted for on the basis of tax laws enacted or substantively enacted at the balance sheet date. Current tax is charged or credited to the income statement, except when it relates to items charged to equity or other comprehensive income. Deferred tax Deferred tax is accounted for on the basis of temporary differences arising from differences between the tax base and accounting base of assets and liabilities. Deferred tax is recognised for all temporary differences, except to the extent where it arises from the initial recognition of an asset or a liability in a transaction that is not a business combination and, at the time of transaction, affects neither accounting profit nor taxable profit. It is determined using tax rates (and laws) that have been enacted or substantively enacted at the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity or other comprehensive income. Deferred tax is provided on temporary differences associated with investments in subsidiaries, branches and joint ventures except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. 52 weeks to 4 March 2023 \u00a3m 52 weeks to 5 March 2022 \u00a3m Current year UK tax 105 131 Current year overseas tax 3 6 Over-provision in prior years 2 5 Total current tax expense 110 142 Origination and reversal of temporary differences 9 52 Under/(over)-provision in prior years 3 (35) Adjustment from change in applicable rate of deferred tax (2) 23 Derecognition of capital losses \u2013 (5) Total deferred tax expense 10 35 Total income tax expense in income statement 120 177 Analysed as: Underlying tax 157 154 Non-underlying tax (37) 23 Total income tax expense in income statement 120 177 Underlying tax rate 22.8% 21.1% Effective tax rate 36.7% 20.7% The effective tax rate of 36.7 per cent (2022: 20.7 per cent) is higher than (2022: higher than) the standard rate of corporation tax in the UK of 19 per cent. The differences are explained below: 52 weeks to 4 March 2023 \u00a3m 52 weeks to 5 March 2022 \u00a3m Profit before tax 327 854 Income tax at UK corporation tax rate of 19.00% 62 162 Effects of underlying items: Disallowed depreciation on UK properties 27 25 Under/(over)-provision in prior years 7 (28) Difference due to change in applicable rate of deferred tax (7) 14 Disallowed depreciation on right of use assets 3 5 Other (3) \u2013 Effects of non-underlying items: Loss on disposal of properties \u2013 (1) Over-provision in prior years (2) (2) Difference due to change in applicable rate of deferred tax 5 9 Restructuring programmes 13 \u2013 Impairment of non-financial assets 15 \u2013 Derecognition of capital losses \u2013 (5) Other \u2013 (2) Total income tax expense in income statement 120 177 It was announced in the UK Government\u2019s Budget on 3 March 2021 that the main UK corporation tax rate will increase to 25 per cent from 1 April 2023. This change was enacted during the previous accounting period, and deferred tax was revalued accordingly. The Spring Budget on 21 March 2023 confirmed the introduction of Pillar 2 reporting requirements for the UK. This has not been enacted to date, but the rules are expected to apply to the Group. Pillar 2 reporting will see the introduction of a global minimum 15 per cent tax rate by the end of 2023, and the Group will be required to file certain returns evidencing the payment of tax at this rate. The potential impact of this is currently being assessed, but the Group does not consider there to be a material exposure at this stage. Income tax charged or (credited) to equity and/or other comprehensive income during the year is as follows: Share-based payment reserve \u00a3m Actuarial reserve \u00a3m Fair value movements \u00a3m Total \u00a3m 52 weeks to 4 March 2023 Current tax in equity or other comprehensive income (3) (25) \u2013 (28) Deferred tax in equity or other comprehensive income (4) (322) (14) (340) (7) (347) (14) (368) 52 weeks to 5 March 2022 Current tax in equity or other comprehensive income (1) \u2013 \u2013 (1) Deferred tax in equity or other comprehensive income (2) 431 87 516 (3) 431 87 515 11 Taxation continued The current and deferred tax in relation to the Group\u2019s defined benefit pension scheme\u2019s remeasurements and available-for-sale fair value movements have been charged or credited through other comprehensive income where appropriate. The movements in deferred income tax assets and liabilities during the financial year, prior to the offsetting of the balances within the same tax jurisdiction, are shown below: Accelerated capital allowances \u00a3m Capital losses \u00a3m Fair value movements \u00a3m Rolled over capital gains \u00a3m Retirement benefit obligations \u00a3m Share-based payments \u00a3m Leases \u00a3m Other \u00a3m Total \u00a3m 6 March 2022 (173) 87 (133) (93) (640) 18 132 (4) (806) Prior year adjustment to income statement (9) \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 6 (3) Credit/(charge) to income statement 12 \u2013 13 \u2013 (11) 8 (20) (11) (9) Credit to equity or other comprehensive income \u2013 \u2013 14 \u2013 328 3 \u2013 \u2013 345 Revaluation adjustment to income statement 4 \u2013 4 \u2013 (1) 2 (3) (4) 2 Revaluation adjustment to equity or other comprehensive income \u2013 \u2013 \u2013 \u2013 (6) 1 \u2013 \u2013 (5) 4 March 2023 (166) 87 (102) (93) (330) 32 109 (13) (476) 7 March 2021 (141) 64 (48) (81) (192) 9 126 8 (255) Prior year adjustment to income statement (7) (3) 2 6 \u2013 \u2013 (1) 38 35 Credit/(charge) to income statement 16 5 4 4 (11) 4 (21) (48) (47) (Charge)/credit to equity or other comprehensive income \u2013 \u2013 (59) \u2013 (276) 2 \u2013 \u2013 (333) Revaluation adjustment to income statement (41) 21 (4) (22) (6) 3 28 (2) (23) Revaluation adjustment to equity or other comprehensive income \u2013 \u2013 (28) \u2013 (155) \u2013 \u2013 \u2013 (183) 5 March 2022 (173) 87 (133) (93) (640) 18 132 (4) (806) 2023 \u00a3m 2022 \u00a3m Total deferred income tax liabilities (704) (1,043) Total deferred income tax assets 228 237 Net deferred income tax liability recognised in non-current liabilities (476) (806) Deferred income tax assets have been recognised in respect of all income tax losses and other temporary differences giving rise to deferred income tax assets because it is probable that these assets will be recovered, with the exception unrecognised capital losses of \u00a3194 million (2022: \u00a3194 million) following Finance Act 2020 which restricts the amount of chargeable (capital) gains that a company can relieve with its carried-forward capital losses. These capital losses have no date of expiry. Deferred income tax assets and liabilities are only offset where there is a legally enforceable right of offset and the deferred income tax assets and the deferred income tax liabilities relate to income taxes levied by the same taxation authority. 11 Taxation continued 12 Earnings per share Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders of J Sainsbury plc by the weighted average number of Ordinary shares in issue during the year, excluding own shares held by the J Sainsbury Employee Share Ownership Trust (ESOT). Diluted earnings per share amounts are calculated by dividing the profit attributable to ordinary shareholders of J Sainsbury plc by the weighted average number of Ordinary shares in issue during the year, excluding own shares held, and adjusted for the effects of potentially dilutive shares. The dilutive impact is calculated as the weighted average of all potentially diluted ordinary shares. These represent share options granted by the Group, including performance- based options, where the scheme to date performance is deemed to have been earned. For the comparative period, the weighted average number of dilutive shares includes the number of shares that would have been issued if all perpetual subordinated convertible bonds are assumed to be converted at the beginning of the period. In addition, underlying basic earnings per share and underlying diluted earnings per share are presented to reflect the underlying profit attributable to ordinary shareholders of J Sainsbury plc and the underlying trading performance of the Group. In calculating the APMs, the profit attributable is adjusted for items considered non-underlying as defined in note 5. No adjustments have been made to the weighted average number of Ordinary or potentially dilutive shares which continue to be determined in accordance with IAS. All operations are continuing for the periods presented. 2023 million 2022 million Weighted average number of shares in issue 2,312.6 2,271.8 Weighted average number of dilutive share options 39.6 39.6 Weighted average number of dilutive subordinated perpetual convertible bonds \u2013 39.6 Total number of shares for calculating diluted earnings per share 2,352.2 2,351.0 \u00a3m \u00a3m Profit for the financial period attributable to ordinary shareholders 207 677 Diluted earnings for calculating diluted earnings per share 207 677 Profit for the financial period attributable to ordinary shareholders of the parent 207 677 Adjusted for non-underlying items (note 5) 363 (124) Tax on non-underlying items (note 5) (37) 23 Underlying profit after tax attributable to ordinary shareholders of the parent 533 576 Diluted underlying profit after tax attributable to ordinary shareholders of the parent 533 576 Pence per share Pence per share Basic earnings 9.0 29.8 Diluted earnings 8.8 28.8 Underlying basic earnings 23.0 25.4 Underlying diluted earnings 22.7 24.5 13 Dividends 2023 pence per share 2022 pence per share 2023 \u00a3m 2022 \u00a3m Amounts recognised as distributions to ordinary shareholders in the year: Final dividend of prior financial year 9.9 7.4 229 164 Interim dividend of current financial year 3.9 3.2 90 74 13.8 10.6 319 238 Proposed final dividend at financial year end 9.2 9.9 213 230 The proposed final dividend was approved by the Board on 26 April 2023 and is subject to shareholders\u2019 approval at the Annual General Meeting. If approved, it will be paid on 14 July 2023 to shareholders on the register as at 9 June 2023. No amount for the proposed final dividend has been recognised at the balance sheet date. Distributions to shareholders will have no tax consequences to the Group. 14 Property, plant and equipment Accounting policies a) Land and buildings Land and buildings are held at historical cost less accumulated depreciation and any recognised provision for impairment. Capital work in progress is held at cost less any recognised provision for impairment. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for intended use. b) Fixtures and equipment Fixtures, equipment and vehicles are held at cost less accumulated depreciation and any recognised provision for impairment. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition and its intended use. c) Depreciation Depreciation is calculated to write down the cost of the assets to their residual values, on a straight-line basis over their useful economic life, using the following rates: \u2014 Freehold buildings and leasehold improvements \u2013 50 years, or the lease term if shorter \u2014 Fixtures, equipment and vehicles \u2013 three to 15 years \u2014 Freehold land is not depreciated Capital work in progress is not depreciated prior to being available for its intended commercial use. Capital work in progress does not include land. d) Disposals and retirement Disposals of property, plant and equipment are recognised when the control over the asset is transferred to another party and the company has no further obligations or involvement with the asset. The gain or loss on disposal is determined by comparing proceeds less any associated costs of disposal with the asset\u2019s carrying amount and is recognised within operating profit. e) Impairment The carrying amount of PPE is reviewed on an ongoing basis to determine whether there is any indication of impairment \u2013 See note 17. f) Climate Change Impacts The assets\u2019 residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. This includes consideration over climate change related risks which may impact the useful lives or residual values of the Group\u2019s assets, such as the impact of flood risks on store and non-store assets, changes in regulations related to carbon emissions and any anticipated replacement of existing assets with new technologies. During the year, no changes were made to the remaining useful lives or residual values of the Group\u2019s assets as a result of climate change risks. g) Capitalisation of interest Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalised to the cost of the asset, gross of tax relief. Land and buildings \u00a3m Fixtures and equipment \u00a3m Total \u00a3m Cost At 6 March 2022 9,693 5,288 14,981 Additions 250 284 534 Disposals (71) (540) (611) Transfer to assets held for sale (7) (3) (10) At 4 March 2023 9,865 5,029 14,894 Accumulated depreciation and impairment At 6 March 2022 2,917 3,662 6,579 Depreciation expense for the year 184 382 566 Impairment loss for the year 110 39 149 Disposals (56) (540) (596) Transfer to assets held for sale (2) (3) (5) At 4 March 2023 3,153 3,540 6,693 Net book value at 4 March 2023 6,712 1,489 8,201 Capital work-in-progress included above 206 314 520 Cost At 7 March 2021 9,655 5,288 14,943 Additions 87 330 417 Disposals (40) (330) (370) Transfer to assets held for sale (9) \u2013 (9) At 5 March 2022 9,693 5,288 14,981 Accumulated depreciation and impairment At 7 March 2021 2,793 3,563 6,356 Depreciation expense for the year 170 421 591 Impairment loss for the year \u2013 6 6 Disposals (37) (328) (365) Transfer to assets held for sale (9) \u2013 (9) At 5 March 2022 2,917 3,662 6,579 Net book value at 5 March 2022 6,776 1,626 8,402 Capital work-in-progress included above 103 314 417 Interest capitalised Interest capitalised included in additions amounted to \u00a31 million (2022: \u00a32 million) for the Group. Accumulated interest capitalised included in the cost of property, plant and equipment net of disposals amounted to \u00a3336 million (2022: \u00a3335 million) for the Group. Accumulated interest capitalised held at net book value in property, plant and equipment amounted to \u00a3281 million (2022: \u00a3284 million) for the Group. The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is 6.1 per cent (2022: 6.2 per cent). Security Property, plant and equipment pledged as security is as follows: 2023 2022 Number of properties Net book value \u00a3bn Number of properties Net book value \u00a3bn Loan due 2031 48 0.9 48 0.9 Revolving Credit Facility \u2013 \u2013 60 1.3 Asset backed pension contribution scheme 48 1.1 48 1.2 Other 6 0.1 6 0.1 102 2.1 162 3.5 14 Property, plant and equipment continued 15 Leases Group as lessee The Group\u2019s lease portfolio is principally comprised of property leases of land and buildings in relation to stores, distribution centres and support offices, but also includes other assets such as motor vehicles. The leases have varying terms and often include break clauses or options to renew beyond the non-cancellable periods. Accounting policies Right-of-use assets Right-of-use assets are recognised at the commencement date of the lease, when the underlying asset is available for use. The cost of right-of-use assets comprises the amount of lease liabilities recognised, any initial direct costs incurred, lease payments made at or before the commencement date and less any lease incentives received. Right-of-use assets are subsequently measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any subsequent remeasurement of lease liabilities. The recognised right-of-use assets are depreciated on a straight-line basis over the shorter of the estimated useful life and the lease term. Lease liabilities Lease liabilities are recognised at the commencement date of the lease and are measured at the present value of lease payments to be made over the lease term, discounted using the incremental borrowing rate (IBR) at the lease commencement date if the interest rate implicit in the lease is not readily determinable. The lease payments include fixed payments and variable lease payments that depend on an index or a rate (using the relevant rate at the commencement date of the lease), less any lease incentives receivable. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period in which the event or condition that triggers the payment occurs. For agreements which contain both lease and non-lease components, such as cleaning and maintenance services, the non-lease component is excluded from the lease payments used to measure the lease liabilities. The IBRs depend on the start date and term of the lease, and are determined based on a reference (risk free) rate and adjustments to reflect the Group\u2019s credit risk. The reference rates are based on UK overnight swap rates and the credit risk adjustments are based on the prices of instruments issued by the group and quoted credit default swaps (CDS). IBRs are determined quarterly. The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease (a break clause), if it is reasonably certain not to be exercised. After the commencement date of the lease, the lease liability is subsequently measured at amortised cost using the effective interest rate method. The carrying amount of lease liabilities is remeasured when there is a change in the future lease payments due to a change in the lease term such as a recognition of an extension or break option, a change in the fixed lease payments or a change in the assessment to purchase the underlying asset. Short-term leases and leases of low-value assets The Group applies the short-term lease recognition exemption to those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option. It also applies the low-value asset recognition exemption to groups of underlying leases where the underlying assets leased are considered uniformly low value (i.e. below \u00a35,000). Lease payments on short-term leases and leases of low-value assets are expensed to the income statement. Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period: Net book value Land and buildings \u00a3m Equipment \u00a3m Total \u00a3m At 6 March 2022 5,266 294 5,560 New leases and modifications 1 283 115 398 Depreciation charge (375) (95) (470) Impairment charge (142) (1) (143) At 4 March 2023 5,032 313 5,345 At 7 March 2021 4,414 333 4,747 New leases and modifications 1 1,244 50 1,294 Depreciation charge (389) (89) (478) Impairment charge (3) \u2013 (3) At 5 March 2022 5,266 294 5,560 1. Includes new leases, terminations, modifications and reassessments. Set out below are the carrying amounts of lease liabilities and the movements during the period: 2023 \u00a3m 2022 \u00a3m At 6 March 2022 and 7 March 2021 6,621 5,834 New leases and modifications 382 1,280 Interest expense 267 281 Payments (781) (774) At 4 March 2023 and 5 March 2022 6,489 6,621 Current 1,533 526 Non-current 4,956 6,095 Maturity analysis 2023 \u00a3m 2022 \u00a3m Contractual undiscounted cash flows Less than one year 1,798 773 One to two years 680 1,683 Two to three years 632 627 Three to four years 591 575 Four to five years 541 542 Total less than five years 4,242 4,200 Five to ten years 2,473 2,416 Ten to fifteen years 1,981 2,005 More than fifteen years 3,505 3,338 Total undiscounted lease liability 12,201 11,959 Lease liability included in the statement of financial position 6,489 6,621 Current 1,533 526 Non-current 4,956 6,095 The Group presents additions to lease liabilities and right-of-use assets in line with the disclosure requirements of IFRS 16 \u2018Leases\u2019. In doing so, additions to right-of-use assets and lease liabilities above include the net impact of new leases, terminations, modifications, and reassessments. In the prior year, the Group exercised purchase options on 21 leased supermarkets held by a property investment pool in which the Group holds an interest. The purchase options were first included within the lease liability in the prior financial year when the Group exercised them. During the current year, the Group reached an agreement on an acquisition price on these 21 supermarkets and thus this acquisition price was used to remeasure the lease liabilities. Significant judgement \u2013 lease terms The inclusion of a lease extension period or lease break period in the lease term is a key judgement for the Group and considers all relevant factors that create an economic incentive for it to exercise them. For leased properties, this includes the current and expected profitability of the respective site, as well as the length of time until the option can be exercised. Any changes to the Group\u2019s judgement over lease terms will impact both the right-of-use asset and lease liability. Set out below are the undiscounted future rental payments not currently included within the reported lease liability for where lease extensions have not been included, or where lease breaks have been assumed: 2023 \u00a3m 2022 \u00a3m Extension options expected to not be exercised 4,781 4,681 Lease breaks expected to be exercised 425 458 Significant estimate \u2013 discount rates As noted above, lease liabilities are measured at the present value of lease payments to be made over the lease term, discounted using the IBR at the lease commencement date (for additions) or at the lease modification date (for modifications). The IBRs depend on the start date and term of the lease, and are determined based on a number of inputs including a reference (risk free) rate and adjustments to reflect the Group\u2019s credit risk. The reference rates are based on UK overnight swap rates and the credit risk adjustments are based on the prices of instruments issued by the Group and quoted credit default swaps (CDS). The following table summarises the impact that a reasonable possible change in the IBR would have had on the lease liability additions and modifications recognised during the year: Increase/ (decrease) in lease liability recognised \u00a3m Increase in IBR of 3% (68) Decrease in IBR of 3% 65 15 Leases continued Amounts recognised in profit or loss The following are the amounts recognised in profit or loss: 2023 \u00a3m 2022 \u00a3m Depreciation of right-of-use assets (470) (478) Impairment of right-of-use assets (143) (3) Interest on lease liabilities (267) (281) Variable lease payments not included in the measurement of lease liabilities (1) \u2013 Finance income from sub-leasing of right-of-use assets 2 2 Operating sublet income 48 56 Expense relating to short-term leases (26) (32) Expense relating to leases of low-value assets (2) (2) Total amount recognised in profit or loss (859) (738) Total cash outflow for leases (excludes sublet income) (810) (808) There were no leases with residual value guarantees. There have been no sale or leaseback transactions during the period. All the right of use assets are recognised on a historic cost convention. Approximately \u00a32,795m (2022: \u00a32,807m) of the Group\u2019s lease liabilities are subject to inflation-linked rentals and a further \u00a3241m (2022: \u00a3255m) are subject to rent reviews. Rental changes linked to inflation or rent reviews typically occur on an annual or five-yearly basis. The Group is committed to payments totalling \u00a3101m (2022: \u00a3nil) in relation to leases that have been signed but not yet commenced. Group as lessor Lessor accounting The Group leases out owned properties and sublets leased properties under operating and finance leases. Such properties include mall units, stores and units within stores. Where the Group subleases assets, the sublease classification is assessed with reference to the head lease right-of-use asset. This assessment considers, among other factors, whether the sublease represents the majority of the remaining life of the head lease. The ratio of rental income to head lease rental payments is used to determine how much of the right-of-use asset should be derecognised, or analysis of square foot leased in the head lease and sublease where appropriate. This assessment takes into consideration whether the sublease/head lease are above or below market rate. Amounts due from lessees under finance leases are recorded as a receivable at an amount equal to the net investment in the lease. This is initially calculated and recognised using the IBR prevalent in the underlying headlease at the recognition date. Any difference between the derecognised right-of-use asset and the newly recognised amounts due for leases under finance leases is immediately recognised in the income statement. The Group recognises finance income over the lease term, reflecting a constant periodic rate of return on the Group\u2019s net investment in the lease. Operating lease income is recognised as earned on a straight-line basis over the lease term. The below table sets out the maturity analysis of lease receivables classified as finance leases: 2023 \u00a3m 2022 \u00a3m Contractual undiscounted cash flows Less than one year 10 7 One to five years 27 36 More than five years 9 5 Total undiscounted net investment in lease receivable 46 48 Lease receivable included in the statement of financial position 35 41 Current 8 5 Non-current 27 36 The below table sets out the maturity analysis of lease receivables classified as operating leases: 2023 \u00a3m 2022 \u00a3m Less than one year 19 18 One to two years 16 16 Two to three years 13 13 Three to four years 11 11 Four to five years 9 10 Five to ten years 31 30 Ten to fifteen years 9 9 More than fifteen years 12 10 Total undiscounted lease payments receivable 120 117 The net book value of property, plant and equipment subject to operating leases at year-end is not material to the accounts. 15 Leases continued 16 Intangible assets Accounting policies a) Goodwill Goodwill represents the excess of the fair value of the consideration of an acquisition over the fair value of the Group\u2019s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is considered to have an indefinite useful life. Goodwill is tested for impairment annually and again whenever indicators of impairment are detected and is carried at cost less any provision for impairment. b) Computer software Computer software is carried at cost less accumulated amortisation and any provision for impairment. Externally acquired computer software and software licences are amortised on a straight-line basis over their useful economic lives of five to fifteen years. Costs relating to development of computer software for internal use are capitalised once the recognition criteria of IAS 38, \u2018Intangible Assets\u2019 are met. Other development expenditures that do not meet these criteria are expensed as incurred. When the software is available for its intended use, these costs are amortised on a straight-line basis over their useful economic lives of five to fifteen years within administrative expenses. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. Costs associated with maintaining computer software are recognised as an expense as incurred. c) Cloud computing arrangements Software as a Service (SaaS) arrangements are service contracts providing the Group with the right to access a cloud provider\u2019s application software over the contract period. Typically such arrangements involve ongoing licence fees to obtain access to the cloud provider\u2019s application software, as well as upfront costs incurred to configure or customise the SaaS solution. Configuration and customisation costs are capitalised in the following instances as intangible assets: \u2014 The Group has both a contractual right to take possession of the software at any time without significant penalty, and the ability to run the software independently of the host vendor. \u2014 The costs incurred meet the definition of and recognition criteria for an intangible asset. This includes for example the development of software code that enhances or modifies, or creates additional capability to, existing systems controlled by Sainsbury\u2019s. Where these conditions are not met, costs incurred to configure or customise, and the ongoing fees to obtain access to the cloud provider\u2019s application software, are recognised as operating expenses when the services are received. Where the configuration or customisation of a SaaS solution is performed by the SaaS vendor, consideration is given to whether this activity is distinct from the provision of the solution itself. This assessment considers the nature of the activities, and whether Sainsbury\u2019s can benefit from any of the services in isolation. Where the activity is not considered distinct, the costs are capitalised as a prepayment and amortised over the expected useful life of the solution. d) Acquired intangible assets Intangible assets acquired in a business combination are recognised at fair value at the acquisition date. Intangible assets with finite useful economic lives are carried at cost less accumulated amortisation and any provision for impairment and are amortised on a straight-line basis over their estimated useful economic lives, ranging from five to ten years, within administrative expenses. Refer to note 17 for details of impairment policies. Goodwill \u00a3m Computer software \u00a3m Acquired brands \u00a3m Customer relationships \u00a3m Total \u00a3m Cost At 6 March 2022 392 1,077 229 32 1,730 Additions \u2013 213 \u2013 \u2013 213 Disposals (1) (185) \u2013 \u2013 (186) At 4 March 2023 391 1,105 229 32 1,757 Accumulated amortisation and impairment At 6 March 2022 26 521 147 30 724 Amortisation expense for the year \u2013 150 20 2 172 Impairment loss for the year 14 9 \u2013 \u2013 23 Disposals (1) (185) \u2013 \u2013 (186) At 4 March 2023 39 495 167 32 733 Net book value at 4 March 2023 352 610 62 \u2013 1,024 Cost At 7 March 2021 394 899 229 32 1,554 Additions \u2013 278 \u2013 \u2013 278 Disposals 1 (2) (100) \u2013 \u2013 (102) At 5 March 2022 392 1,077 229 32 1,730 Accumulated depreciation and impairment At 7 March 2021 28 457 127 28 640 Amortisation expense for the year \u2013 129 20 2 151 Disposals (2) (65) \u2013 \u2013 (67) At 5 March 2022 26 521 147 30 724 Net book value at 5 March 2022 366 556 82 2 1,006 1. Disposals included write offs of software-as-a-service balances. Goodwill balances are detailed in note 17. 17 Impairment of non-financial assets Accounting policies Goodwill Goodwill is not amortised but tested for impairment annually or more frequently where there is an indication that the asset may be impaired. At the acquisition date goodwill is allocated to the CGU or group of CGUs within the Retail or Financial Services segments that are expected to benefit from the combination. Impairment is assessed by measuring the recoverable amount of the CGU, calculated as the higher of fair value less cost to dispose and value-in-use, at the level at which this is monitored by management. Where the carrying value of the CGU exceeds the recoverable amount an impairment loss is recognised in the income statement. The impairment charge is allocated first against goodwill and then pro-rata over other assets within the CGU by reference to the carrying amount of each remaining asset in the unit. Impairment losses recognised for goodwill are not subsequently reversed. Property, plant and equipment, right-of-use assets, and finite lived intangible assets Property, plant and equipment (PPE), right-of-use assets, and finite-lived intangible assets are assessed on an ongoing basis to determine whether there is an indication that the net book value is no longer supportable. If any such indication exists, the recoverable amount of the asset, being the higher of its fair value less costs to dispose and its value-in-use, is estimated in order to determine the extent of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the CGU to which the asset belongs. If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its recoverable amount and an impairment loss is recognised immediately in the income statement. Where there has been a change in the estimates used to determine the recoverable amount and an impairment loss subsequently reverses, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, not to exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset or CGU in prior years. An impairment loss reversal is recognised in the income statement. 16 Intangible assets continued Identification of cash generating units Cash generating units are deemed the smallest group of assets that independently generate cash inflows and are independent of the cash flows generated by other assets. The CGUs identified within the respective reportable operating segments are as follows: Retail Cash generating units are deemed to be corporate level business units, trading stores, store pipeline development sites or in certain cases for Argos, a cluster of stores. PPE, intangible assets and right-of-use assets are allocated to the store CGU they are associated with. For non-store assets, including depots and IT assets, these are allocated to store CGUs where it can be done on a reasonable and consistent basis, otherwise these are allocated to the CGU corporate level to which they relate. Goodwill recognised on acquisition of retail chains of stores (Bells and Jacksons) is allocated to its respective store CGUs. Goodwill arising on the purchase of Home Retail Group is allocated to the Home Retail Group CGU. Nectar is a separate CGU. Financial Services Cash generating units are deemed to be each respective product or product group that is capable of generating cash flows independent of other products. Non-product assets are reviewed separately as collective CGUs with the products that they support. Goodwill arising on the purchase of Sainsbury\u2019s Bank plc is allocated to the Financial Services CGU. Identification of a triggering event Management considered whether the level of uncertainty within the wider macroeconomic environment, including sustained increases in the Bank of England gilt rates, represented an indicator of impairment at the reporting date. It was determined that the increase in discount rates was a significant impairment indicator and therefore a full impairment review was undertaken. Approach and assumptions The recoverable amount for CGUs have been determined based on the fair value less cost to dispose and a value-in-use calculation which is based upon the cash flows expected to be generated, derived from the latest budget and forecast data which are reviewed by the Board. Budget and forecast data reflects both past experience and future expectations of market conditions. A vacant possession valuation basis is used to approximate the fair value less costs to dispose. This is not considered to be a significant accounting judgement. The key assumptions in measuring the value-in-use are as follows: Assumption Retail Segment Financial Services Segment Cash flow years/ assumptions \u2014 Derived from the Board approved cash flow projections for four years and then for owned stores, extrapolated into perpetuity with an assumed growth rate of 2.0%. \u2014 For leased stores, cash flows are taken to lease end with an assumed growth rate of 2.0% beyond the four-year forecast period. \u2014 In the case of properties identified for closure, cash flow years relate to the remaining period that the store will trade for. \u2014 Online grocery sales are fulfilled by individual stores and therefore these cash flows are allocated to the individual store CGUs which fulfil the online sales. In Argos, online GM&C sales for Click & Collect are allocated to the individual store CGUs which fulfil the online sales. \u2014 Derived from the Board approved cash flow projections for four years and then extrapolated over the remaining useful lives of the assets being tested for impairment with no assumed growth rate. Discount rate \u2014 A post-tax discount rate representing the Retail segment\u2019s weighted average cost of capital (WACC), subsequently grossed up to a pre-tax rate of 9.1%. \u2014 The post-tax WACC has been calculated using the capital asset pricing model, the inputs of which include a 20-year average risk-free rate for the UK, a UK equity risk premium, levered debt premium and risk adjustment and an average beta for the Group. \u2014 The discount rate is applied consistently to all individual store CGUs and the Group of CGUs supported by Sainsbury\u2019s or Argos stores. \u2014 A post-tax discount rate representing the Financial Services segment\u2019s weighted average cost of capital (WACC), subsequently grossed up to a pre-tax rate of 15.1%. \u2014 The post-tax WACC has been calculated using a combination of adjusted market analysis and the actual cost of debt on Tier 2 capital instruments. \u2014 The discount rate is applied consistently to all individual product CGUs and the collective CGUs which support the products. For store pipeline development sites, where there are plans to develop the store, the carrying value of the asset is compared with its value-in-use using a methodology consistent with the store CGU approach described above. Future cash flows include the estimated costs to completion. For sites where there is no plan to develop a store, the recoverable amount is based on its fair value less costs to dispose. 17 Impairment of non-financial assets continued Climate change considerations The Group\u2019s scenario analysis performed as part of the Task Force on Climate-Related Financial Disclosures (TCFD) report (refer to page 18) identified that the most material climate-related risks were heat events, labour capacity, drought, flooding, regulation and changes in consumer preferences. Produce, Cotton, Coffee, Tea, Clothing, Meat, Fish and Poultry (MFP), and Fuel were the product categories most exposed to the climate-related risks. The most material transitional climate risk was in fuel. As such, the Group\u2019s current year impairment review included cash flow assumptions in relation to the expected future revenue loss within the fuel category. As such, the impairment conclusions reached have incorporated the expected climate-related risks associated with fuel sales. Other than fuel, changes in consumer preferences in MFP was identified as the risk most vulnerable to transitional risks and modelling this risk in isolation to 2030 in a 1.5\u00b0C scenario calculated a \u00a3300 million to \u00a3350 million loss in revenue. The Group has considered what the impact that this revenue loss (if unmitigated) could have on the carrying value of the Group\u2019s store assets. In doing so, a corresponding reduction in margin and therefore cash flows has been modelled. Immaterial impairment risks were identified. As such, all other climate change related risks do not have a material impact on the Group\u2019s impairment considerations. Output and sensitivities Impairment charges recognised in the Retail Segment relate to both sites identified for closure as part of the restructuring programme as well as impairments on stores that will continue to trade but for which the cash flows no longer support the carrying amount of the assets. There were no charges recognised in the Financial Services Segment. The overall charges are as follows: Restructuring programme \u00a3m Impairments \u00a3m Total \u00a3m Impairment of property, plant and equipment 8 141 149 Impairment of leased assets 21 122 143 Impairment of intangible assets 5 18 23 34 281 315 Of the above assumptions, the value-in-use calculations are most sensitive to changes in the discount rate, forecast cash flows, and the long-term growth rate used beyond the forecast four-year forecast period. The table below sets out the key sensitivities performed on the value-in-use models and considered the reasonable possible changes in these assumptions. The impact of changing one sensitivity does not have a consequential impact on other sensitivities. Sensitivity area Sensitivities Increase/(decrease) in impairment \u00a3m Discount rate Increase of 2% Decrease of 2% 163 (105) Cash flows Increase of 10% Decrease of 10% (77) 57 Long-term growth rate Increase of 0.5% Decrease of 1% (30) 58 Goodwill Goodwill was separately tested at the year-end as required under IAS 36. Goodwill comprises the following: 2023 \u00a3m 2022 \u00a3m Jacksons Stores Limited 18 28 Home Retail Group 119 119 Sainsbury\u2019s Bank plc 45 45 Nectar 147 147 Bells Stores Limited 5 9 Other 18 18 352 366 Value-in-use calculations used to derive the recoverable amount of the CGU to which the respective goodwill has been allocated are based on the following key assumptions: Assumption Cash flow years/ assumptions Cash flows relating to Home Retail Group, Sainsbury\u2019s Bank plc and Nectar are derived from Board approved cash flow projections for four years and then extrapolated into perpetuity with an assumed growth rate of 2.0%. Cash flows relating to goodwill attributable to stores are consistent with the assumptions detailed above. Discount rate A post-tax discount rate representing the Retail segment\u2019s WACC, as detailed above, has been used for all goodwill balances, except Sainsbury\u2019s Bank plc where the post-tax discount rate representing the Financial Services segment\u2019s WACC, as detailed above, has been used. 17 Impairment of non-financial assets continued Jackson Stores Limited and Bells Stores Limited goodwill balances are allocated to individual store CGUs to which they relate, within the Retail segment detailed above. Home Retail Group goodwill is allocated to the collective Argos store and non-store CGUs. Sainsbury\u2019s Bank plc goodwill is allocated to the Financial Services collective CGUs, as noted above. Nectar is a separate CGU. Goodwill impairments of \u00a314 million were recognised in the year as part of the year-end impairment review, detailed above. This impairment was in relation to the store CGUs to which Jacksons Stores Limited and Bells Stores Limited goodwill amounts are allocated to. There was no impairment identified at the collective CGU level for Argos nor Financial Services, thus there was nil impairment in the Home Retail Group or Sainsbury\u2019s Bank plc goodwill amounts. No impairments were recognised to Nectar goodwill. Sensitivity analysis on the impairment tests for each group of cash-generating units to which goodwill has been allocated has been performed. The valuations indicate sufficient headroom such that a reasonably possible change to key assumptions would not result in any impairment of goodwill. While goodwill impairments of \u00a314 million were noted on certain store CGUs to which Jacksons Stores Limited and Bells Stores Limited goodwill amounts are allocated to, any reasonable possible changes in assumptions would not lead to changes in this impairment amount of more or less than \u00a32 million. The headroom disclosed below for goodwill in Jacksons Stores Limited and Bells Stores Limited relates to all store CGUs to which these goodwill amounts are allocated. Overall, management are satisfied that there are no reasonable possible changes to assumptions that would lead to further impairments in Jacksons Stores Limited, or impairments in any other goodwill. Sensitivities (revised headroom) Carrying amount \u00a3m Headroom \u00a3m Discount rate Cash flows Decrease of 2% \u00a3m Increase of 2% \u00a3m Decrease of 10% \u00a3m Increase of 10% \u00a3m Jacksons Stores Limited 18 13 20 9 10 15 Home Retail Group 119 1,257 2,072 803 1,050 1,464 Sainsbury\u2019s Bank plc 45 418 525 338 358 477 Nectar UK 147 1,165 1,692 871 1,031 1,300 Bells Stores Limited 5 1 1 \u2013 \u2013 1 Other 18 21 41 10 16 27 18 Financial assets at fair value through other comprehensive income Accounting policies Financial assets that are held for both the purpose of collecting contractual cash flows and to sell are classified as fair value through other comprehensive income (FVOCI). They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. Equity investments have been irrevocably designated as fair value through other comprehensive income. Subsequent to initial recognition at fair value plus transaction costs, these assets are recorded at fair value at each period end with the movements recognised in other comprehensive income until derecognition or impaired. On derecognition, the cumulative gain or loss previously recognised in other comprehensive income reserves is recognised in the income statement for debt instruments. Gains and losses on equity instruments are never recycled to the income statement. Dividends on financial assets at fair value through other comprehensive income are recognised in the income statement when the entity\u2019s right to receive payment is established. Interest on financial assets at fair value through other comprehensive income debt instruments is recognised using the effective interest method. 4 March 2023 \u00a3m 5 March 2022 \u00a3m Non-current Equity Other financial assets 17 382 Debt Financial Services related investment securities 498 222 515 604 Current Equity Other financial assets 366 \u2013 Debt Financial Services related investment securities 128 196 494 196 1,009 800 The other financial assets predominantly represents the Group\u2019s beneficial interest in a commercial property investment pool. The fair value of the other financial asset is based on discounted cash flows assuming a property rental growth rate of 0 per cent (2022: 0 per cent) and a discount rate of nine per cent (2022: seven per cent). There were no disposals in the current year (2022: nil) and no impairment provisions in either the current or the previous financial year. Sensitivities are included in note 28. This is recognised as a current asset as the property investment pool ends in the next 12 months. 17 Impairment of non-financial assets continued 19 Inventories Accounting policies Inventories comprise goods held for resale and are valued on a standard cost or weighted average cost basis which approximates to actual cost, and carried at the lower of cost or net realisable value. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Cost includes all direct expenditure and other appropriate attributable costs incurred in bringing inventories to their present location and condition. Provision is made for obsolete, slow moving or damaged items where appropriate. 4 March 2023 \u00a3m 5 March 2022 \u00a3m Gross finished goods 2,026 1,930 Inventory provision (127) (133) Inventory recognised on Group balance sheet 1,899 1,797 The amount of inventories recognised as an expense and charged to cost of sales for the 52 weeks to 4 March 2023 was \u00a325,198 million (2022: \u00a322,499 million). Inventory losses and provisions recognised as an expense for the year were \u00a3613 million (2022: \u00a3511 million). 20 Trade and other receivables (a) Trade and other receivables Accounting policies Trade and other receivables are non-interest bearing and are on commercial terms. They are initially recognised at fair value and subsequently measured at amortised cost less allowances for expected credit losses, using the simplified approach under IFRS 9, with adjustments for factors specific to each receivable. 2023 \u00a3m 2022 \u00a3m Non-current Other receivables 28 41 Prepayments 28 24 56 65 Current Trade receivables 141 148 Other receivables 308 363 Accrued income 4 \u2013 Prepayments 174 172 627 683 Trade and other receivables include \u00a388 million (2022: \u00a376 million) relating to supplier arrangements where there is no right of offset. Refer to note 8. In addition, current other receivables of \u00a3308 million (2022: \u00a3363 million) include \u00a3142 million (2022: \u00a3171 million) of bank funds in the course of settlement. The carrying amounts of trade and other receivables are denominated in pound sterling. (b) Allowance for expected credit losses The Group\u2019s exposure to credit risk arising from its retail operations is minimal given that the customer base is large and unrelated and that the overwhelming majority of customer transactions are settled through cash or secure electronic means. New parties wishing to obtain credit terms with the Group are credit checked prior to invoices being raised and credit limits are determined on an individual basis. 2023 Not past due \u00a3m 0 to 6 months past due \u00a3m 6 to 12 months past due \u00a3m Over 1 year past due \u00a3m Total \u00a3m Trade receivables 112 25 7 12 156 Other receivables 336 6 1 8 351 Gross carrying amount \u2013 Trade and other receivables 448 31 8 20 507 Allowance for expected credit losses (7) (2) (5) (16) (30) Net carrying amount on balance sheet 441 29 3 4 477 2022 Not past due \u00a3m 0 to 6 months past due \u00a3m 6 to 12 months past due \u00a3m Over 1 year past due \u00a3m Total \u00a3m Trade receivables 136 15 6 5 162 Other receivables 403 5 2 10 420 Gross carrying amount \u2013 Trade and other receivables 539 20 8 15 582 Allowance for expected credit losses (6) (5) (7) (12) (30) Net carrying amount on balance sheet 533 15 1 3 552 (c) Major counterparties The Group has four (2022: five) major counterparties totalling \u00a3176 million (2022: \u00a3124 million). No major counterparty balances are considered overdue or impaired. 21 Amounts due from Financial Services customers and other banks Accounting policies Loans and advances are initially recognised at fair value and subsequently held at amortised cost, using the effective interest method, less provision for impairment and recognised on the balance sheet when cash is advanced. Refer to note 29 for a detailed description of the accounting policies applicable to financial assets and note 28 for the accounting policies applicable to impairment of financial assets. 2023 \u00a3m 2022 \u00a3m Non-current Loans and advances to customers 1,959 2,069 Impairment of loans and advances to customers (51) (43) 1,908 2,026 Current Loans and advances to customers 3,573 3,202 Loans and advances to banks 100 121 Impairment of loans and advances to customers (189) (160) 3,484 3,163 Eligible personal and mortgage loans with applicable haircuts are used as collateral for the bilateral personal loans securitisation facility and the Bank of England\u2019s Term Funding Scheme with additional incentives for Small and Medium-sized enterprises (TFSME) and Indexed Long-term Repo (ILTR) facilities. As at 4 March 2023, \u00a3494 million (2022: \u00a3638 million) of Personal Loans assets, including \u00a380 million (\u00a380 million) of loans indirectly encumbered via the Bank\u2019s securitisation facilities, and \u00a3459 million (2022: \u00a3626 million) of Mortgage assets were pledged to the Bank of England facilitating funding of \u00a3660 million (2022: \u00a3661 million) from the TFSME and \u00a3nil (2022: \u00a3225 million) from the ILTR. A further \u00a3137 million (2022: \u00a369 million) of Personal Loans assets were pledged indirectly via the Bank\u2019s securitisation facilities generating \u00a3100 million (2022: \u00a350 million) of funding via sale and repurchase agreements and collateral swaps. Refer to note 28 for further details on Financial Services impairments of loans and advances. 22 Assets held for sale Accounting policies Assets are classified as held for sale if their carrying amount is to be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable within one year from the date of classification and the assets are available for sale in their present condition. Assets held for sale are stated at the lower of the carrying amount and fair value less costs to dispose. 2023 \u00a3m 2022 \u00a3m Opening balance 8 24 Classified as held for sale in the year 5 \u2013 Sold in the year (5) (16) Closing balance 8 8 For the remaining assets, the sale is still considered probable in the next financial year and so they remain classified as held for sale. The fair value of assets held for sale is based on independent market valuations of the assets. 23 Trade and other payables Accounting policies Trade payables are initially recognised at fair value and subsequently measured at amortised cost. Amounts are presented net of supplier arrangements due where there is a contractual right of offset. 2023 \u00a3m 2022 \u00a3m Current Trade payables 3,361 2,965 Other payables 596 675 Accruals 538 565 Deferred income 342 341 4,837 4,546 Non-current Other payables \u2013 11 Accruals \u2013 2 Deferred income \u2013 11 \u2013 24 Deferred income The following table presents a reconciliation of deferred income during the year: 2023 \u00a3m 2022 \u00a3m Opening balance 352 406 Revenue deferred in the year 340 282 Revenue recognised in the year which has previously been deferred (350) (336) Closing balance 342 352 The deferred revenue balance includes \u00a3315 million (2022: \u00a3327 million) in relation to deferred Nectar points. Foreign currency risk The Group has net euro denominated trade payables of \u00a335 million (2022: \u00a353 million) and US dollar denominated trade payables of \u00a386 million (2022: \u00a3119 million). Supplier financing arrangements The Group has supply chain finance programmes in place. The programmes act as an alternative source of financing for the suppliers who have the option to trade their invoices with funding providers in order to receive cash earlier than the invoice due dates. The payment terms offered to suppliers who are party to the supply chain finance programmes are within standard supplier payment terms and agreed directly between the Group and the supplier. Balances outstanding under the supplier financing arrangements are classified as trade payables, and cash flows are included in operating cash flows, since the financing arrangements are agreed between the supplier, the funding providers and the third-party platform providers. The Group does not provide additional credit enhancement nor obtain any working capital benefit from the arrangements. Included in trade payables at 4 March 2023 are amounts of \u00a3607 million (2022: \u00a3355 million) drawn by suppliers who are party to the supply chain finance programmes. 24 Amounts due to Financial Services customers and banks Accounting policies With the exception of fixed rate bonds, amounts due to Financial Services customers are generally repayable on demand and accrue interest at retail deposit rates. 2023 \u00a3m 2022 \u00a3m Current Customer accounts 4,360 4,083 Other deposits 520 361 4,880 4,444 Non-current Customer accounts 374 152 Other deposits 692 663 1,066 815 Other deposits of \u00a31,212 million (2022: \u00a31,024 million) relate to deposits from wholesale counterparties, including the Bank of England. 25 Provisions Accounting policies and key information Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic recourses will be required to settle the obligation and where the amount can be reliably estimated. Provisions are measured at managements best estimate of the consideration required to settle the obligation at the reporting date and discounted using a pre-tax rate that reflects current market assessments where the time value of money is deemed material. An increase in the provision due to the passage of time is recognised as an interest expense. Provisions for onerous contracts are recognised when the Group believes that the unavoidable costs of meeting or novating the contract exceed the economic benefits expected to be received under it. Where assets are dedicated to the fulfilment of a contract that cannot be redirected to other parts of the Group, an impairment charge would be recognised to reduce the carrying value of the assets to nil before recognising a separate onerous contract. A restructuring provision is recognised when the Group has developed a detailed formal plan and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring. Property provisions Where the Group no longer operates from a leased property, onerous property contract provisions are recognised for the least net cost of exiting from the contract. The amounts provided are based on the Group\u2019s best estimates of the likely committed outflows and site closure dates. These provisions do not include rent in accordance with IFRS 16, however do include unavoidable costs related to the lease such as service charges and insurance. Property provisions also include provisions for dilapidations which are recognised where the Group has the obligation to make-good its leased properties, which is when a decision to exit a lease has been made. This is the point at which a reliable estimate of the expected cost for dilapidations can be made. These provisions are recognised based on historically settled dilapidations which form the basis of the estimated future cash outflows. Any difference between amounts expected to be settled and the actual cash outflow will be accounted for in the period when such determination is made. Where the Group is able to exit lease contracts before the expiry date or agree sublets, this results in the release of any associated property provisions. Such events are subject to the agreement of landlords, therefore the Group makes no assumptions on the ability to either exit or sublet a property until a position is agreed. Utilisation of the above amounts is expected to be incurred in conjunction with the profile of the leases to which they relate. Insurance provisions The provision relates to the Group\u2019s outstanding insurance claims liabilities in relation to public and employer\u2019s liability claims, and third party motor claims. Claims provisions are based on assumptions regarding past claims experience and on assessments by an independent actuary and are intended to provide a best estimate of the most likely or expected outcome. Restructuring provisions The current year charge relates to redundancies announced as part of Argos store closures, depot closures, and the exit of operations in Ireland. Utilisation of restructuring provisions is expected to be incurred in line with the closure date of the site to which the provision relates. Financial Services related provisions Financial Services loan commitment provisions reflect expected credit losses modelled in relation to loan commitments not yet recognised on the balance sheet, including on credit cards and Argos store cards. Other Financial Services related provisions are primarily in relation to Argos Financial Services customers in respect of potential redress payable arising from the historic sales of Payment Protection Insurance (PPI). The eventual cost is dependent on response rates, uphold rates, complaint rates, redress costs and claim handling costs. The provision represents management\u2019s best estimate of future costs. These assumptions are inherently uncertain and the ultimate financial impact may differ from the amount provided. Property provisions \u00a3m Insurance provisions \u00a3m Restructuring \u00a3m Financial Services related provisions \u00a3m Other provisions \u00a3m Total \u00a3m At 6 March 2022 140 62 29 26 14 271 Additional provisions 26 30 64 5 \u2013 125 Unused amounts reversed (33) (4) (3) (1) (1) (42) Utilisation of provision (19) (29) (32) (2) \u2013 (82) At 4 March 2023 114 59 58 28 13 272 Current 55 19 30 28 8 140 Non-current 59 40 28 \u2013 5 132 At 7 March 2021 164 67 54 26 38 349 Additional provisions 9 34 44 6 1 94 Unused amounts reversed (7) (5) (16) (3) (24) (55) Utilisation of provision (27) (34) (53) (3) (1) (118) Amortisation of discount 1 \u2013 \u2013 \u2013 \u2013 1 At 5 March 2022 140 62 29 26 14 271 Current 16 22 28 26 8 100 Non-current 124 40 1 \u2013 6 171 Climate change considerations The Group takes into account the potential impact of climate change on its legal and constructive obligations, such as potential changes in regulations related to carbon emissions, environmental liabilities and natural disasters. The Group also considers the potential impact of climate change on the costs of complying with environmental regulations and the costs of natural disasters. The Group has reviewed its provisions and concluded that no adjustments need to be made for climate change risks, nor that any new provisions need to be recognised for climate-related matters. Significant estimate \u2013 provisions The Group\u2019s provisions are estimates of the actual costs and timing of future cash flows, which are dependent on future events and market conditions. Thus there is inherently an element of estimation uncertainty within the provisions recognised by the Group. Any difference between expectations and the actual future liability will be accounted for in the period when such determination is made. The provisions are most sensitive to estimates of the future cash outflows. The following table summarises the impact that a reasonable possible change in expenditure required to settle the present obligation at the end of the reporting period would have had on the amounts recognised during the year. Increase/(decrease) in provisions recognised Property provisions \u00a3m Insurance provisions \u00a3m Restructuring \u00a3m Other provisions \u00a3m Total \u00a3m Increase in cash outflow of 5% 6 3 3 1 13 Decrease in cash outflows of 5% (6) (3) (3) (1) (13) Sensitivities on Financial Services ECL provisions are included in note 28, therefore not included in the above. 26 Called up share capital, share premium and merger reserve Accounting policies Ordinary shares are classified as equity instruments. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds. 2023 million 2022 million 2023 \u00a3m 2022 \u00a3m Called up share capital Allotted and fully paid ordinary shares 28 4 /7p 2,352 2,336 672 668 Share premium account Share premium 1,418 1,406 The movements in the called up share capital, share premium and merger reserve are set out below: Number of ordinary shares million Ordinary shares \u00a3m Share premium account \u00a3m Merger reserve \u00a3m At 5 March 2022 2,336 668 1,406 568 Allotted in respect of share option schemes 16 4 12 \u2013 At 4 March 2023 2,352 672 1,418 568 At 6 March 2021 2,231 637 1,173 568 Allotted in respect of share option schemes 14 5 17 \u2013 Allotted in respect of Hybrid Convertible bond payment 91 26 216 \u2013 At 5 March 2022 2,336 668 1,406 568 For the year ended 4 March 2023, 15,987,425 Ordinary shares (2021/22: 14,541,968) with a nominal value of 28 4 /7p each were issued for consideration of \u00a316 million (2021/22: \u00a322 million) to satisfy awards under the Group\u2019s share options schemes. During the year ended 5 March 2022, the Group redeemed the \u00a3250 million perpetual convertible bonds, of which \u00a3242 million were converted to shares. As such, the Group issued 91,026,265 Ordinary shares to settle its liability, increasing share capital and share premium by \u00a326 million and \u00a3216 million respectively. 25 Provisions continued 27 Capital redemption and other reserves Movements in retained earnings during the reported periods are presented within the consolidated statement of changes in equity. Movements within individual reserves that are accumulated and presented as \u2018Other Reserves\u2019 within the consolidated statement of changes in equity are as follows: Currency translation reserve \u00a3m Own Share Reserve \u00a3m Financial assets at fair value through other comprehensive income \u00a3m Cash flow hedge \u00a3m Total other reserves \u00a3m Capital redemption reserve \u00a3m At 6 March 2022 (1) (68) 293 117 341 680 Currency translation differences 4 \u2013 \u2013 \u2013 4 \u2013 Financial assets at fair value through other comprehensive income movements \u2013 \u2013 2 \u2013 2 \u2013 Cash flow hedges gains and losses transferred to inventory \u2013 \u2013 \u2013 (139) (139) \u2013 Items reclassified from financial assets at fair value through other comprehensive income reserve \u2013 \u2013 (1) \u2013 (1) \u2013 Cash flow hedges effective portion of fair value movements \u2013 \u2013 \u2013 93 93 \u2013 Items reclassified from cash flow hedge reserve \u2013 \u2013 (1) (17) (18) \u2013 Purchase of own shares \u2013 (45) \u2013 \u2013 (45) \u2013 Allotted in respect of share schemes \u2013 23 \u2013 \u2013 23 \u2013 Deferred tax \u2013 \u2013 \u2013 14 14 \u2013 At 4 March 2023 3 (90) 293 68 274 680 At 7 March 2021 \u2013 (33) 251 (84) 134 680 Currency translation differences (1) \u2013 \u2013 \u2013 (1) \u2013 Financial assets at fair value through other comprehensive income movements \u2013 \u2013 71 \u2013 71 \u2013 Cash flow hedges gains and losses transferred to inventory \u2013 \u2013 \u2013 28 28 \u2013 Items reclassified from financial assets at fair value through other comprehensive income reserve \u2013 \u2013 4 \u2013 4 \u2013 Cash flow hedges effective portion of fair value movements \u2013 \u2013 \u2013 204 204 \u2013 Items reclassified from cash flow hedge reserve \u2013 \u2013 \u2013 7 7 \u2013 Purchase of own shares \u2013 (48) \u2013 \u2013 (48) \u2013 Allotted in respect of share schemes \u2013 14 \u2013 \u2013 14 \u2013 Other adjustments \u2013 (1) \u2013 16 15 \u2013 Deferred tax \u2013 \u2013 (33) (54) (87) \u2013 At 5 March 2022 (1) (68) 293 117 341 680 The Group has reclassified the Own Share Reserve of \u00a368 million as at 5 March 2022 and \u00a333 million as at 6 March 2021 from Retained earnings to Capital redemption and other reserves to provide greater clarity to users over the Group\u2019s accumulated profits and losses as well as to better align the nature of reserves presented cumulatively within the Statement of changes in equity. Retained earnings and Capital redemption and other reserves have subsequently been adjusted for the year ended 5 March 2022 from \u00a34,692 million and \u00a31,089 million to \u00a34,760 million and \u00a31,021 million respectively, and at 6 March 2021 from \u00a33,228 million and \u00a3847 million to \u00a33,261 million and \u00a3814 million respectively. Currency translation reserve The currency translation reserve accumulates foreign exchange differences arising on the translation of net assets in foreign operations which are recognised in Other Comprehensive Income. The cumulative amount is reclassified to retained earnings when the related investment is disposed. Own share reserve The own share reserve represents the cost of shares in the Company held by the ESOT. The number of shares held by the ESOT, outlined in the table below, are held for potential awards under outstanding employee share award plans. 4 March 2023 5 March 2022 Market Value \u00a3m Nominal Value \u00a3m Number of Ordinary shares million Market Value \u00a3m Nominal Value \u00a3m Number of Ordinary shares million Investment in own shares 99 10.7 37.3 66 7.6 26.6 Maximum number of shares held during the period 83 10.9 38.0 75 7.7 2 7. 0 Investment in own shares are recorded at cost, net of directly attributable costs for the purchase of issued, or issuance of new shares. Costs related to administering the ESOT are recognised within the Income Statement when incurred. The related cost is transferred to retained earnings when shares are issued by the ESOT to employees to satisfy employee share awards. During the period, the ESOT acquired 20.0 million of the Company\u2019s Ordinary shares via market purchase for cash consideration of \u00a345 million (2022: 16.3 million shares via market purchase for cash of \u00a348 million). The ESOT subsequently disposed of 9.3 million (2022: 6.9 million) Ordinary shares in the Company by way of distribution to settle outstanding employee share awards. The ESOT has waived its right to receive dividends and has agreed to abstain from exercising their right to vote. Financial assets at fair value through other comprehensive income The financial assets at fair value through other comprehensive income reserve represents the fair value gains and losses on the financial assets at fair value through other comprehensive income held by the Group. Cash flow hedge reserve The cash flow hedge reserve represents the effective portion of gains or losses on derivatives designated and that qualify as cash flow hedges. Amounts are transferred to the balance sheet and included within the initial cost of the asset in which is being hedged, or to the income statement, as appropriate. Capital redemption reserve The capital redemption reserve represents the aggregated nominal value of shares redeemed and subsequently cancelled by the Group. The balance relates to the redemption of class B shares following shareholder approval at the Company\u2019s Extraordinary General Meeting on 12 July 2004 to return \u00a3680 million of share capital. The final redemption date for B shares was 18 July 2007 and all transactions relating to the B shares have now been completed. 28 Financial risk management The principal financial risks faced by the Group relate to liquidity risk, credit risk, market risk (foreign currency risk, interest rate risk and commodity risk) and capital risk. Financial risk management is managed by a central treasury department in accordance with policies and guidelines which are reviewed and approved by the Board of Directors. The risk management policies are designed to minimise potential adverse effects on the Group\u2019s financial performance by identifying financial exposures and setting appropriate risk limits and controls. The risk management policies also ensure sufficient liquidity is available to the Group to meet foreseeable financial obligations and that cash assets are invested safely. Financial risk management with respect to Financial Services is separately managed within the Financial Services\u2019 governance structure. Liquidity risk Liquidity risk is the risk that the Group may be unable to meet its financial obligations as they fall due. The principal operational cash flow of the Group is largely stable and predictable reflecting the low business risk profile of the food retail sector and the cyclical profile of the non-food retail sector. Cash flow forecasts are produced to assist management in identifying future liquidity requirements. The Group\u2019s liquidity policy sets a minimum funding headroom of \u00a3500 million in excess of forecast funding requirements over a rolling 12-month time horizon. The Group manages its liquidity risk by maintaining a core of long-dated borrowings, pre-funding future cash flow commitments and holding contingent committed credit facilities. The Group has a \u00a31,575 million unsecured committed facility which consists of a \u00a31,000 million Revolving Credit Facility and a \u00a3575 million Term Loan. The Revolving Credit Facility is split into two Facilities, a \u00a3500 million Facility (A) and a \u00a3500 million Facility (B). Facility A has a maturity of December 2026 and Facility B has a maturity of December 2027. The Term Loan has a maturity of March 2026. The Revolving Credit Facility and Term Loan were undrawn at 4 March 2023. As detailed in note 23, some suppliers have access to supply chain finance facilities, which allows these suppliers to benefit from the Group\u2019s credit profile. The total size of the facility at 4 March 2023 was \u00a31,054 million (2022: \u00a31,101 million) across a number of banks and platforms. The amount utilised was \u00a3607 million with headroom of \u00a3447 million. The level of utilisation is dependent on the individual supplier requirements and varies significantly over time. 27 Capital redemption and other reserves continued The table below analyses the Group\u2019s financial liabilities into relevant maturity groupings based on the remaining period to the contractual maturity date. The amounts disclosed in the tables are the contractual undiscounted cash flows or an estimate of cash flows in respect of floating interest rate liabilities. At 4 March 2023 Less than one year \u00a3m One to two years \u00a3m Two to five years \u00a3m More than five years \u00a3m Non-derivative financial liabilities Secured loans: Loan due 2031 1 (79) (82) (272) (289) Trade and other payables (4,495) \u2013 \u2013 \u2013 Amounts due to Financial Services customers and banks 2 (5,101) (359) (766) \u2013 Derivative contracts \u2013 net settled Commodity contracts (1) 1 \u2013 \u2013 Interest rate swaps in hedging relationships 1, 3 28 13 4 4 Other interest rate swaps \u2013 Sainsbury\u2019s Bank 4 \u2013 \u2013 \u2013 Derivative contracts \u2013 gross settled Foreign exchange forwards \u2013 outflow 4 (1,560) (222) \u2013 \u2013 Foreign exchange forwards \u2013 inflow 4 1,602 220 \u2013 \u2013 Commodity contracts \u2013 outflow (16) (28) (59) (164) Commodity contracts \u2013 inflow 44 58 116 200 At 5 March 2022 Less than one year \u00a3m One to two years \u00a3m Two to five years \u00a3m More than five years \u00a3m Non-derivative financial liabilities Secured loans: Loan due 2031 1 (76) (80) (265) (378) Unsecured loans Bank overdraft (7) \u2013 \u2013 \u2013 Trade and other payables (4,205) (13) \u2013 \u2013 Amounts due to Financial Services customers and banks 2 (4,444) (109) (708) \u2013 Derivative contracts \u2013 net settled Commodity contracts 22 2 \u2013 \u2013 Interest rate swaps in hedging relationships 1, 3 (4) 7 4 1 Derivative contracts \u2013 gross settled Foreign exchange forwards \u2013 outflow 4 (1,680) (233) \u2013 \u2013 Foreign exchange forwards \u2013 inflow 4 1,707 234 \u2013 \u2013 Commodity contracts \u2013 outflow (13) (25) (61) (56) Commodity contracts \u2013 inflow 82 55 102 109 Assumptions: 1. Cash flows relating to debt and swaps linked to inflation rates have been calculated using a RPI of 5 per cent for the year ended 4 March 2023, 5.0 per cent for the year ending 2 March 2024 and 5.0 per cent for future years (2022: RPI of 1.4 per cent for the year ending 5 March 2022 and 5 per cent for years 2023 and beyond). 2. Cash flows relating to amounts due to Sainsbury\u2019s Bank customers and banks are calculated using contractual terms and interest rates for fixed rate instruments. Where balances are contractually repayable on demand, behavioural assumptions are applied to estimate the interest payable on those balances. These are shown as due within one year. 3. The swap rate that matches the remaining term of the interest rate swap as at 4 March 2023 has been used to calculate the floating rate cash flows over the life of the interest rate swaps shown above (2022: 5 March 2022). 4. Cash flows in foreign currencies have been translated using spot rates as 4 March 2023 and 5 March 2022. Financial services Liquidity risk is the risk that Sainsbury\u2019s Bank and its subsidiaries (the Bank) cannot meet its payment obligations as they fall due, or can only do so at excessive cost. The Bank seeks to ensure that financial obligations can be met at all times, even under liquidity stress conditions. The annual Internal Liquidity Adequacy Assessment Process (ILAAP) enables the Bank to: (1) Identify and assess its most relevant liquidity risk drivers; (2) Quantify its liquidity needs under various stress scenarios; and (3) Put in place appropriate limits and controls to mitigate liquidity risks. In meeting its internal limits as well as PRA requirements, the Bank maintains a stock of high quality liquid assets that can be readily monetised by outright sale or repurchase agreement to meet the Bank\u2019s obligations to depositors and other creditors. The Bank\u2019s Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) are regularly monitored and forecast alongside cash flow and funding ratios. Long term and short term forecasts are prepared to assess liquidity requirements, taking into account factors such as ATM cash management, contractual maturities and customer deposit patterns (stable or less stable deposits) as well as outflows regarding undrawn commitments. These reports support daily liquidity management, with early warning indicators reviewed on a daily basis and appropriate triggers for escalation and action in line with risk appetite, Liquidity and Funding Policy and Liquidity Contingency Plan. Asset encumbrance ratios and risk indicators for wholesale funding are also regularly monitored and reported to the Asset-Liability Committee (ALCO). 28 Financial risk management continued Asset encumbrance 2023 2022 Carrying value of encumbered assets \u00a3m Matching liabilities, contingent liabilities or securities lent \u00a3m Carrying value of encumbered assets \u00a3m Matching liabilities, contingent liabilities or securities lent \u00a3m Loans and advances to customers 1,116 760 1,365 885 Debt securities \u2013 \u2013 157 75 Other assets 64 \u2013 40 27 Cash and balances with central banks 15 \u2013 15 \u2013 The primary sources of encumbrance in the Bank relate to margin requirements for derivative transactions and collateral relating to secured funding transactions. Cash collateral is advanced and received as variation margin on derivative transactions, whilst eligible treasury assets (primarily Gilts and Treasury bills) are pledged as collateral for initial margin requirements on derivatives which are centrally cleared. Eligible personal loans and mortgages, with applicable haircuts, are used as collateral for Bank of England funding facilities, the Term Funding Scheme with additional incentives for SMEs (TFSME) and Indexed Long Term Repo (ILTR) facilities. Credit risk a. Retail credit risk management Counterparty credit risk is the risk of a financial loss arising from counterparty default or non-performance in respect of the Group\u2019s holdings of cash and cash equivalents, derivative financial assets, deposits with banks, investments in marketable securities, trade and other receivables and loans and advances to customers. Specifically within Financial Services, retail credit risk is the possibility of losses arising from a retail customer failing to meet their agreed repayment terms as they fall due under mortgage, unsecured personal loan, credit card, store card or monthly payment plan arrangements. The Financial Services division utilise automated scorecards to assess the credit worthiness and affordability criteria of new applicants and ongoing behavioural characteristics of existing customers. The outcome from all scorecard models is monitored utilising a set of credit quality metrics to ensure actual performance is in line with agreed expectations. Additional expert underwriting of credit applications is undertaken by a specialist operational team where further consideration is appropriate. The Retail Credit Risk Committee of Sainsbury\u2019s Bank provide portfolio oversight control over credit strategy to maintain lending in line with the Board approved risk appetite, with additional oversight and control provided by the Executive Risk Committee and Board Risk Committee. Internal Audit provide additional assurance by undertaking regular reviews on the adequacy of credit risk policies and procedures. b. Wholesale and derivative credit risk management The Group (excluding Financial Services) sets counterparty limits for each of its banking and investment counterparties based on their credit ratings and credit default swap pricing. The minimum long-term credit rating accepted by the Group is BBB- (Standard & Poor\u2019s and Fitch) or Baa3 (Moody\u2019s) or, in the case of pound sterling liquidity funds, AAA or Aaa/MR1+ from Moody\u2019s. In the event of a split credit rating, the lower rating applies. The table below analyses the Group\u2019s (including Financial Services) cash and cash equivalents by credit exposure excluding bank balances, store cash, cash in transit and cash at ATMs. Counterparty Long-term rating Group 2023 \u00a3m Group 2022 \u00a3m Financial institutions \u2013 Money market funds AAA/Aaa 140 \u2013 Financial institutions \u2013 Money market deposits AAA/Aaa 50 \u2013 Financial institutions \u2013 Money market deposits AA+/Aa1 to A/A2 215 25 Deposits at central banks AA+/Aa1 345 234 The table below analyses the fair value of the Group\u2019s derivative financial assets by credit exposure, excluding any collateral held. Counterparty Long-term rating Group 2023 \u00a3m Group 2022 \u00a3m Interest rate swaps AA+/Aa1 to A/A2 99 35 Inflation rate swaps AA+/Aa1 to A/A2 2 5 FX forward contracts AA+/Aa1 to A/A2 49 46 Commodity forward contracts AA+/Aa1 to A/A2 7 25 The Bank\u2019s treasury portfolio is held primarily for liquidity management purposes and in the case of derivatives, for the purpose of managing market risk. The liquidity portfolio is invested in eligible investment securities that qualify for the regulatory Liquidity Coverage Ratio (LCR) and internal Operational Liquidity Pool (OLP). These investments include the Bank of England\u2019s (BoE) reserve account, UK government securities (gilts or Treasury bills), multilateral development bank securities, government guaranteed agency securities, UK regulated covered bond programmes and asset backed securities. Limits are established for all counterparty and asset class exposures based on their respective credit quality and market liquidity. Consideration is also given to geographical region and the strength of relevant sovereign credit ratings. Derivatives are subject to the same credit risk control procedures as are applied to other wholesale market instruments and the credit risk arising from mark to market derivative valuations is mitigated by daily margin calls, posting cash collateral to cover exposures. Daily monitoring is undertaken by the Bank\u2019s Treasury and Financial Risk Teams, including early warning indicators with appropriate triggers for escalation. 28 Financial risk management continued 28 Financial risk management continued c. Maximum exposure to credit risk The table below shows the maximum exposure to credit risk for the components of the balance sheet, including derivatives. The maximum exposure is shown gross, before the effect of mitigation through the use of collateral agreements. 2023 \u00a3m 2022 \u00a3m Credit risk exposures relating to on balance sheet items Loans and advances to customers and other banks 5,392 5,189 Cash and balances with central banks 1,319 825 Derivative financial instruments (excludes level 3 instruments) 156 111 Investment securities 626 418 Other assets 477 552 Credit risk exposures relating to off balance sheet items Loan commitments 11 26 Total credit risk exposures 7,981 7,1 2 1 The commitments to lend disclosed in the above table do not include undrawn limits on credit cards and store cards of \u00a38,674 million (2022: \u00a38,777 million). These are not considered contractual commitments but, because in practice Financial Services does not expect to withdraw these credit limits from customers, they are within the scope of impairment provisioning. d. Impairment of financial assets Accounting policies Impairments on financial assets are accounted for using a 3-stage forward-looking expected credit loss (ECL) approach in line with IFRS 9. The Group is required to record an allowance for ECL for all loans and other debt financial assets not held at FVTPL, together with loan commitments and financial guarantee contracts. ECLs are based on the difference between the cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. For Financial Services portfolios of loans, such as credit card lending, storecard lending and personal loans, impairment provisions are calculated for groups of assets, otherwise impairment is identified at a counterparty specific level. The allowance is calculated by reference to the estimated probability of default (PD), exposure at default (EAD) and loss given default (LGD). \u2014 The probability of default represents the likelihood of a borrower defaulting within 12 months from the balance sheet date or within the expected lifetime of the borrower. \u2014 Exposure at default represents the expected amount due from the borrower at the point of default by reference to exposure at the balance sheet date adjusted for expected future changes including repayments and utilisation of undrawn facilities. \u2014 Loss given default represents the expected percentage loss at the point of default relative to the EAD. The estimate takes into account utilisation of any expected collections and recoveries strategies, debt sale arrangements and collateral. ECL 3 stage model \u2014 Stage 1 \u2013 Impairment allowance on financial assets that have not significantly increased in credit risk since origination, nor are credit impaired, is calculated using the probability that a borrower will default within 12 months from the balance sheet date. Interest income is recognised on the gross carrying value of the financial asset. \u2014 Stage 2 \u2013 Where a financial asset exhibits a significant increase in credit risk (SICR) but is not yet considered to be credit impaired, the probability of default considered in the impairment allowance is based upon the lifetime probability of the borrower defaulting. Interest income continues to be recognised on the gross carrying value of the financial asset. \u2014 Stage 3 \u2013 Assets considered to be credit impaired resulting from one or more events that have occurred that has resulted in a detrimental impact on the estimated future cash flows of the asset. Stage 3 assets will continue to recognise lifetime expected impairment losses (with a 100% probability of default) and interest income will be recognised on the net carrying amount (i.e. gross amount less impairment allowance). Significant increases in credit risk The Group determines whether there has been a significant increase in credit risk by reference to quantitative thresholds, qualitative indicators and the backstop presumption that credit risk has significantly increased if contractual payments are more than 30 days past due. Quantitative thresholds have been determined that when the lifetime PD of an instrument as at the reporting date has increased to greater than a specified multiple of the origination lifetime PD, a significant increase in credit risk is deemed to have occurred. Qualitative tests are based around the Group\u2019s credit origination policy rules for Financial Services customers. These rules are in place at account origination in order to decline accounts that may demonstrate risk factors outside of risk appetite that are not yet reflected in PD measures. At the reporting date, if an account satisfies any policy decline rules that it had not at the point of origination, it will be considered to have significantly increased in credit risk. There is no probationary period applied in respect of accounts that cure from stage 2 to stage 1. Transfer criteria have been subject to extensive analysis to ensure that they appropriately reflect the flow of accounts from origination to default so as to maximise the number of accounts that flow through the stages and minimise accounts that jump from stage 1 to stage 3, or that fail to enter stage 3 from stage 2. The Group has applied the low credit risk exemption in respect of its high quality treasury portfolio held for liquidity purposes. This exemption permits low credit risk debt securities (i.e. those considered investment grade) to remain in Stage 1 without an assessment of significant increase in credit risk. Definition of default The Group\u2019s definition of default is used in determining those accounts classified as stage 3 (i.e. credit impaired). The Group has chosen not to rebut the backstop presumption prescribed by IFRS 9 that where an account is 90 days or more past its due date then default has occurred. The Group has also defined a number of unlikeliness-to-pay criteria that result in an account being deemed to have defaulted. These include: \u2014 Where operational collections activities have been exhausted on accounts that are less than 90 days past due and the account is subject to recoveries processes \u2014 If any forbearance has been granted on the account (see forbearance definition below). \u2014 Where the customer is subject to insolvency proceedings \u2014 Where the customer is deceased Where an account no longer meets any of the default criteria, such as by bringing payments back up to date, the Group will continue to consider the account as being in default for the probation period (24 months for Loans and Cards, and 12 months for Storecards) from the date when it last met the definition of default. Write-off Loans and advances to customers are written off (either partially or in full) when there is no realistic prospect of recovery. This is generally the case when the Group determines that the borrower does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to write-off. Subsequent recoveries of amounts previously written off result in impairment gains recorded in the statement of comprehensive income. Expected lifetime For the purposes of considering the lifetime probability of default, the expected lifetime of a financial asset is the contractual term where this is fixed within the contract, or in the case of revolving products such as credit cards a behavioural life is determined by reference to historic trends. Modified financial assets When the contractual cash flows of a financial asset have been renegotiated or modified and the financial asset was not derecognised, its gross carrying amount is recalculated as the present value of the modified contractual cash flows, discounted at the original effective interest rate with a gain or loss recognised in the income statement. 28 Financial risk management continued Loans and advances to customers per stage The tables below summarise the breakdown of the gross carrying amount of loans and advances to customers per stage. Unsecured lending represents Sainsbury\u2019s Bank credit cards and personal loan lending in addition to Argos storecards and monthly payment plan. Secured lending represents Sainsbury\u2019s Bank mortgage lending. At 4 March 2023 Unsecured lending Stage 1 \u00a3m Stage 2 \u00a3m Stage 3 \u00a3m Total \u00a3m Impaired Less than 3 months, but impaired \u2013 \u2013 31 31 Over 3 months \u2013 \u2013 91 91 Recoveries \u2013 \u2013 81 81 Total gross impaired loans \u2013 \u2013 203 203 Past due 30 days to 3 months \u2013 23 \u2013 23 Past due less than 30 days 10 26 \u2013 36 Not past due 4,302 430 \u2013 4,732 Total gross amount due 4,312 479 203 4,994 Impairment Impairment on gross balance (45) (51) (144) (240) Undrawn commitments impairment (12) (7) - (19) Total impairment (57) (58) (144) (259) Coverage 1.3% 12.1% 70.9% 5.2% At 4 March 2023 Secured lending Stage 1 \u00a3m Stage 2 \u00a3m Stage 3 \u00a3m Total \u00a3m Impaired Less than 3 months, but impaired \u2013 \u2013 5 5 Over 3 months \u2013 \u2013 1 1 Recoveries \u2013 \u2013 \u2013 \u2013 Total gross impaired loans \u2013 \u2013 6 6 Past due 30 days to 3 months \u2013 \u2013 \u2013 \u2013 Past due less than 30 days \u2013 1 \u2013 1 Not past due 533 41 \u2013 574 Total gross amount due 533 42 6 581 Impairment Impairment on gross balance - - - - Undrawn commitments impairment - - - - Total impairment - - - - Coverage 0.0% 0.1% 10.4% 0.1% 28 Financial risk management continued At 5 March 2022
Secured lending
Stage 1
\u00a3m
Stage 2
\u00a3m
Stage 3
\u00a3m
Total
\u00a3m
Impaired
Less than 3 months, but impaired \u2013 \u2013 31 31
Over 3 months \u2013 \u2013 75 75
Recoveries \u2013 \u2013 59 59
Total gross impaired loans \u2013 \u2013 165 165
Past due 30 days to 3 months \u2013 20 \u2013 20
Past due less than 30 days 11 29 \u2013 40
Not past due 3,815 465 \u2013 4,280
Total gross amount due 3,826 514 165 4,505
Impairment
Impairment on gross balance (34) (47) (120) (201)
Undrawn commitments impairment (10) (8) (1) (19)
Total impairment (44) (55) (121) (220)
Coverage 1.2% 10.7% 73.3% 4.9%
At 5 March 2022
Secured lending
Stage 1
\u00a3m
Stage 2
\u00a3m
Stage 3
\u00a3m
Total
\u00a3m
Impaired
Less than 3 months, but impaired \u2013 \u2013 8 8
Over 3 months \u2013 \u2013 1 1
Recoveries \u2013 \u2013 \u2013 \u2013
Total gross impaired loans \u2013 \u2013 9 9
Past due 30 days to 3 months \u2013 \u2013 \u2013 \u2013
Past due less than 30 days \u2013 1 \u2013 1
Not past due 713 59 \u2013 772
Total gross amount due 713 60 9 782
Impairment
Impairment on gross balance \u2013 \u2013 (2) (2)
Undrawn commitments impairment \u2013 \u2013 \u2013 \u2013
Total impairment \u2013 \u2013 (2) (2)
Coverage 0.1% 0.7% 23.6% 0.4%
28 Financial risk management continued
The tables below present the reconciliations of ECL allowances on loans and advances to customers, and to overall amounts held on the balance sheet: At 4 March 2023 Stage 1 \u00a3m Stage 2 \u00a3m Stage 3 \u00a3m Total \u00a3m Gross exposure Impaired \u2013 \u2013 209 209 Past due but not impaired 10 50 \u2013 60 Neither past due nor impaired 4,835 471 \u2013 5,306 4,845 521 209 5,575 Allowance for expected credit loss Opening loss allowance (34) (47) (122) (203) Transfers between stages (11) 22 (11) \u2013 Additional provisions less amounts recovered (8) (2) 8 (2) Write-offs \u2013 4 35 39 Changes in credit risk during the year 8 (28) (54) (74) Closing loss allowance (45) (51) (144) (240) Net exposure 4,800 470 65 5,335 Hedging fair value adjustment (43) Loans and advances to other banks 100 Net book value within amounts due from financial services customers on balance sheet 5,392 At 5 March 2022 Stage 1 \u00a3m Stage 2 \u00a3m Stage 3 \u00a3m Total \u00a3m Gross exposure Impaired \u2013 \u2013 174 174 Past due but not impaired 11 50 \u2013 61 Neither past due nor impaired 4,528 524 \u2013 5,052 4,539 574 174 5,287 Allowance for expected credit loss Opening loss allowance (40) (63) (160) (263) Transfers between stages 8 (3) (5) \u2013 Additional provisions less amounts recovered (6) 2 13 9 Write-offs \u2013 1 78 79 Changes in credit risk during the year 4 16 (48) (28) Closing loss allowance (34) (47) (122) (203) Net exposure 4,505 527 52 5,084 Hedging fair value adjustment (16) Loans and advances to other banks 121 Net book value on balance sheet 5,189 Financial commitments Sainsbury\u2019s Bank has off-balance sheet commitments to extend credit to customers of \u00a311 million (2022: \u00a326 million). These commitments do not include undrawn limits on credit cards and store cards of \u00a38,674 million (2022: \u00a38,777 million). These are not considered contractual commitments but, because in practice Financial Services does not expect to withdraw these credit limits from customers, they are within the scope of impairment provisioning. At the year-end, \u00a320 million of expected credit loss provisions are recognised in respect of off-balance sheet loan commitments and undrawn limits in line with IFRS 9 (2022: \u00a319 million). 28 Financial risk management continued Credit quality per class of loans and advances The Group defines the following classifications for all loans and advances to customers: High, Satisfactory, Low and Credit impaired. These are segmented by 12 month probability of default (PD) under IFRS 9. IFRS 9 12 month PD High quality: <=3.02% Satisfactory quality >=3.03% \u2013 11.10% Low quality >=11.11% Credit impaired 100% Unsecured lending At 4 March 2023 Stage 1 \u00a3m Stage 2 \u00a3m Stage 3 \u00a3m Total \u00a3m High quality 3,593 125 \u2013 3,718 Satisfactory quality 641 215 \u2013 856 Low quality 78 139 \u2013 217 Credit impaired \u2013 \u2013 203 203 Total 4,312 479 203 4,994 At 5 March 2022 Stage 1 \u00a3m Stage 2 \u00a3m Stage 3 \u00a3m Total \u00a3m High quality 3,401 233 \u2013 3,634 Satisfactory quality 381 181 \u2013 562 Low quality 44 100 \u2013 144 Credit impaired \u2013 \u2013 165 165 Total 3,826 514 165 4,505 Secured lending At 4 March 2023 Stage 1 \u00a3m Stage 2 \u00a3m Stage 3 \u00a3m Total \u00a3m High quality 533 30 \u2013 563 Satisfactory quality \u2013 10 \u2013 10 Low quality \u2013 2 \u2013 2 Credit impaired \u2013 \u2013 6 6 Total 533 42 6 581 At 5 March 2022 Stage 1 \u00a3m Stage 2 \u00a3m Stage 3 \u00a3m Total \u00a3m High quality 713 59 \u2013 772 Satisfactory quality \u2013 1 \u2013 1 Low quality \u2013 \u2013 \u2013 \u2013 Credit impaired \u2013 \u2013 9 9 Total 713 60 9 782 e. Significant estimate \u2013 macro-economic scenarios IFRS 9 requires that the measurement of ECL should reflect an unbiased and probability weighted amount that is determined by evaluating a range of forward-looking economic assumptions. The Group has engaged an external supplier to provide economic forecasts which are subject to review, challenge and approval through the Bank\u2019s governance processes. The ECL models utilise 4 scenarios (2022: 4 scenarios) including a \u2018base case\u2019 scenario considered to be the most likely outcome together with an upside, downside scenario and severe downside. The base case has been assigned a probability weighting of 40% with the upside, downside and severe downside scenarios weighted 30%, 25%, 5% respectively (2022: base scenario 45%; upside, downside and severe downside scenarios weighted 35%, 15%, 5% respectively). 28 Financial risk management continued The key macro-economic assumptions included in the ECL calculation (shown as five-year averages from the reporting date) were: As at 4 March 2023 Base % Upside % Downside % Severe downside % Unemployment rate 5.3 4.5 6.2 7.6 Consumer price growth 3.4 2.9 3.8 4.3 GDP 0.8 1.4 0.3 (0.3) Mortgage debt as a percentage of household income 99.9 97.6 102.0 104.5 Real household disposable income 0.8 1.2 0.2 (0.3) Probability weighting (%) 40% 30% 25% 5% Sensitivity analysis impact on impairment of 100 per cent weighting \u00a3(2.5)m \u00a3(12.5)m \u00a312.9m \u00a344.5m f. Management overlays and post model adjustments (PMAs) Overlays and PMAs are short-term increases or decreases to the ECL at either a customer or portfolio level to account for items that have not been fully reflected in the existing models. Consistent with the most recent recommendations of the Taskforce on Disclosures about Expected Credit Losses (DECL), the Group has defined overlays as adjustments made outside of the granular account level ECL calculation and PMAs as being calculated at granular account level, most often in respect of known data or model limitations. Internal governance is in place to regularly monitor management overlays and to reduce the reliance on management overlays through model recalibration or redevelopment, as appropriate. Management overlays and PMAs applied in estimating the reported ECL at 4 March 2023 are set out in the following table. The table includes adjustments in relation to data and model limitations resulting from economic uncertainty related to the cost of living crisis. It shows the adjustments applicable to the scenario weighted ECL numbers. At 4 March 2023 \u00a3m At 5 March 2022 \u00a3m Economic adjustment (4) 10 Operational overlays 1 5 Total (3) 15 The proportion of net overlays and post model adjustments is (1)% of the total ECL provision as at 4 March 2023 (2022: 9%). Economic overlays are included where management judge the underlying models do not respond adequately to the economic scenarios. During the year, the historic economic post model adjustment relating to COVID-19 was released, however, a new economic post model adjustment was introduced given the cost of living crisis and uncertainty around the potential impact the large inflation increase may have on customer behaviour or change in economic outlook. The majority of the Operational overlays relate to model or data limitations that are manually corrected, whilst a permanent fix is being developed. g. Collateral relating to loans and advances to customers Mortgages held over residential properties represent the only collateral held by the Group for retail exposures. The market value of collateral held for impaired loans and loans past due but not impaired was \u00a317 million (2022: \u00a323 million). An analysis by loan-to-value (LTV) ratio of the Group\u2019s residential mortgage lending is presented below. The value of collateral used in determining the LTV ratios has been estimated based upon the last actual valuation, adjusted to take into account subsequent movements in house prices. At 4 March 2023 Stage 1 \u00a3m Stage 2 \u00a3m Stage 3 \u00a3m Total \u00a3m Less than 70% 519 41 5 565 70% to 80% 14 1 1 16 80% to 90 % \u2013 \u2013 \u2013 \u2013 90% to 100% \u2013 \u2013 \u2013 \u2013 Greater than 100% \u2013 \u2013 \u2013 \u2013 Total mortgages 533 42 6 581 At 5 March 2022 Stage 1 \u00a3m Stage 2 \u00a3m Stage 3 \u00a3m Total \u00a3m Less than 70% 607 57 8 672 70% to 80% 102 2 1 105 80% to 90% 4 1 \u2013 5 90% to 100% \u2013 \u2013 \u2013 \u2013 Greater than 100% \u2013 \u2013 \u2013 \u2013 Total mortgages 713 60 9 782 28 Financial risk management continued h. Forbearance The Group provides support to customers who are experiencing financial difficulties. Forbearance is defined as relief granted by a lender to assist customers in financial difficulty, through arrangements which temporarily allow the customer to pay an amount other than the contractual amounts due. These temporary arrangements may be initiated by the customer or the Group where financial difficulty would prevent repayment within the original terms and conditions of the contract. The main aim of forbearance is to support customers in returning to a position where they are able to meet their contractual obligations. The Group has well defined forbearance policies and processes. A number of forbearance options are made available to customers. These include arrangements to repay arrears over a period of time by making payments above the contractual amount, that ensure the loan is repaid within the original repayment term and short-term concessions, where the borrower is allowed to make reduced repayments (or in exceptional circumstances, no repayments) on a temporary basis to assist with short-term financial hardship. The table below details the values of secured and unsecured advances that are subject to the Group\u2019s forbearance programmes: 2023 2022 Gross loans and advances subject to forbearance \u00a3m Forbearance as a total of loans and advances % Forbearance covered by impairment provision % Gross loans and advances subject to forbearance \u00a3m Forbearance as a total of loans and advances % Forbearance covered by impairment provision % Unsecured 61 1.2 69.1 52 1.2 72.0 Secured 1 0.2 4.5 2 0.3 25.7 Total 62 1.1 68.1 54 1 70.1 Market risk The Group uses forward contracts to hedge foreign exchange and commodity exposures, and interest rate swap contracts to hedge interest rate exposures. The use of financial derivatives is governed by Board approved policies which prohibits the use of derivative financial instruments for speculative purposes. a. Foreign currency risk Currency risk is the risk of increased costs arising from unexpected movements in exchange rates impacting the Group\u2019s foreign currency denominated supply contracts. The Group\u2019s currency risk policy seeks to limit the impact of fluctuating exchange rates on the Group\u2019s income statement by requiring highly probable foreign currency cash flows to be hedged. Highly probable foreign currency cash flows, which may be either contracted or uncontracted, are hedged on a layered basis using foreign currency forward contracts. The Group has exposure to currency risk on balances held in foreign currency denominated bank accounts, which may arise due to short-term timing differences on maturing hedges and underlying supplier payments. The Group considers that a ten per cent movement in exchange rates against pound sterling is a reasonable measure of volatility. The impact of a ten per cent movement in the exchange rate of US dollar and euro versus pound sterling as at the balance sheet date, with all other variables held constant, is summarised in the table below: Group 2023 Change in exchange rate impact on post-tax profit +/-10% \u00a3m 2023 Change in exchange rate impact on cash flow hedge reserve +/-10% \u00a3m 2022 Change in exchange rate impact on post-tax profit +/-10% \u00a3m 2022 Change in exchange rate impact on cash flow hedge reserve +/-10% \u00a3m USD/GBP 5/(6) (110)/135 3/(3) (115)/141 EUR/GBP 2/(3) (32)/40 3/(3) (29)/36 Financial Services The Bank is exposed to foreign exchange (FX) risk through its holding of cash denominated in foreign currencies, primarily Euro and US Dollar, within its travel money bureaux in Sainsbury\u2019s stores and its currency dispensing ATM machines. The FX positions are hedged on a regular basis. b. Interest rate risk Interest rate risk is the risk of increased costs or lower income arising from unexpected movements in interest rates and inflation rates impacting the Group\u2019s borrowing and investment portfolios. The Group\u2019s interest rate policy seeks to limit the impact of fluctuating interest and inflation rates by maintaining a diversified mix of fixed rate, floating rate and variable capped rate liabilities. Interest on financial instruments is classified as fixed rate if interest resets on the borrowings are less frequent than once every 12 months. Interest on financial instruments is classified as floating rate if interest resets on the borrowings occur every 12 months or more frequently. Floating rate instruments are considered variable capped rate if the nominal interest rate is subject to a cap. 28 Financial risk management continued The mix of the Group\u2019s financial assets and liabilities at the balance sheet date was as follows: Fixed \u00a3m Floating \u00a3m Variable capped \u00a3m Total \u00a3m Interest bearing financial assets at fair value through other comprehensive income 25 664 \u2013 689 Amounts due from Financial Services customers and other banks 2,690 2,702 \u2013 5,392 Cash and cash equivalents 456 863 \u2013 1,319 Borrowings (122) \u2013 (539) (661) Amounts due to Financial Services customers and banks (1,477) (4,469) \u2013 (5,946) Derivative effect: Interest rate swaps (1,143) 1,143 \u2013 \u2013 Inflation linked swaps (490) \u2013 490 \u2013 At 4 March 2023 (61) 903 (49) 793 Fixed \u00a3m Floating \u00a3m Variable capped \u00a3m Total \u00a3m Interest bearing financial assets at fair value through other comprehensive income 121 297 \u2013 418 Amounts due from Financial Services customers and other banks 2,799 2,390 \u2013 5,189 Cash and cash equivalents 547 278 \u2013 825 Bank Overdrafts \u2013 (7) \u2013 (7) Borrowings (179) \u2013 (575) (754) Amounts due to Financial Services customers and banks (603) (4,656) \u2013 (5,259) Derivative effect: Interest rate swaps (1,952) 1,952 \u2013 \u2013 Inflation linked swaps (490) \u2013 490 \u2013 At 5 March 2022 243 254 (85) 412 (i) Cash flow sensitivity for floating rate instruments The Group considers that a 100 basis point movement in interest rates is a reasonable measure of volatility. The sensitivity of floating rate balances to a change of 100 basis points in the interest rate (or such lesser amount as would result in a zero rate of interest) at the balance sheet date is shown below: 2023 Impact on post-tax profit \u00a3m 2023 Impact on cash flow hedge reserve \u00a3m 2022 Impact on post-tax profit \u00a3m 2022 Impact on cash flow hedge reserve \u00a3m Change in floating rate +/-100bps 1/2 (0)/0 (5)/9 (0)/0 (ii) Cash flow sensitivity for variable capped rate liabilities The Group holds \u00a3539 million of capped inflation-linked borrowings (2022: \u00a3575 million) of which \u00a3490 million (2022: \u00a3490 million) have been swapped into fixed rate borrowings using inflation rate swaps maturing on 19 April 2023. The Group considers that a 100 basis point movement in the RPI rate is a reasonable measure of volatility. The sensitivity of variable capped balances to a change of 100 basis points in the RPI rate at the balance sheet date is shown below: 2023 Impact on post-tax profit \u00a3m 2023 Impact on cash flow hedge reserve \u00a3m 2022 Impact on post-tax profit \u00a3m 2022 Impact on cash flow hedge reserve \u00a3m Change in floating rate +/-100bps 0/(0) 1/(1) (0)/0 5/(6) 28 Financial risk management continued Financial Services Interest Rate Risk in the Banking Book (IRRBB) arises from interest rate movements which impact the present value and timing of future cash flows resulting in changes in the underlying value of a bank\u2019s assets and liabilities and hence its economic value. Interest rates movements also affect a bank\u2019s earnings by altering interest-sensitive income and expenses, affecting its net interest income. The main types of interest rate risk faced by the Bank are: \u2014 Repricing gap risk: the risk arising from timing differences in the interest rate changes of bank assets and liabilities (e.g. fixed rate personal loans and instant access savings accounts). \u2014 Yield curve risk: the risk arising from changes in the slope and shape of the yield curve. \u2014 Basis risk: risk arising from imperfect correlation between different interest rate indices (e.g. administered rate on savings products and treasury assets linked to SONIA). \u2014 Prepayment risk: the risk arising from the timing of customer prepayments which differ from planning and hedging assumptions. \u2014 Pipeline risk: the risk of a customer drawing down, or not, a product at a rate which is unfavourable for the Bank. \u2014 Credit Spread Risk: the risk of adverse effects resulting from a change in credit spreads, arising via the Bank\u2019s Treasury portfolio. Interest risk exposure is actively managed within limits that are aligned with the Bank\u2019s risk appetite by using financial instruments such as interest rate swaps and by taking into account natural hedges between assets and liabilities with similar repricing characteristics. Hedging strategies are implemented and reviewed to ensure the Bank remains within its limits. The Bank\u2019s market risk appetite statements defines limits for the following market risk measures: \u2014 Capital at Risk: an aggregate measure based on assessing each of the IRRBB risks and allocating a capital charge against each risk driver using a series of plausible but severe interest rate stresses. This includes parallel and non-parallel movements of the yield curve. Where applicable a customer behavioural repayment profile is applied. \u2014 Annual Earnings at Risk: measures the sensitivity of the Bank\u2019s earnings over the next 12 months, in response to adverse movements in interest rates. c. Commodity Risk Commodity risk is the risk of increased costs arising from unexpected movements in commodity prices impacting the Group\u2019s own use consumption of electricity, gas and diesel. The Group hedges own use consumption of electricity and gas with forward purchases under flexible purchasing arrangements with its suppliers as well as power purchase agreements for electricity. The Group uses a combination of purchasing agreements and financial derivatives to hedge fuel exposures on a layered basis using contracts for difference. See note 30 for derivative disclosures. Capital risk management The Group defines capital as total equity plus net debt. The Board\u2019s capital objective is to maintain a strong and efficient capital base to support the Group\u2019s strategic objectives, provide optimal returns for shareholders and safeguard the Group\u2019s status as a going concern. There has been no change to capital risk management policies during the year. The Board monitors a broad range of financial metrics including return on capital employed, balance sheet gearing and fixed charge cover. The Board can manage the Group\u2019s capital structure by diversifying the debt portfolio, adjusting the size and timing of dividends paid to shareholders, recycling capital through sale and leaseback transactions, issuing new shares or repurchasing shares in the open market and flexing capital expenditure. From time-to-time, the ESOT may purchase shares in the Company from the open market for the purpose of satisfying awards under the Group\u2019s employee share plans however the Group does not currently operate a defined share buy-back plan. The Revolving Credit Facility and Term Loan have a single repeating financial covenant. Part of the Group\u2019s capital risk management is to ensure compliance with both the financial and general covenants included within the Group\u2019s borrowing facilities. Examples of general covenants include restrictions on the permitted value of asset disposals and incremental indebtedness. In addition to there being no breaches of financial and general covenants in the financial year ended 4 March 2023, there is healthy headroom within all covenants as at 4 March 2023. Financial Services capital resources (unaudited) The following table analyses the regulatory capital resources under CRD IV. From a prudential perspective, Sainsbury\u2019s Bank is monitored and supervised on a consolidated basis with its subsidiary, Home Retail Group Card Services Limited, from the point of acquisition of Argos Financial Services in September 2016. The Bank has obtained an individual consolidation waiver from the PRA, which allows the Bank to monitor its capital position on a consolidated basis only. Therefore, the capital position shown below is on a regulatory consolidated basis. The Bank implemented IFRS 9, effective 1 March 2018. The following table analyses the regulatory capital resources under CRD IV and aligns to the phase-in approach of IFRS 9 impacts on capital, over a five-year period. Transitional 2023 IFRS 9 \u00a3m Full impact 2023 IFRS 9 \u00a3m Transitional 2022 IFRS 9 \u00a3m Full impact 2022 IFRS 9 \u00a3m Common Equity Tier 1 (CET 1) capital: Ordinary share capital 701 701 701 701 Allowable reserves 165 165 126 126 Regulatory adjustments (144) (167) (142) (180) Tier 1 capital 722 699 685 647 Tier 2 capital (loan notes \u2013 listed) 113 113 109 109 Total capital 835 812 794 756 28 Financial risk management continued Regulatory capital is calculated under the Capital Requirements Regulations and Capital Requirements Directive (collectively known as CRD IV) and aligns to the phase-in approach of IFRS 9 impacts on capital, over a 5-year period from 1 March 2018, as enacted in the UK. Common Equity Tier 1 (CET 1) capital includes ordinary share capital, other reserves, losses and regulatory deductions. The movement of CET 1 capital during the financial year is analysed as follows: Transitional 2023 IFRS 9 \u00a3m Full impact 2023 IFRS 9 \u00a3m Transitional 2022 IFRS 9 \u00a3m Full impact 2022 IFRS 9 \u00a3m At 1 March 2022 and 1 March 2021 685 647 791 726 Verified profits attributable to shareholders 38 38 22 22 Foreseeable dividend \u2013 \u2013 (50) (50) Transitional adjustments (15) \u2013 (27) \u2013 Other reserve movements 1 1 (2) (2) Movement in additional value adjustments (1) (1) 1 1 Movement in intangible assets 15 15 (50) (50) Movement in Non Performing Exposures insufficient coverage (1) (1) \u2013 \u2013 At 28 February 2023 and 28 February 2022 722 699 685 647 Leverage ratio (unaudited) The leverage ratio is defined as the ratio of Tier 1 capital to adjusted assets, which is measured below on a regulatory consolidated basis. The denominator represents the total non-risk weighted assets of the regulatory group (Bank and Home Retail Group Card Services Limited) adjusted for certain off balance sheet exposures assets and regulatory deductions and provides a non-risk-weighted \u2018backstop\u2019 capital measure. The leverage ratio is calculated below as at 28 February 2023 on the UK basis which allows central bank assets to be excluded from the leverage exposures. The Bank\u2019s leverage ratio of 9.6% exceeds the minimum Basel leverage ratio of 3%. Transitional 2023 IFRS 9 \u00a3m Full impact 2023 IFRS 9 \u00a3m Transitional 2022 IFRS 9 \u00a3m Full impact 2022 IFRS 9 \u00a3m Components of the leverage ratio Total assets as per published financial statements (Sainsbury\u2019s Bank plc consolidated group) 1 7,209 7,209 6,516 6,516 Movement on consolidation of subsidiary undertakings 1 (6) (6) \u2013 \u2013 Exposure value for derivatives and securities financing transactions 32 32 37 37 Off balance sheet exposures: unconditionally cancellable (10%) 867 867 878 878 Off balance sheet: other (100%) 2 2 5 5 Other adjustments (242) (265) (169) (207) Central Bank Claims (331) (331) (219) (219) 7,531 7,508 7,048 7,010 Tier 1 capital 722 699 685 647 Leverage ratio 9.6% 9.3% 9.7% 9.2% 1. As a result of Sainsbury\u2019s Bank moving to prepare consolidated accounts, the prior year comparatives have been restated to use the total assets of the Consolidated Financial Services sector. A deconsolidation adjustment is then applied to get the total assets of the prudential regulated group. Capital management The Bank manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of its activities. Capital adequacy is monitored on an ongoing basis by senior management, the ALCO, the Executive Risk Committee and the Board Risk Committee. Our submissions to the PRA in the year have shown that the Bank has complied with all externally imposed capital requirements. The Bank will disclose Pillar 3 information as required by the Capital Requirements Regulations and PRA prudential sourcebook on the J Sainsbury plc external website. 28 Financial risk management continued 29 Financial instruments Accounting policies a) Financial assets The Group classifies all of its financial assets as either amortised cost, fair value through other comprehensive income (FVOCI) or fair value through profit or loss (FVTPL). The Group\u2019s non-derivative financial assets comprise: \u2014 Cash and cash equivalents (note 31) \u2014 Trade and other receivables, excluding prepayments and accrued income (note 20) \u2014 Amounts due from Financial Services customers and other banks (note 21) \u2014 Financial assets at FVOCI (note 18) To determine their classification and measurement category, IFRS 9 requires all financial assets, except equity instruments and derivatives, to be assessed based on a combination of the entity\u2019s business model for managing the assets and the instruments\u2019 contractual cash flow characteristics. In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are \u2018solely payments of principal and interest (SPPI)\u2019 on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. The business model assessment reflects how the Group manages the risks relating to the underlying financial assets, including whether the Group\u2019s principal objective is to collect the contractual cash flows arising from the instruments (amortised cost), to sell the financial instruments (FVTPL) or a combination thereof (FVOCI). Financial instruments at amortised cost Financial assets that are principally held for the collection of contractual cash flows and which pass the SPPI test are classified as amortised cost. For the Group this includes cash, receivables and amounts due from Financial Services customers and other banks. The Group has no intention of trading these assets. With the exception of trade receivables that do not contain a significant financing component, the Group initially measures these financial assets at fair value plus transaction costs. Subsequently these assets are carried at amortised cost less impairment using the effective interest rate method. Income from these financial assets is calculated on an effective interest rate basis and is recognised in the income statement. Financial assets at fair value through other comprehensive income Accounting policies are detailed in note 18. Financial assets at fair value through profit and loss The Group\u2019s derivatives are classified as fair value through profit or loss. They are carried in the statement of financial position at fair value with net changes in fair value recognised in the income statement. Financial assets are derecognised when the contractual cash flows from the asset have expired or have been transferred, usually by sale, and with them either substantially all the risks and rewards of the asset or significant risks and rewards, along with the unconditional ability to sell or pledge the asset. b) Financial liabilities The Group recognises all of its financial liabilities at amortised cost and all derivative financial liabilities are classified as FVTPL. Financial liabilities costs, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accrual basis in the income statement using the effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. The Group\u2019s non-derivative financial liabilities comprise: \u2014 Borrowings (note 33) \u2014 Trade and other payables, excluding deferred income, other taxes and social security costs payable, and other accruals (note 23) \u2014 Amounts due to Financial Services customers and banks (note 24) \u2014 Lease liabilities (note 15) Interest-bearing bank loans, overdrafts, other deposits and amounts due to Sainsbury\u2019s Bank customers are recorded initially at fair value, which is generally the proceeds received, net of direct issue costs. Subsequently, these liabilities are held at amortised cost using the effective interest rate method. Financial liabilities are derecognised when the obligation under the liability is discharged, cancelled, or expires. Financial assets and liabilities by category The carrying amount of the Group\u2019s financial assets, financial liabilities and derivative financial instruments as at the balance sheet date are as follows: Amortised cost \u00a3m Fair value through OCI \u00a3m Fair value through profit or loss \u00a3m Total \u00a3m Cash and cash equivalents 1,319 \u2013 \u2013 1,319 Trade and other receivables 477 \u2013 \u2013 477 Amounts due from Financial Services customers and other banks 5,392 \u2013 \u2013 5,392 Financial assets at FVOCI \u2013 1,009 \u2013 1,009 Trade and other payables (4,495) \u2013 \u2013 (4,495) Borrowings (656) \u2013 \u2013 (656) Amounts due to Financial Services customers and banks (5,946) \u2013 \u2013 (5,946) Derivative financial instruments \u2013 \u2013 213 213 Lease liabilities (6,489) \u2013 \u2013 (6,489) At 4 March 2023 (10,398) 1,009 213 (9,176) Amortised cost \u00a3m Fair value through OCI \u00a3m Fair value through profit or loss \u00a3m Total \u00a3m Cash and cash equivalents 825 \u2013 \u2013 825 Trade and other receivables 552 \u2013 \u2013 552 Amounts due from Financial Services customers and other banks 5,189 \u2013 \u2013 5,189 Financial assets at FVOCI \u2013 800 \u2013 800 Trade and other payables (4,218) \u2013 \u2013 (4,218) Borrowings (761) \u2013 \u2013 (761) Amounts due to Financial Services customers and banks (5,259) \u2013 \u2013 (5,259) Derivative financial instruments \u2013 \u2013 259 259 Lease liabilities (6,621) \u2013 \u2013 (6,621) At 5 March 2022 (10,293) 800 259 (9,234) c) Fair value estimation Set out below is a comparison of the carrying amount and the fair value of financial instruments that are carried in the financial statements at a value other than fair value. The fair values of financial assets and liabilities are based on prices available from the market on which the instruments are traded. Where market values are not available, the fair values of financial assets and liabilities have been calculated by discounting expected future cash flows at prevailing interest rates. The fair values of short-term deposits, trade receivables, other receivables, overdrafts and payables and lease liabilities are assumed to approximate to their book values. At 4 March 2023 Carrying amount \u00a3m Group fair value \u00a3m Financial assets Amounts due from Financial Services customers 1 5,392 5,340 Financial liabilities Loans due 2031 (539) (639) Tier 2 capital due 2028 (122) (131) Amounts due to Financial Services customers and other banks (5,946) (5,954) At 5 March 2022 Carrying amount \u00a3m Group fair value \u00a3m Financial assets Amounts due from Financial Services customers 1 5,189 5,216 Financial liabilities Loans due 2031 (575) (717) Tier 2 capital due 2023 (179) (180) Amounts due to Financial Services customers and other banks (5,259) (5,260) 1. Included within a portfolio fair value hedging relationship with \u00a33,033 million (2022: \u00a33,235 million) of interest rate swaps. The fair value of financial liabilities have been calculated by discounting cash flows at prevailing interest rates and are within Level 2 of the fair value hierarchy, with the exception of the Tier 2 Capital, where the fair value is calculated using prevailing market prices and is therefore Level 1. 29 Financial instruments continued Fair value measurements recognised in the balance sheet The following table provides an analysis of financial instruments that are recognised at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable: \u2014 Level 1 fair value measurements are derived from quoted market prices (unadjusted) in active markets for identical assets or liabilities at the balance sheet date. This level includes listed equity securities and debt instrument on public exchanges; \u2014 Level 2 fair value measurements are derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). The fair value of financial instruments is determined by discounting expected cash flows at prevailing interest rates; and \u2014 Level 3 fair value measurements are derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). Level 1 \u00a3m Level 2 \u00a3m Level 3 \u00a3m Total \u00a3m At 4 March 2023 Financial instruments at fair value through other comprehensive income Other financial assets \u2013 383 \u2013 383 Investment securities 626 \u2013 \u2013 626 Derivative financial assets \u2013 156 131 287 Derivative financial liabilities \u2013 (74) \u2013 (74) At 5 March 2022 Financial instruments at fair value through other comprehensive income Other financial assets \u2013 15 367 382 Investment securities 418 \u2013 \u2013 418 Derivative financial assets \u2013 111 180 291 Derivative financial liabilities \u2013 (32) \u2013 (32) Reconciliation of Level 3 fair value measurements of financial assets and liabilities: Commodity derivatives \u00a3m Total \u00a3m At 6 March 2022 180 180 In cost of sales in the Group income statement (30) (30) In other comprehensive income (19) (19) At 4 March 2023 131 131 Financial instruments at FVTOCI \u00a3m Commodity derivatives \u00a3m Total \u00a3m At 7 March 2021 291 6 297 In cost of sales in the Group income statement \u2013 76 76 In other comprehensive income 76 98 174 At 5 March 2022 367 180 547 29 Financial instruments continued Level 3 other financial assets Other financial assets categorised as Level 3 in the prior year of \u00a3367 million relate to the Group\u2019s beneficial interest in a property investment pool. Given the Group has reached an agreement on an acquisition price for the properties within this investment pool during the period (see note 15 for further details), these financial assets have been reclassified to Level 2. Level 3 derivative financial assets \u2013 power purchase agreement The Group has entered into several long-term fixed price Power Purchase agreements with independent producers. Included within derivative financial assets is \u00a3131 million (2022: \u00a3180 million) relating to these agreements. The Group has entered into a new Power Purchase Agreement during the year, and this has been designated as a cash flow hedge. The Group values its Power Purchase agreements as the net present value of the estimated future usage at the contracted fixed price less the market implied forward energy price discounted at the prevailing swap rate. The Group also makes an assumption regarding expected energy output based on the historical performance and the producer\u2019s estimate of expected electricity output. The sensitivity of this balance to changes of 20 per cent in the assumed rate of energy output and 20 per cent in the implied forward energy prices holding other assumptions constant is shown below: Not in a hedge relationship 2023 Change in volume +/-20.0% \u00a3m 2023 Change in electricity forward pricing +/-20.0% \u00a3m 2022 Change in volume +/-20.0% \u00a3m 2022 Change in electricity forward pricing +/-20.0% \u00a3m Derivative financial instruments 20/(20) 11/(11) 23/(23) 16/(16) Designated in a cash flow hedge relationship 2023 Change in volume +/-20.0% \u00a3m 2023 Change in electricity forward pricing +/-20.0% \u00a3m 2022 Change in volume +/-20.0% \u00a3m 2022 Change in electricity forward pricing +/-20.0% \u00a3m Derivative financial instruments 43/(44) 15/(16) 32/(32) 20/(20) 29 Financial instruments continued d) Offsetting financial instruments Financial assets and liabilities are offset, and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty. The following table sets out the Group\u2019s financial assets and financial liabilities that are subject to counterparty offsetting or a master netting agreement. The master netting agreements regulate settlement amounts in the event a party defaults on their obligations. Gross amounts of recognised financial assets and liabilities \u00a3m Amounts offset in the balance sheet \u00a3m Net amounts recognised in the balance sheet \u00a3m Amounts not offset in balance sheet Cash collateral pledged \u00a3m Net amounts \u00a3m Assets Derivative financial assets 287 \u2013 287 (49) 238 Trade and other receivables 624 (147) 477 \u2013 477 Cash and cash equivalents 1,319 \u2013 1,319 \u2013 1,319 Total assets at 4 March 2023 2,230 (147) 2,083 (49) 2,034 Liabilities Derivative financial liabilities (74) \u2013 (74) 52 (22) Trade and other payables (4,642) 147 (4,495) \u2013 (4,495) Total liabilities at 4 March 2023 (4,716) 147 (4,569) 52 (4,517) Assets Derivative financial assets 291 \u2013 291 (20) 271 Trade and other receivables 643 (91) 552 \u2013 552 Cash and cash equivalents 825 \u2013 825 \u2013 825 Total assets at 5 March 2022 1,759 (91) 1,668 (20) 1,648 Liabilities Derivative financial liabilities (32) \u2013 (32) 20 (12) Trade and other payables (4,309) 91 (4,218) \u2013 (4,218) Total liabilities at 5 March 2022 (4,341) 91 (4,250) 20 (4,230) The Group holds certain financial derivatives which are subject to credit support agreements. Under these agreements cash collateral is posted by one party to the other party should the fair value of the financial derivative exceed a pre-agreed level. As at 4 March 2023, the Group held no collateral against these financial derivative assets (2022: \u00a3nil). Financial Services has derivatives that are governed by the International Swaps and Derivatives Association and their associated credit support annex bilateral agreements where if the fair value exceeds a pre-agreed level, cash collateral is posted. As at 4 March 2023, Financial Services and its subsidiary had pledged / posted collateral of \u00a349 million (2022: provided collateral of \u00a320 million) against the derivatives and received collateral of \u00a352 million (2022: \u00a320 million). The Group also operates a cash pooling arrangement and collective net overdraft facility with its main clearing bank. As at 4 March 2023 the Group had a net overdraft of \u00a3nil (2022: \u00a37 million) under this facility. 30 Derivative financial instruments and hedge accounting Accounting policies The Group uses derivative financial instruments to hedge its exposure to foreign exchange, interest rate and commodity risks. All derivative financial instruments are initially measured at fair value on the contract date and are also measured at fair value at subsequent reporting dates. Where derivatives do not qualify for hedge accounting, any changes in the fair value of the derivative financial instrument are recognised in the income statement as they arise. To qualify for hedge accounting, the Group documents, at the inception of the hedge, the hedging risk management strategy, the relationship between the hedging instrument and the hedged item or transaction, the nature of the risks being hedged and an assessment of the effectiveness of the hedging relationship to ensure it is highly effective on an ongoing basis. Where a derivative does qualify for hedge accounting, any changes in fair value are recognised depending on the nature of the hedge relationship and the item being hedged as follows: i) Cash flow hedges Hedge relationships are classified as cash flow hedges where the derivative financial instruments hedge the Group\u2019s exposure to variability in cash flows resulting from a highly probable forecasted transaction. These include the exchange rate risk of inventory purchases denominated in foreign currency, interest rate risk and commodity risk on purchases of power and fuel. Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognised directly in other comprehensive income and the ineffective portion is recognised immediately in the income statement. 29 Financial instruments continued If a cash flow hedge is hedging a firm commitment or forecast transaction that results in the recognition of a non-financial asset or liability, then, at the time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in other comprehensive income are included in the initial measurement of the asset or liability. This applies to the Group\u2019s foreign currency hedges in relation to inventory purchases. ii) Fair value hedges The Group designates certain derivatives as fair value hedges where the derivative financial instrument hedges the change in fair value of the particular risks inherent in recognised assets or liabilities (fair value hedges). The Group has adopted IFRS 9 hedge accounting requirements for its fair value hedges of investment securities and its one-for-one hedge on Tier 2 Debt issuance within Sainsbury\u2019s Bank. The Group continues to adopt IAS 39 for its macro portfolio fair value hedges of fixed rate personal loans and residential mortgages, as it is permitted to do so under IFRS 9 and until the point that the new macro hedge accounting standard is finalised and adopted. Fair value hedging matches the change in fair value of designated hedged items against the corresponding change in value of the hedging derivative. The designated hedged item can be a recognised asset or liability, a firm commitment, or an identified portion of an asset. The effective part of any gain or loss on the hedged item adjusts the balance of the hedged item and is recognised in the income statement, offsetting the gain or loss on the hedging derivative. Should circumstances arise where the hedge relationship subsequently proves ineffective, is early settled, or is terminated the adjustment to the balance of the hedged item is amortised over the remaining life of the hedged item and to the income statement. Micro fair value hedging \u2013 IFRS 9 The Group has purchased a number of fixed rate debt investment securities and has issued fixed rate subordinated debt within Sainsbury\u2019s Bank. These instruments are hedged via plain vanilla interest rate swaps, with the critical economic terms of both the hedging instrument and hedged item matching. The notional amount, fixed interest legs and maturity dates are economically matched. Portfolio fair value hedging \u2013 IAS 39 The Group uses portfolio fair value hedging as a risk management tool for hedging interest rate risk on the Personal Loans and Mortgage portfolios. Portfolio fair value hedging allows the designation of the whole or part of a portfolio of assets or liabilities with similar risk exposures. The hedged item can be designated based on expected maturities to match the hedging derivative maturity. Hedge effectiveness is considered to have been met where the change in fair value of the hedged item offsets the change in fair value of hedging instruments, within the 80 to 125 per cent ratio corridor. The effects of hedge accounting on the Group\u2019s financial position and performance The fair value of derivative financial instruments has been disclosed in the balance sheet as follows: 2023 Asset \u00a3m 2023 Liability \u00a3m 2022 Asset \u00a3m 2022 Liability \u00a3m Non-current 217 (58) 213 (3) Current 70 (16) 78 (29) Total 287 (74) 291 (32) The table below provides a breakdown of the type of derivatives in fair value and cash flow hedges as well as derivatives not in a formal hedge accounting relationship. 2023 2022 Asset Liability Asset Liability Fair value \u00a3m Notional \u00a3m Fair value \u00a3m Notional \u00a3m Fair value \u00a3m Notional \u00a3m Fair value \u00a3m Notional \u00a3m Fair value hedges Interest rate swaps 99 2,149 (52) 675 35 2,249 (19) 986 Cash flow hedges Inflation rate swaps \u2013 490 \u2013 \u2013 5 490 \u2013 \u2013 Foreign exchange forward contracts 49 1,049 (17) 482 46 1,153 (13) 323 Commodity contracts 7 21 (5) 45 25 33 \u2013 \u2013 Power Purchase contracts 79 15 \u2013 \u2013 98 6 \u2013 \u2013 Derivatives not in a formal hedging relationship Interest rate swaps 1 209 \u2013 \u2013 \u2013 9 \u2013 \u2013 Cross currency swaps \u2013 \u2013 \u2013 \u2013 \u2013 44 \u2013 69 Foreign exchange forward contracts \u2013 14 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Power Purchase contracts 52 11 \u2013 \u2013 82 11 \u2013 \u2013 Total 287 3,958 (74) 1,202 291 3,995 (32) 1,378 30 Derivative financial instruments and hedge accounting continued Cash flow hedges There is an economic relationship between the hedged items and the hedging instruments as the terms of the interest rate swaps, foreign exchange and commodity forward contracts match the terms of the expected highly probable forecast transactions (i.e., notional amount and expected payment date). The Group has established a hedge ratio of 1:1 for the hedging relationships as the underlying risk of the foreign exchange and commodity forward contracts are identical to the hedged risk components. To test the hedge effectiveness, the Group uses the hypothetical derivative method and compares the changes in the fair value of the hedging instruments against the changes in fair value of the hedged items attributable to the hedged risks. Hedge ineffectiveness can arise from: \u2014 Differences in the timing of the cash flows of the hedged items and the hedging instruments \u2014 Different indexes (and accordingly different curves) linked to the hedged risk of the hedged items and hedging instruments \u2014 The counterparties\u2019 credit risk differently impacting the fair value movements of the hedging instrument compared to the hedged items \u2014 Changes to the forecasted cash flows of hedged items At 4 March 2023 the maturity profile and average price/rate of the hedging instruments used in the Group\u2019s non-dynamic hedging strategies were as follows: Maturity At 4 March 2023 Less than 1 month 1 to 3 months 3 months to 1 year One to five years More than five years Cash flow hedges Interest rate risk Notional amount \u2013 490 \u2013 \u2013 \u2013 Average interest receive \u2013 5.00% \u2013 \u2013 \u2013 Maturity At 5 March 2022 Less than 1 month 1 to 3 months 3 months to 1 year One to five years More than five years Cash flow hedges Interest rate risk Notional amount \u2013 \u2013 \u2013 490 \u2013 Average interest receive \u2013 \u2013 \u2013 1.37% \u2013 The impact of the hedged items on the Group\u2019s financial statements is as follows: At 4 March 2023 Change in value of hedged item for calculating hedge ineffectiveness \u00a3m Change in value of hedging instrument for calculating hedge ineffectiveness \u00a3m Cumulative impact on cash flow hedge reserve \u00a3m Cash flow hedges Foreign exchange forward contracts (123) 123 9 Commodity contracts 11 (11) 2 Power Purchase Agreements 19 (19) 79 At 5 March 2022 Change in value of hedged item for calculating hedge ineffectiveness \u00a3m Change in value of hedging instrument for calculating hedge ineffectiveness \u00a3m Cumulative impact on cash flow hedge reserve \u00a3m Cash flow hedges Inflation rate swaps (8) 8 5 Foreign exchange forward contracts 1 (73) 73 25 Commodity contracts (25) 25 25 Power Purchase Agreements (98) 98 98 1. Includes \u00a316 million reclassified to retained earnings during the year. There are no amounts remaining in the hedging reserves for which hedge accounting is no longer applied. 30 Derivative financial instruments and hedge accounting continued The following table presents a reconciliation by risk category of the cash flow hedge reserve and analysis of other comprehensive income in relation to hedge accounting: At 4 March 2023 Opening \u00a3m Fair value movements recognised in other comprehensive income \u00a3m Amounts reclassified \u00a3m Closing \u00a3m Reclassification recognised in Inflation rate swaps 5 \u2013 (5) \u2013 Finance costs Foreign exchange forward contracts 25 123 (139) 9 Inventory Commodity contracts 25 (11) (12) 2 Cost of sales Power purchase agreements 98 (19) \u2013 79 Cost of sales Tax (36) 14 \u2013 (22) 117 107 (156) 68 At 5 March 2022 Opening \u00a3m Fair value movements recognised in other comprehensive income \u00a3m Amounts reclassified \u00a3m Closing \u00a3m Reclassification recognised in Interest rate swaps (1) \u2013 1 \u2013 Finance costs Inflation rate swaps (13) 8 10 5 Finance costs Foreign exchange forward contracts 1 (92) 73 44 25 Inventory/retained earnings Commodity contracts 4 25 (4) 25 Cost of sales Power purchase agreements \u2013 98 \u2013 98 Cost of sales Tax 18 (54) \u2013 (36) (84) 150 51 117 1. Includes \u00a316 million reclassified to retained earnings during the year. Fair value hedges Within the Financial Services business, interest rate swaps are executed to hedge interest rate risk arising from fixed rate exposures in its retail personal loan and retail mortgage books, and certain fixed rate treasury investment securities, which are predominantly funded by variable rate linked liabilities. The cash flows under the hedging instruments (interest rate swap derivatives) substantially match the cash flow profile of the hedged items (personal loans, mortgages, treasury investment securities and borrowings). The changes in fair value of the derivatives offset changes in the fair value of the hedged items through the income statement, with any ineffective portion also being recognised in the income statement. The main source of ineffectiveness within the micro hedge relationships relates to the floating leg valuation changes inherent within the hedging instrument that do not exist within the hedged item. Ineffectiveness on portfolio hedges can also arise as a result of mismatch in cash flow maturities between the hedged item and hedging instrument and basis risk between cash flows discounted using different benchmark rates. 30 Derivative financial instruments and hedge accounting continued At 4 March 2023 the maturity profile and average price/rate of the hedging instruments used in the Group\u2019s non-dynamic hedging strategies were as follows: Maturity Less than 1 month 1 to 3 months 3 months to 1 year One to five years More than five years At 4 March 2023 Fair value hedges Interest rate risk Interest rate swaps Notional amount \u2013 125 589 748 1,362 Average net interest receive \u2013 0.73% 0.71% 1.17% 3.50% At 5 March 2022 Fair value hedges Interest rate risk Interest rate swaps Notional amount \u2013 138 584 1,246 1,267 Average net interest receive \u2013 (0.08)% (0.20)% (0.28)% 0.06% The impact of the hedged items on Group\u2019s financial statements is as follows: Carrying amount of the hedged item Change in fair value used for measuring ineffectiveness for the period Accumulated amount of fair value hedge adjustments included in the carrying amount of the hedged item At 4 March 2023 Assets \u00a3m Liabilities \u00a3m \u00a3m Assets \u00a3m Liabilities \u00a3m Fair value hedges Interest rate swaps 2,615 \u2013 (27) (43) \u2013 Amounts due from Financial Services customers Interest rate swaps \u2013 \u2013 3 \u2013 \u2013 Financial assets at FVOCI Interest rate swaps \u2013 (122) 5 \u2013 3 Borrowings 2,615 (122) (19) (43) 3 At 5 March 2022 Carrying amount of the hedged item Change in fair value used for measuring ineffectiveness for the period Accumulated amount of fair value hedge adjustments included in the carrying amount of the hedged item Line item in financial statements Assets \u00a3m Liabilities \u00a3m \u00a3m Assets \u00a3m Liabilities \u00a3m Fair value hedges Interest rate swaps 2,725 \u2013 (38) (16) \u2013 Amounts due from Financial Services customers Interest rate swaps 197 \u2013 (4) (3) \u2013 Financial assets at FVOCI Interest rate swaps \u2013 (179) 1 \u2013 (2) Borrowings 2,922 (179) (41) (19) (2) 30 Derivative financial instruments and hedge accounting continued The impact of the hedging instruments on the financial statements is as follows: At 4 March 2023 Notional amount \u00a3m Carrying amount Change in fair value for measuring ineffectiveness for the period \u00a3m Line item in financial statements Asset \u00a3m Liability \u00a3m Fair value hedges Interest rate swaps (loans and mortgages) 2,704 99 (52) 35 Derivative financial assets/ liabilities Interest rate swaps (Tier 2 capital) 120 \u2013 \u2013 1 Derivative financial liabilities Interest rate swaps (investment securities) \u2013 \u2013 \u2013 (5) Derivative financial assets 2,824 99 (52) 31 At 5 March 2022 Notional amount \u00a3m Carrying amount Change in fair value for measuring ineffectiveness for the period \u00a3m Line item in financial statements Asset \u00a3m Liability \u00a3m Fair value hedges Interest rate swaps (loans and mortgages) 3,164 30 (18) 40 Derivative financial liabilities Interest rate swaps (Tier 2 capital) \u2013 \u2013 (1) (1) Derivative financial assets Interest rate swaps (investment securities) 71 5 \u2013 5 Derivative financial liabilities 3,235 35 (19) 44 Fair value hedge relationships impacted profit or loss as follows: Hedge ineffectiveness recognised in cost of sales 2023 \u00a3m 2022 \u00a3m Change in value of hedged items for calculating hedge ineffectiveness (19) (41) Change in value of hedging instruments for calculating hedge ineffectiveness 31 44 Hedge ineffectiveness recognised in cost of sales 12 3 Derivatives not in a hedge relationship Some of the Group\u2019s derivative contracts do not qualify for hedge accounting and are therefore not designated in a hedging relationship. In addition, where gains or losses on a derivative contract economically offset the losses or gains on an underlying transaction, the derivative is not designated as being in a hedging relationship. The Group has several long-term fixed price Power Purchase agreements with independent producers as detailed in note 29. Included within derivative financial assets is \u00a3131 million (2022: \u00a3180 million) relating to these agreements, of which \u00a353 million (2022: \u00a382 million) is not within a hedging relationship. Fair value losses of \u00a329 million (2022: gain of \u00a376 million) have been recognised in the income statement during the year for these arrangements. Sainsbury\u2019s Bank and its subsidiaries has a \u00a39 million portfolio of interest rate swaps hedging mortgage pipeline offers that cannot be entered into a hedge accounting relationship (2022: \u00a39 million) with fair value fluctuations fully accounted for in the P&L, with no effective offset. Additionally, Sainsbury\u2019s Bank had a \u00a3200 million interest rate swap (2022: \u00a3nil) intended to economically hedge certain Treasury positions. The fair value fluctuations crediting the income statement for interest rate derivatives not in a hedge accounting relationship was \u00a31 million (2022: \u00a3nil). 30 Derivative financial instruments and hedge accounting continued 31 Cash and cash equivalents Accounting policies Cash and cash equivalents Cash and bank balances comprise cash in hand and at bank, deposits at central banks, investments in money market funds and deposits and other short-term highly liquid investments. To be classified as cash and cash equivalents, an asset must: \u2014 Be readily convertible into cash; \u2014 Have an insignificant risk of changes in value; and \u2014 Have a maturity period of typically three months or less at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Group\u2019s cash management are included as a component of cash and cash equivalents for the purposes of the cash flow statement. Cash flow statement The Group presents its cash flow statement using the indirect method, whereby profit is reconciled to net cash from operating activities by adjusting profit and loss for non-cash items. Interest, dividends and taxes The Group has chosen to present interest received on bank deposits and other financial assets as well as dividends received as cash flows from investing activities because they are returns on the Group\u2019s investments. Dividends paid are presented as financing cash flows as they are considered a cost of obtaining financial resources. Interest paid on borrowings is presented within cash flows from operating activities as they are held for cash management purposes. Lease payments and receipts Lease payments are presented as follows in the Group cash flow statement: \u2014 Cash payments for the principal element of the lease liabilities are presented as cash flows from financing activities \u2014 Cash payments for the interest element of lease liabilities are presented as interest paid within cash flows from operating activities consistent with presentation of interest payments \u2014 Short-term lease payments, payments for leases of low-value assets and variable lease payments that are not included in the measurement of the lease liabilities as cash flows from operating activities \u2014 Cash receipts in relation to sub-leases (both operating and finance leases) are included within operating cash flows For the purposes of the cash flow statement, cash and cash equivalents comprise the following: 2023 \u00a3m 2022 \u00a3m Cash in hand and bank balances 569 566 Money market funds 255 25 Money market deposits 150 \u2013 Deposits at central banks 345 234 Cash and bank balances as reported in the Group balance sheet 1,319 825 Bank overdrafts \u2013 (7) Net cash and cash equivalents as reported in the Group cash flow statement 1,319 818 Of the above balance, \u00a328 million was restricted at the balance sheet date (2022: \u00a318 million). The balance includes \u00a315 million (2022: \u00a315 million) held as a reserve deposit with the Bank of England in accordance with statutory requirements is not available for use in day-to-day operations, \u00a310 million (2022: \u00a3nil) held within the ESOT, and \u00a33 million (2022: \u00a33 million) is restricted for insurance purposes. Reconciliation of cash flow items Working capital Inventories \u00a3m Financial assets at fair value through OCI \u00a3m Trade and other receivables \u00a3m Amounts due from Financial Services customers \u00a3m Trade and other payables \u00a3m Amounts due to Financial Services customers and other deposits \u00a3m Provisions \u00a3m At 4 March 2023 1,899 1,009 683 5,392 (4,837) (5,946) (272) At 5 March 2022 1,797 800 748 5,189 (4,570) (5,259) (271) Balance sheet movement (102) (209) 65 (203) 267 687 1 Fair value movements \u2013 2 \u2013 (27) \u2013 \u2013 \u2013 Hedge adjustments (3) \u2013 \u2013 \u2013 (2) \u2013 \u2013 Interest in working capital \u2013 \u2013 \u2013 \u2013 9 \u2013 \u2013 Reclassification to other lines in the cash flow statement \u2013 \u2013 3 \u2013 11 \u2013 \u2013 Financial Services ECL impairments \u2013 \u2013 \u2013 (76) \u2013 \u2013 \u2013 Movement in capital accruals \u2013 \u2013 \u2013 \u2013 (8) \u2013 \u2013 Other \u2013 \u2013 \u2013 (1) 3 \u2013 (1) Movement shown in cash flow statement (105) (207) 68 (307) 280 687 \u2013 Inventories \u00a3m Financial assets at fair value through OCI \u00a3m Trade and other receivables \u00a3m Amounts due from Financial Services customers \u00a3m Trade and other payables \u00a3m Amounts due to Financial Services customers and other deposits \u00a3m Provisions \u00a3m At 5 March 2022 1,797 800 748 5,189 (4,570) (5,259) (271) At 6 March 2021 1,625 844 775 5,407 (4,508) (6,289) (349) Balance sheet movement (172) 44 27 218 62 (1,030) (78) Fair value movements \u2013 71 \u2013 (38) \u2013 \u2013 \u2013 Hedge adjustments (7) \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Interest in working capital \u2013 \u2013 \u2013 \u2013 (6) \u2013 \u2013 Transfer of SaaS spend to prepayments \u2013 \u2013 9 \u2013 \u2013 \u2013 \u2013 Reclassification to other lines in the cash flow statement \u2013 \u2013 \u2013 \u2013 (28) \u2013 \u2013 Financial Services ECL impairments \u2013 \u2013 \u2013 (19) \u2013 \u2013 \u2013 Movement in capital accruals \u2013 \u2013 \u2013 \u2013 1 \u2013 \u2013 Amortisation of discount \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 (1) Other \u2013 \u2013 (3) \u2013 (1) \u2013 (1) Movement shown in cash flow statement (179) 115 33 161 28 (1,030) (80) 31 Cash and cash equivalents continued Other 2023 Note Gross additions \u00a3m Capitalised interest \u00a3m Movement in capital accruals \u00a3m Movement shown in cash flow statement \u00a3m Purchase of property, plant and equipment 14 (534) 1 8 (525) Purchase of intangible assets 16 (213) \u2013 \u2013 (213) 2022 Note Gross additions \u00a3m Capitalised interest \u00a3m Movement in capital accruals \u00a3m Movement shown in cash flow statement \u00a3m Purchase of property, plant and equipment 14 (417) 2 (1) (416) Purchase of intangible assets 16 (278) \u2013 \u2013 (278) Profit on the sale of properties and early termination of leases in the cash flow statement is reconciled as follows: 52 weeks to 4 March 2023 \u00a3m 52 weeks to 5 March 2022 \u00a3m Loss/(Profit) on disposal of properties (note 5) 3 (7) Non-underlying gain on early termination of leases (note 5) (2) (9) Profit on disposal of properties within restructuring programmes (note 5) (11) (12) Non-underlying SaaS adjustment (note 5) \u2013 21 Underlying gain on early termination of leases (4) (3) (Profit)/loss on disposal of intangible assets (1) 4 Profit on sale of non-current assets and early termination of leases (15) (6) 32 Analysis of net debt The Group\u2019s definition of net debt includes the following: \u2014 Cash \u2014 Borrowings and overdrafts \u2014 Lease liabilities \u2014 Perpetual securities \u2014 Debt-related financial assets at fair value through other comprehensive income \u2014 Derivatives used in hedging borrowings Net debt includes the capital injections to Sainsbury\u2019s Bank, but excludes the net debt of Sainsbury\u2019s Bank and its subsidiaries (Financial Services). Financial Services\u2019 net debt balances are excluded because they are required as part of the business as usual operations of a bank, as opposed to specific forms of financing for the Group. Derivatives exclude those not used to hedge borrowings, and borrowings exclude bank overdrafts as they are disclosed separately. 31 Cash and cash equivalents continued A reconciliation of opening to closing net debt is included below. Balances and movements for the total Group and Financial Services are shown in addition to Retail to enable reconciliation between the Group balance sheet and Group cash flow statement. Cash movements Non-cash movements 6 March 2022 \u00a3m Cash flows excluding interest \u00a3m Net interest (received)/ paid \u00a3m Accrued interest \u00a3m Other non-cash movements \u00a3m Changes in fair value \u00a3m 4 March 2023 \u00a3m Retail Net derivative financial instruments 5 \u2013 (5) 5 (5) \u2013 \u2013 Borrowings (excluding overdrafts) (575) 40 45 (40) (9) \u2013 (539) Lease liabilities (6,618) 512 267 (267) (382) \u2013 (6,488) Arising from financing activities (7,1 88) 552 307 (302) (396) \u2013 (7,027 ) Financial assets at fair value through other comprehensive income \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Cash and cash equivalents 436 247 \u2013 \u2013 \u2013 \u2013 683 Bank overdrafts (7) 7 \u2013 \u2013 \u2013 \u2013 \u2013 Retail net debt (6,759) 806 307 (302) (396) \u2013 (6,344) Financial Services Net derivative financial instruments 4 \u2013 \u2013 \u2013 \u2013 (4) \u2013 Borrowings (excluding overdrafts) (179) 55 9 (12) \u2013 5 (122) Lease liabilities (3) 2 \u2013 \u2013 \u2013 \u2013 (1) Arising from financing activities (178) 57 9 (12) \u2013 1 (123) Financial assets at fair value through other comprehensive income 418 207 \u2013 \u2013 \u2013 1 626 Cash and cash equivalents 389 247 \u2013 \u2013 \u2013 \u2013 636 Financial Services net debt 629 511 9 (12) \u2013 2 1,139 Group Net derivative financial instruments 9 \u2013 (5) 5 (5) (4) \u2013 Borrowings (excluding overdrafts) (754) 95 54 (52) (9) 5 (661) Lease liabilities (6,621) 514 267 (267) (382) \u2013 (6,489) Arising from financing activities (7,366) 609 316 (314) (396) 1 (7,150) Financial assets at fair value through other comprehensive income 418 207 \u2013 \u2013 \u2013 1 626 Cash and cash equivalents 825 494 \u2013 \u2013 \u2013 \u2013 1,319 Bank overdrafts (7) 7 \u2013 \u2013 \u2013 \u2013 \u2013 Group net debt (6,130) 1,317 316 (314) (396) 2 (5,205) Retail net debt (6,759) 806 307 (302) (396) \u2013 (6,344) Of which: Leases (6,618) (6,488) Net debt excluding lease liabilities (141) 144 Other non-cash movements relate to interest accruals, new leases and foreign exchange. 32 Analysis of net debt continued Cash movements Non-cash movements 7 March 2021 \u00a3m Cash flows excluding interest \u00a3m Net interest (received)/paid \u00a3m Accrued interest \u00a3m Other non-cash movements \u00a3m Changes in fair value \u00a3m 5 March 2022 \u00a3m Retail Net derivative financial instruments (14) \u2013 10 (10) 11 8 5 Borrowings (excluding overdrafts) (826) 248 28 (25) \u2013 \u2013 (575) Lease liabilities (5,829) 491 281 (281) (1,280) \u2013 (6,618) Arising from financing activities (6,669) 739 319 (316) (1,269) 8 ( 7,18 8) Financial assets at fair value through other comprehensive income 1 \u2013 \u2013 \u2013 \u2013 (1) \u2013 Cash and cash equivalents 546 (110) \u2013 \u2013 \u2013 \u2013 436 Bank overdrafts (99) 92 \u2013 \u2013 \u2013 \u2013 (7) Retail net debt (excluding perpetual securities) (6,221) 721 319 (316) (1,269) 7 (6,759) Financial Services Net derivative financial instruments \u2013 \u2013 \u2013 \u2013 \u2013 4 4 Borrowings (excluding overdrafts) (179) \u2013 10 (11) \u2013 1 (179) Lease liabilities (5) 2 \u2013 \u2013 \u2013 \u2013 (3) Arising from financing activities (184) 2 10 (11) \u2013 5 (178) Financial assets at fair value through other comprehensive income 537 (115) \u2013 \u2013 \u2013 (4) 418 Cash and cash equivalents 1,029 (640) \u2013 \u2013 \u2013 \u2013 389 Financial Services net debt 1,382 (753) 10 (11) \u2013 1 629 Group Net derivative financial instruments (14) \u2013 10 (10) 11 12 9 Borrowings (excluding overdrafts) (1,005) 248 38 (36) \u2013 1 (754) Lease liabilities (5,834) 493 281 (281) (1,280) \u2013 (6,621) Arising from financing activities (6,853) 741 329 (327) (1,269) 13 ( 7,3 6 6 ) Financial assets at fair value through other comprehensive income 538 (115) \u2013 \u2013 \u2013 (5) 418 Cash and cash equivalents 1,575 (750) \u2013 \u2013 \u2013 \u2013 825 Bank overdrafts (99) 92 \u2013 \u2013 \u2013 \u2013 (7) Group net debt (excluding perpetual securities) (4,839) (32) 329 (327) (1,269) 8 (6,130) Retail net debt (excluding perpetual securities) (6,221) 721 319 (316) (1,269) 7 (6,759) Perpetual convertible bonds (248) 8 \u2013 \u2013 240 \u2013 \u2013 Retail net debt (including perpetual securities) (6,469) 729 319 (316) (1,029) 7 (6,759) Of which: Leases (5,829) (6,618) Net debt excluding lease liabilities (640) (141) 32 Analysis of net debt continued Reconciliation of net cash flow to movement in net debt 52 weeks to 4 March 2023 \u00a3m 52 weeks to 5 March 2022 \u00a3m Opening net debt (6,759) (6,469) Cash flow movements Net increase/(decrease) in cash and cash equivalents (including overdrafts) 501 (658) Elimination of Financial Services movement in cash and cash equivalents (247) 640 Repayment of perpetual capital securities \u2013 8 Decrease in Retail borrowings 40 248 Decrease in Retail lease obligations 512 491 Net interest paid on components of Retail net debt 307 319 Changes in net debt resulting from cash flow 1,113 1,048 Non-cash movements Accrued interest (302) (316) Retail fair value and other non-cash movements (396) (1,022) Changes in net debt resulting from non-cash movements (698) (1,338) Movement in net debt 415 (290) Closing net debt (6,344) (6,759) 33 Borrowings 2023 2022 Current \u00a3m Non-current \u00a3m Total \u00a3m Current \u00a3m Non-current \u00a3m Total \u00a3m Loan due 2031 48 491 539 44 531 575 Bank overdrafts \u2013 \u2013 \u2013 7 \u2013 7 Transaction costs (1) (4) (5) \u2013 \u2013 \u2013 Sainsbury\u2019s Bank Tier 2 Capital 6 116 122 3 176 179 53 603 656 54 707 761 a) Loan due 2031 The loan is secured against 48 (2022: 48) supermarket properties (note 14). This is an inflation linked amortising loan from the finance company Longstone Finance plc with an outstanding principal value of \u00a3527 million (2022: \u00a3566 million) fixed at a real rate of 2.36 per cent where principal and interest rate are uplifted annually by RPI subject to a cap at five per cent and a floor at nil per cent. The carrying value of the loan is \u00a3539 million (2022: \u00a3575 million) with a final repayment date of April 2031. The Group has entered into inflation swaps to convert \u00a3490 million (2022: \u00a3490 million) of the \u00a3527 million (2022: \u00a3566 million) loan from RPI linked interest to fixed rate interest until April 2023. These transactions have been designated as cash flow hedges (note 30). The principal activity of Longstone Finance plc is the issuance of commercial mortgage-backed securities and applying the proceeds towards the secured loans due 2031 with the Group as summarised above. Intertrust Corporate Services Limited holds all the issued share capital of Longstone Finance Holdings Limited on trust for charitable purposes. Longstone Finance Holdings Limited beneficially owns all the issued share capital of Longstone Finance plc. As the Group has no interest, power or bears any risk over these entities they are not included in the Group consolidation. b) Bank overdrafts Bank overdrafts are repayable on demand and bear interest at a spread above Bank of England base rate. c) Sainsbury\u2019s Bank Tier 2 Capital due 2033 The Bank issued \u00a3120 million of fixed rate reset callable subordinated Tier 2 notes in September 2022. These notes pay interest on the principal amount at a rate of 10.5 per cent per annum, payable in equal instalments semi-annually in arrears, until March 2028 at which time the interest rate will reset. This was issued in conjunction with a tender to repurchase and extinguish \u00a3120 million of the existing \u00a3175 million subordinated Tier 2 notes that were issued in November 2017. The Bank subsequently redeemed the remaining \u00a355 million of the existing \u00a3175 million issued in November 2022. d) Short term borrowings The Group refinanced its Revolving Credit Facility in December 2022. The new Revolving Credit Facility is unsecured and is split into two Facilities, a \u00a3500 million Facility (A) and a \u00a3500 million Facility (B). Facility A has a maturity of December 2026 and Facility B has a maturity of December 2027. At 4 March 2023, the Revolving Credit Facility was undrawn (2022: undrawn). The Revolving Credit Facility incurs commitment fees at market rates and drawdowns bear interest at a margin above SONIA. The Group maintains uncommitted facilities to provide additional capacity to fund short-term working capital requirements. Drawdowns on these uncommitted facilities bear interest at a margin. The uncommitted facilities were undrawn at 4 March 2023 (2022: undrawn). 32 Analysis of net debt continued e) Term loan The Group issued a \u00a3575 million unsecured term loan in December 2022, with maturity of March 2026. This new term loan refinanced the \u00a3575 million Bridge Loan Facility arranged in October 2022 with maturity of November 2024. At 4 March 2023, the term loan was undrawn. f) Transaction costs Transaction costs are amortised on a straight-line basis over the life of the facility they relate to. 34 Employee costs 2023 \u00a3m 2022 \u00a3m Employee costs for the Group during the year amounted to: Wages and salaries, including bonus and termination benefits 3,088 3,119 Social security costs 240 240 Pension costs \u2013 defined contribution schemes 191 183 Share-based payments expense 59 58 3,578 3,600 2023 \u2019000 2022 \u2019000 The average number of employees, including directors, during the year was: Full-time 63 65 Part-time 99 116 162 181 Full-time equivalent 107 117 Details of key management compensation can be found in note 39 and within the Directors\u2019 Remuneration Report on pages 96 to 113. 35 Retirement benefit obligations Accounting policies \u2013 defined contribution pension schemes The Group contributions to defined contribution pension schemes are charged to the income statement as incurred. Any contributions unpaid at the balance sheet date are included as an accrual as at that date. The Group has no further payment obligations once the contributions have been paid. Accounting policies \u2013 defined benefit pension scheme (Sainsbury\u2019s Pension Scheme) The surplus or deficit recognised in the balance sheet for defined benefit schemes represents the difference between the fair value of the plan assets and the present value of the defined benefit obligation at the balance sheet date. The defined benefit obligation is actuarially calculated on an annual basis using the projected unit credit method. Actuarial gains and losses are reported in the statement of other comprehensive income as incurred, and comprise both the effects of changes in actuarial assumptions and experience adjustments arising because of differences between the previous actuarial assumptions and what has actually occurred. The income statement charge consists of a financing charge, which is the net of interest cost on pension scheme liabilities and interest income on plan assets and defined benefit pension scheme expenses. The financing charge is determined by applying the discount rate used to measure the defined benefit obligation to the pension scheme liabilities and plan assets at the beginning of the financial year. Background The retirement benefit obligations relate to the Sainsbury\u2019s Pension Scheme plus three unfunded pension liabilities for former senior employees of Sainsbury\u2019s and Home Retail Group. The Sainsbury\u2019s Pension Scheme has two sections, the Sainsbury\u2019s Section which holds the assets and liabilities of the original Sainsbury\u2019s Pension Scheme, and the Argos Section which holds the assets and liabilities of the Home Retail Group Pension Scheme. Each section\u2019s assets are segregated by deed and ring fenced for the benefit of the members of that section. The Scheme is run by a corporate trustee with nine directors. The Scheme is also used to pay life assurance benefits to current (including new) colleagues. The retirement benefit obligations at the year-end have been calculated by Isio, the actuarial advisers to the Group, using the projected unit credit method and based on adjusting the position at the date of the previous triennial valuation for known events and changes in market conditions as allowed under IAS 19 \u2018Employee Benefits\u2019. 33 Borrowings continued Sainsbury\u2019s section The section was closed to new employees on 31 January 2002 and closed to future accrual on 28 September 2013. There are three benefit categories: final salary, career average and cash balance. Final salary and career average benefits are determined by service and salary. Cash balance benefits are determined by the accrued retirement account credits. Argos section The section was closed to new employees in 2009 and to future accrual in January 2013. Pension benefits are based on service and final salary when leaving the Scheme. Triennial valuation The Trustee\u2019s triennial valuation is used to determine the contributions required for the Scheme to pay all the benefits due, now and in the future. The Trustee must allow for a level of prudence and so these assumptions therefore place a relatively high value on the Scheme\u2019s liabilities. By contrast, IAS 19 \u2018Employee Benefits\u2019 requires all companies to value the liabilities on a \u2018best estimate\u2019 basis which places a lower value on the liabilities and therefore a more favourable financial position. As such, the accounting value is different to the result obtained using the Trustee\u2019s triennial valuation basis. The Trustee completed a triennial valuation as at 30 September 2021, resulting in an actuarial surplus of \u00a3130 million (comprising a surplus of \u00a3231 million in the Sainsbury\u2019s section and a \u00a3101 million deficit in the Argos section) on a technical provisions basis, from a deficit of \u00a3538 million in 2018. The asset backed contributions structure (ABC) established by Sainsbury\u2019s in July 2019 continues to deliver as planned. Under the ABC, properties with a valuation of \u00a31,350 million were transferred into a newly formed property holding company \u2013 Sainsbury\u2019s Property Holdings Limited (Propco) from the Sainsbury\u2019s Property Scottish Partnership and other Sainsbury\u2019s Group Companies. The Propco is a wholly owned subsidiary of the Group and leases the transferred properties to other Group companies. Rental receipts facilitate payments of interest and capital on loan notes issued to the Partnership, in which the Scheme holds an interest. The Partnership is controlled by Sainsbury\u2019s and its results are consolidated by the Group. The Scheme\u2019s investment in the Partnership does not qualify as a plan asset for the purposes of the Group\u2019s consolidated financial statements and is therefore not included within the fair value of plan assets. The value of the properties transferred to the Propco remains in the Group\u2019s property, plant and equipment on the balance sheet, and the Group retains full operational flexibility to extend, develop and substitute them. The Scheme\u2019s interest in the Partnership entitled it to annual distributions over up to 20 years initially through three payment streams: 1) Payments to the Sainsbury\u2019s section (\u00a315 million per year) which stopped from December 2021 2) Payments to the Argos section (\u00a320 million per year) 3) Switching payment stream, paid to either the Sainsbury\u2019s section or Argos section (initially \u00a323 million per year, increasing to \u00a333 million by 2038) No other cash contributions were paid during the year (2022: cash contributions of \u00a310 million). The payments to the Sainsbury\u2019s and Argos sections (streams 1 and 2) would stop in 2030, or when the relevant section reached its funding target, if earlier. The Sainsbury\u2019s section reached its funding target on 31 December 2021 and so the first payment stream was permanently switched off, even though the subsequent updating of assumptions under the 2021 triennial valuation resulted in a small deficit on this funding basis. The switching stream (stream 3) was initially paid to the Sainsbury\u2019s section until it reached the funding target, when it switched to the Argos section. Payments continue until 2038 or until both sections have reached their funding targets, if earlier. The level of property in the Propco reduces as the Scheme reaches the funding targets. The level of security was designed to reduce as the Scheme\u2019s funding level improves, as the risk of a Group insolvency to the Scheme reduces. Once a section reaches a specific funding target for three consecutive quarters, the level of security that the Scheme can access reduces at the following 31 March in line with the Residual Security Amount (RSA) caps set out in the ABC framework. The security is currently provided by properties in the ABC which are valued annually. If the value of the security is outside a corridor either side of the RSA, the Company must top up if the value is less, or can chose to remove property from the Propco if the value is higher; however if a default event were to occur, the Scheme would only have rights over the security to the value of the RSA \u2013 any excess value would remain in the Propco and revert to the Company. IFRIC 14 Under IFRIC 14, a company is required to measure any economic benefits available to it in the form of refunds or reductions to future contributions at the maximum amount that is consistent with the terms and conditions of the pension scheme. These are regarded as available to a company if it has an unconditional right to realise them at some point during the life of the pension scheme or when all benefits are finally settled. Such an unconditional right would not exist when the availability of the refund or the reduction in future contribution would be contingent upon factors beyond the company\u2019s control. Management is of the view that it has an unconditional right to a refund of surplus under IFRIC 14. As such no adjustment has been made for potential additional liabilities. In forming this conclusion management has considered whether the Group can control the run-off of the Scheme until there are no liabilities left, consistent with IFRIC 14. For example, if the Trustee has a unilateral power to wind up the Scheme while there are liabilities remaining, then it is viewed that the Group cannot access surplus through this route. For both sections, management have assessed that the Group can control run-off until no liabilities remain by complying with its obligations under the Scheme rules and pensions legislation, and there will therefore be a gradual settlement of the planned liabilities over the life of each section. The Scheme rules list certain situations under which the Trustee can wind up the Scheme; however, whilst there is gradual settlement of the Scheme\u2019s liabilities, these are concluded to be within the control of the Group. As a result, it is concluded that the Trustee does not have a unilateral power to wind up the Scheme nor augment benefits while the Scheme is ongoing. 35 Retirement benefit obligations continued Unfunded pension liabilities The unfunded pension liabilities are unwound when each employee reaches retirement and takes their pension from the Group payroll or is crystallised in the event of an employee leaving or retiring and choosing to take the provision as a one-off cash payment. a) Income statement The amounts recognised in the income statement are as follows: 2023 \u00a3m 2022 \u00a3m Excluded from underlying profit before tax: Interest cost on pension liabilities 1 (221) (197) Interest income on plan assets 277 212 Total included in finance income 56 15 Defined benefit pension scheme expenses (6) (7) Past service credit/(cost) \u2013 3 Settlement gains 2 8 \u2013 Total excluded from underlying profit before tax 58 11 Total income statement income 58 11 1. Includes interest of \u00a31 million for the unfunded pension scheme (2022: \u00a31 million). 2. A settlement credit of \u00a38 million has been recognised relating to a gain on payments made to members exiting the scheme relative to the liabilities. b) Other comprehensive income Remeasurements of the retirement benefit obligations have been recognised as follows: 2023 \u00a3m 2022 \u00a3m Return on plan assets, excluding amounts included in interest (4,739) 739 Actuarial gains/(losses) arising from changes in: Finance assumptions 1 3,518 334 Demographic assumptions 2 38 133 Experience 3 (215) 251 Total actuarial gains 3,341 718 Total remeasurements (1,398) 1,457 1. Includes \u00a313 million for the unfunded pension scheme (2022: \u00a31 million). 2. Includes \u00a31 million for the unfunded pension scheme (2022: \u00a31 million). 3. Includes a charge of \u00a3(1) million for the unfunded pension scheme (2022: \u00a3nil). c) Balance sheet The amounts recognised in the balance sheet are as follows: 2023 2022 Sainsbury\u2019s \u00a3m Argos \u00a3m Group \u00a3m Sainsbury\u2019s \u00a3m Argos \u00a3m Group \u00a3m Present value of funded obligations (5,128) (793) (5,921) (8,060) (1,313) (9,373) Fair value of plan assets 6,007 927 6,934 10,158 1,535 11,693 Retirement benefit surplus 879 134 1,013 2,098 222 2,320 Present value of unfunded obligations (12) (12) (24) (20) (17) (37) Retirement benefit surplus 867 122 989 2,078 205 2,283 The retirement benefit surplus and the associated deferred income tax balance are shown within different line items on the face of the balance sheet. 35 Retirement benefit obligations continued The movements in the Group\u2019s net defined benefit obligations are as follows: 2023 \u00a3m 2022 \u00a3m As at the beginning of the year 2,283 744 Net interest income 56 15 Remeasurement (losses)/gains (1,398) 1,457 Pension scheme expenses (6) (7) Contributions by employer 44 71 Benefits paid 2 \u2013 Past service credit \u2013 3 Settlement gains 8 \u2013 As at the end of the year 989 2,283 The movements in the retirement benefit obligations (including unfunded obligations) are as follows: 2023 \u00a3m 2022 \u00a3m As at the beginning of the year (9,410) (10,256) Interest cost (221) (197) Remeasurement gains 3,341 718 Benefits paid 308 322 Past service credit \u2013 3 Settlement gains 37 \u2013 As at the end of the year (5,945) (9,410) Analysed as: Retirement benefit obligations (5,921) (9,373) Unfunded obligations (24) (37) The movements in the fair value of plan assets are as follows: 2023 \u00a3m 2022 \u00a3m As at the beginning of the year 11,693 11,000 Interest income on plan assets 277 212 Pension scheme expenses (6) (7) Remeasurement (losses)/gains (4,739) 739 Contributions by employer 44 71 Benefits paid (306) (322) Settlement gains (29) \u2013 As at the end of the year 6,934 11,693 Significant estimate \u2013 pension scheme assets The Scheme holds some private market assets as they are expected to deliver a more favourable risk/return profile than public market equivalents. These assets are relatively illiquid (likely to be realised over c.5 years) but the Scheme holds sufficient liquid assets (cash, gilts and other liquid securities) to be confident that it can meet its pension and collateral obligations over time. The valuation of these assets is based on the audited accounts of the funds, where available, and net asset value statements from the investment managers where recent accounts are not available. For many of these investments, the valuations provided are at 30 September. The Group therefore performs a roll-forward for these valuations, adjusting for cash received or paid and applying the changes seen in relevant liquid indices as follows: Asset Class Returns from 30-Sep-22 to 4-Mar-23 Global equity USD return 16.58% Global High Yield Debt USD return 6.73% US loans USD return 6.07% UK REITS GBP return 9.96% The roll-forward has increased the valuation of illiquid assets by \u00a395 million. A 1 per cent increase/decrease in the indices used would have caused a \u00a316 million increase/decrease in the adjustment. Investment strategy and risks associated with the Group\u2019s defined benefit pension scheme The investment strategy of the Scheme is determined by the Trustee. The Trustee considers that its primary responsibility in respect of investments is to ensure, for the duration of the Scheme, that funds will be available to meet the benefit payment obligations as they fall due. Following the completion of the 2021 triennial valuation and updated actuarial assumptions which resulted in a surplus on the statutory basis and the volatility following the mini budget in September 2022 which also had an impact on the Scheme\u2019s funding, the Trustee continues to target being funded on a gilts +0.5% p.a. basis, while limiting the downside risk associated with investment policy wherever possible. The investment objectives target a 50% or better chance of fully funded on this basis by the end of 2024 for the Argos section and the end of 2028 for the Sainsbury\u2019s section. 35 Retirement benefit obligations continued Before the political events in late 2022 and associated significant and rapid market movements, both sections of the Scheme were almost fully hedged against interest rate and inflation changes. However, to best manage the ongoing situation and protect the Scheme by maintaining liquidity levels to settle collateral calls in the event of further significant interest rate volatility, the Trustee decided to reduce the interest rate hedging and the Company also made a short-term loan facility of \u00a3500 million available. The timing of the changes that were implemented for the Sainsbury\u2019s section coincided with in a fall in gilt yields which reduced the ongoing funding level. There was only a slight impact on the Argos section as the reduction in hedging was implemented later. The Trustee did not draw on the short-term loan facility, which was withdrawn, as agreed, in January 2023. As the 2021 triennial valuation was already signed, there was no change to the contributions to the Scheme, and the Company does not currently anticipate any impact on the 2024 triennial valuation contribution requirements. The Trustee has since taken action to partially reinstate the interest rate hedging ratios. The Trustee has also reviewed the collateral sufficiency framework which ensures sufficient high quality liquid assets are maintained to meet liquidity requirements, even in times of market stress and volatility. The level of collateral that the Scheme can call on at any time is well above the limits suggested recently by the Pensions Regulator. The risks associated with achieving the above strategy are as follows: Risk Description Mitigation Investment Strategy Risk Underperformance of the investment strategy relative to the changes in the Scheme\u2019s liabilities reduces the future resources available to meet pension obligations. The Scheme adopts a liability driven investment framework to generate excess asset returns with reference to its liabilities by largely removing its interest and inflation uncertainties. Investment Implementation Risks Poor execution including investment managers\u2019 underperformance relative to their targets leads to lower funding levels. Investment mandates are closely monitored against their portfolio benchmarks and risk allowances set out in investment guidelines. The Investment Committee can terminate consistently underperforming mandates. Custody Risks Inadequate controls lead to inaccurate record keeping and loss of assets through investment fraud. The top tier global custodian Northern Trust oversees the Scheme\u2019s assets. The Trustee also uses an independent third party consultant to periodically review Northern Trust\u2019s performance and compare it to its peers. Sustainability, including ESG and climate risks Investment managers do not have appropriate policies and procedures in place to identify and assess ESG risks and opportunities. The Scheme incorporates ESG, stewardship and other related risks into its Statement of Investment Principles (SIP) and publishes an annual Implementation Statement and a TCFD report. Investment managers are requested to confirm whether they operate in line with the Trustee\u2019s policies. The approach that the Trustee has adopted as part of its ongoing process to deliver a Net Zero goal by 2050 includes investment decisions based on new climate governance and reporting standards, engagement with corporates and government, maintaining outcomes focused on climate objectives in investments, and the role of the Scheme\u2019s investment managers in signing up to the UN Principles of Responsible Investment and having Net Zero targets. ESG risks encompass a broad range of risks across the Environmental, Social and Governance activities of the entities in which the Scheme ultimately invests. Examples of ESG risks could include risks associated with exposure to climate transition (e.g. exposure to fossil fuels), risks associated with a lack of diversity, equity and inclusion, or risks associated with poor corporate governance. Investment Regulatory Risk Insufficient training and awareness of regulatory requirements results in non-compliance with regulations. The Trustee has top tier advisers and is advised by Eversheds Sutherland and CMS Cameron McKenna on legal and regulatory matters, and closely follows changes in regulatory requirements and developments for pensions and investments. Periodic training is provided to the Investment Committee, advisers, and if necessary, the full Board by relevant experts. Investment Liquidity Risks Insufficient liquidity to meet ongoing or unexpected cash flow requirements in respect of member benefit payments, as well as collateral top up requests to manage the Scheme\u2019s derivative positions. The Scheme adopts a collateral sufficiency framework which ensures sufficient high quality liquid assets are maintained in order to meet liquidity requirements, even in times of market stress. The Investment Adviser liaises with the Scheme Actuary and the Pensions Department to understand current and future cash flow requirements. Investment Counterparty Risks Financial losses may be incurred due to failure of counterparties or inability to roll-over derivative positions. Asset Managers manage credit limits for all their derivative counterparty exposures and monitor positions over derivative roll dates. Longevity Risks The Scheme pays benefits longer than expected due to members\u2019 increasing life expectancy. Longevity risk is managed as part of the Scheme\u2019s integrated risk management framework. The Trustee monitors longevity risk and aims to achieve sufficient funding levels by meeting prudent milestone targets which take account of the potential for increased life expectancy. Currency Risks The Scheme\u2019s unhedged foreign currency exposure leads to additional volatility for non-sterling denominated assets\u2019 returns as all benefits are denominated in pound sterling. The Trustee monitors foreign currency exposure and uses hedging programmes to efficiently control foreign currency risk at reasonable cost. Geopolitical Risk The Scheme\u2019s asset returns are negatively impacted by unpredictable geopolitical events. The Trustee adopts a top-down risk management framework and their advisors and asset managers closely monitor all positions impacted by geopolitical events. 35 Retirement benefit obligations continued The major categories of plan assets are as follows: Quoted 2023 \u00a3m Unquoted 1 2023 \u00a3m Quoted 2022 \u00a3m Unquoted 1 2022 \u00a3m Liability matching assets 3,092 1,629 7,096 2,167 Growth assets Equity Private \u2013 429 \u2013 393 Derivatives 2 \u2013 4 \u2013 7 Fixed Income Securities Emerging Market Bonds \u2013 \u2013 139 4 Alternatives Real Estate \u2013 397 \u2013 593 Private Debt \u2013 726 \u2013 733 Diversified Growth \u2013 303 \u2013 301 Cash and Cash equivalents 354 \u2013 260 \u2013 3,446 3,488 7,495 4,198 1. Certain unquoted fixed interest securities, private equity and debt investments and property investments are stated at fair value. These fair values may differ from their realisable values due to the absence of liquid markets in these investments. 2. Swap contract derivatives outstanding at the year-end are stated at the net present value of future discounted cash flows of each leg of the swap. For the comparative period, quoted and unquoted asset balances have been reclassified from \u00a37,793 million and \u00a33,900 million to \u00a37,495 million and \u00a34,198 million to reflect an asset manager\u2019s categorisation of some investments held. Included within liability matching assets are Government Bonds totalling \u00a34,083m (2022: \u00a310,938m), Corporate Bonds totalling \u00a31,988m (2022: \u00a35,549m), and Fixed income derivatives totalling \u00a3356m (2022: \u00a3487m), offset by repurchase agreements totalling \u00a3(1,706)m (2022: \u00a3(7,711)m). Circa 94% of the Scheme\u2019s corporate bonds are invested in investment grade credit. The remainder are either unrated or below investment grade. The Sainsbury\u2019s Pension Scheme adopts a liability driven investment (LDI) framework to manage its funding risk and reduce volatility by largely removing the interest rate and inflation rate impacts of its liabilities. As a result, the value of the Scheme\u2019s assets changes in the similar way to its liabilities, which helps maintain its ability to pay benefits and therefore member security over the long term. Of the above assets, \u00a33,506 million are denominated in pound sterling and \u00a33,427 million are denominated in overseas currencies. d) Assumptions The principal actuarial assumptions used at the balance sheet date are as follows: 2023 % 2022 % Discount rate 5.00 2.40 Inflation rate \u2013 RPI 3.25 3.60 Inflation rate \u2013 CPI 2.55 2.90 Future pension increases 1.90 \u2013 2.95 2.30 \u2013 3.45 Discount rate The discount rate for the Scheme is derived from the expected yields on high quality corporate bonds over the duration of the Group\u2019s pension scheme and extrapolated in line with gilts with no theoretical growth assumptions. High quality corporate bonds are those for which at least one of the main ratings agencies considers to be at least AA (or equivalent). Inflation On 25 November 2022, the Government and UK Statistics Authority\u2019s joint consultation response on RPI reform was published. This confirmed their intention to amend the RPI calculation methodology to be aligned to that already in use for the calculation of the CPI (including housing) with effect from 2030. As a result, the Group reduced the post 2030 gap between RPI and CPI to nil in the prior year, effectively assuming RPI will be aligned with CPI post 2030, resulting in a single weighted average RPI-CPI gap of 0.70% p.a. for the 4 March 2023 year-end. This approach has been applied consistently in the current year. 35 Retirement benefit obligations continued Mortality The base mortality assumptions are based on the SAPS S2 tables, with adjustments to reflect the Scheme\u2019s population. Following the completion of the 2021 triennial valuation and consideration of the previous three years of mortality experience both in the Scheme and the UK as a whole, the Company has decided to update the actuarial mortality base tables that determine the life expectancy assumptions to reflect a best-estimate adjustment derived from analysis carried out for the valuation. Future mortality improvements for the 2023 year-end are CMI 2021 projections with a long term rate of improvement of 1.25 per cent p.a. Future mortality improvements for the 2023 year-end are CMI 2021 projections with a long term rate of improvement of 1.25 per cent p.a. Future mortality improvements for the 2022 year-end were CMI 2021 projections with a long term rate of improvement of 1.25 per cent p.a. While COVID-19 had an impact on mortality in 2020, the impact on future mortality trends is currently unknown. All IAS 19 calculations use the CMI model, which measures potential changes to future mortality trends. The Group\u2019s policy is to use the available version as at the year-end which is still CMI 2021 which was released on 9 March 2022. As a result of the significant change to mortality in the CMI 2020 model, the CMI modified the calibration process for CMI 2020 to allow choice on the weighting placed on an individual year\u2019s data. For the Core version of CMI 2020, a weight of zero per cent was applied to 2020 data and weightings of 100 per cent for other years, so the potentially exceptional 2020 experience was ignored when modelling future improvements. This approach was maintained for CMI 2021, with zero per cent weighting applied to 2020 and 2021 data. A 10 per cent weighting has therefore been applied again to the 2020 and 2021 mortality data, broadly reflecting that the effects of the pandemic were significantly reduced going forwards with mortality rates for 2022 immediately returning to those in 2019. Thereafter, mortality improvements are in line with the CMI 2021 Core model. The impact of different weightings on the Scheme liabilities is included in the sensitivities section within this note. The life expectancy for members aged 65 years at the balance sheet date is as follows: Sainsbury\u2019s section Main Scheme 2023 Years Sainsbury\u2019s section Executive Scheme 2023 Years Argos section 2023 Years Sainsbury\u2019s section Main Scheme 2022 Years Sainsbury\u2019s section Executive Scheme 2022 Years Argos section 2022 Years Male pensioner 19.5 22.7 20.3 19.6 23.8 21.3 Female pensioner 23.3 24.0 23.4 23.5 25.0 23.9 The life expectancy at age 65 for members aged 45 years at the balance sheet date is as follows: Sainsbury\u2019s section Main Scheme 2023 Years Sainsbury\u2019s section Executive Scheme 2023 Years Argos section 2023 Years Sainsbury\u2019s section Main Scheme 2022 Years Sainsbury\u2019s section Executive Scheme 2022 Years Argos section 2022 Years Male pensioner 20.7 24.0 21.6 20.8 25.0 22.5 Female pensioner 24.9 25.5 24.8 25.0 26.5 25.4 e) Sensitivities The present value of the Scheme\u2019s liabilities recognised at the balance sheet date and the net financing charge recognised in the income statement are dependent on the discount rate. Other key assumptions within this calculation are based on market conditions or estimates of future events, including mortality rates. The carrying value of the retirement benefit obligations is impacted by changes to any of the assumptions used, however is most sensitive to changes in the discount rate. The sensitivities are calculated using the same methodology used to calculate the retirement benefit obligation, by considering the impact for a given change in assumption. The net retirement benefit obligation is the difference between the retirement benefit obligation and the fair value of plan assets. Changes in the assumptions may occur at the same time as changes in the fair value of plan assets. There has been no change in the calculation methodology since the prior period. Sainsbury\u2019s \u00a3m Argos \u00a3m Total \u00a3m Financial sensitivities An increase of 0.5% in the discount rate would decrease the present value of funded obligations by 346 61 407 A decrease of 0.5% in the discount rate would increase the present value of funded obligations by 389 68 457 An increase of 0.5% in the inflation rate would increase the present value of funded obligations by 180 44 224 A decrease of 0.5% in the inflation rate would decrease the present value of funded obligations by 175 42 217 An increase of 0.5% in the inflation rate for future pension increases would increase the present value of funded obligations by 87 23 111 A decrease of 0.5% in the inflation rate for future pension increases would reduce the present value of funded obligations by 87 22 108 Demographic sensitivities An increase of one year to the life expectancy would increase the present value of funded obligations by 160 24 183 Changing the 2020 and 2021 weighting parameters in CMI 2021 to 0% would increase the present value of funded obligations by 99 8 107 Changing the 2020 and 2021 weighting parameters in CMI 2021 to 25% would decrease the present value of funded obligations by 54 8 62 35 Retirement benefit obligations continued f) Future benefit payments Details of future committed payments are included in the Background section at the beginning of this note. Expected cash contributions in FY23/24 are approximately \u00a345 million. The duration of the plan liabilities is around 15 years for the Sainsbury\u2019s section and 17 years for the Argos section. The following table provides information on the timing of benefit payments (amounts undiscounted): 2023 \u00a3m 2022 \u00a3m Within the next 12 months (next annual reporting period) 237 240 Between 2 and 5 years 1,104 1,003 Between 6 and 15 years 3,779 3,644 Between 16 and 25 years 3,974 4,176 Beyond 25 years 5,345 6,362 Total expected payments 14,439 15,425 36 Share-based payments Accounting policies The Group provides benefits to employees (including Directors) of the Group in the form of equity-settled and cash-settled share-based payment transactions, whereby employees render services in exchange for shares, rights over shares or the value of those shares in cash terms. For equity-settled share-based payments, the fair value of the employee services rendered is determined by reference to the fair value of the shares awarded or options granted, excluding the impact of any non-market vesting conditions. All share options are valued using an option-pricing model (Black-Scholes). This fair value is charged to the income statement over the vesting period of the share-based payment scheme with a corresponding increase in equity. For cash-settled share-based payments, the fair value of the employee services rendered is determined at each balance sheet date and the charge recognised through the income statement over the vesting period of the share-based payment scheme, with a corresponding increase in accruals. The value of the charge is adjusted in the income statement over the remainder of the vesting period to reflect expected and actual levels of options vesting, with the corresponding adjustments made in equity and accruals. The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity. The Group recognised \u00a359 million (2022: \u00a358 million) of employee costs (note 34) related to share-based payment transactions made during the financial year. The Group operates several share-based payment schemes as set out below: a) Savings-Related Share Option Scheme (Sharesave) The Group operates a Savings-Related Share Option Scheme, which is open to all UK employees with more than three months\u2019 continuous service. This is an approved HMRC scheme and was established in 1980. Under Sharesave, participants remaining in the Group\u2019s employment at the end of the three-year (and historically also five-year) savings period are entitled to use their savings to purchase shares in the Company at a pre-stated exercise price. Employees leaving for certain reasons can use their savings to purchase shares within six months of their leaving. A reconciliation of Sharesave option movements is shown below: 2023 Number of options million 2023 Weighted average exercise price pence 2022 Number of options million 2022 Weighted average exercise price pence Outstanding at beginning of year 58.3 186 64.1 179 Granted 23.7 167 13.8 228 Lapsed / forfeited (14.0) 206 (10.0) 179 Exercised (8.6) 167 (9.6) 204 Outstanding at end of year 59.4 177 58.3 186 Exercisable at end of year 7.1 166 4.7 238 Exercisable Range 161 to 260 161 to 260 The weighted average share price for options exercised over the year was 258 pence (2022: 259 pence). The weighted average remaining contractual life of options outstanding at 4 March 2023 was 1.9 years (2022: 1.8 years). 35 Retirement benefit obligations continued Options granted during the year were valued using the Black-Scholes option-pricing model. No performance conditions were included in the fair value calculations. The fair value per option granted during the year and the assumptions used in the calculation are as follows: 2023 2022 Share price at grant date (pence) 226 277 Exercise price (pence) 167 228 Expected volatility \u2013 3 Year Period (%) 28.9 30.8 Option life \u2013 3 Year Period (years) 3.2 3.2 Expected dividends (expressed as dividend yield %) 5.6 4.0 Risk-free interest rate \u2013 3 Year Period (%) 3.0 0.1 Fair value per option \u2013 3 Year Period (pence) 57 59 The expected volatility is based on the standard deviation of the Group\u2019s share price for the period immediately prior to the date of grant of award, over the period identical to the vesting period of the award, adjusted for management\u2019s view of future volatility of the share price. b) Long-Term Incentive Plan Under the Long-Term Incentive Plan, shares are conditionally awarded to Senior Managers of the Company. The core awards are calculated as a percentage of the participants\u2019 salaries and scaled according to grades. Performance is measured at the end of the three-year performance period. If the required performance conditions, which are financial and non-financial non-market conditions, have been met, the awards vest and the participants are able to exercise 100% of the awards received. For 2020 awards and prior, recipients were only able to receive 50% of their awards after 3 years and 50% of their awards after 4 years. Options granted will expire five years from the grant date. For Executive Directors, awards will normally be subject to a two-year holding period following the end of the three-year performance period. Options granted to acquire the award of shares will expire six years from the date of grant. Dividends will accrue on the shares that vest in the form of additional shares. The core award can grow by up to four times, dependent on the level of performance. Straight-line vesting will apply if performance falls between two points. Awards are structured as nil cost options. A reconciliation of the number of shares conditionally allocated is shown below: 2023 Million 2022 Million Outstanding at beginning of year 18.5 12.2 Conditionally allocated 9.7 12.9 Released to participants ( 7.4) (5.0) Lapsed (1.8) (1.6) Outstanding at end of year 19.0 18.5 The weighted average remaining contractual life of share options outstanding at 4 March 2023 was 0.9 years (2022: 1.5 years). Details of shares conditionally allocated at 4 March 2023 are set out below: Date of conditional award 2023 Million 2022 Million 11 May 2017 (2017 Future Builder) \u2013 1.1 11 May 2018 (2018 Future Builder) 0.7 2.8 09 May 2019 (2019 Future Builder) 4.4 2.9 07 May 2020 (2020 Future Builder) 3.0 3.3 06 Jun 2021 (2021 Win in Food Plan) 7.6 8.4 01 Jun 2022 (2022 Leaders\u2019 Share Award) 3.3 \u2013 19.0 18.5 The 2021 Win in Food Plan was opened up to a larger population of managers, which was a one-off increase specifically for this plan. 36 Share-based payments continued No performance conditions were included in the fair value calculations. The fair value per option granted during the year and the assumptions used in the calculation are as follows: 2023 2022 Share price at grant date (pence) 230 267 Option life (years) 3 3 Fair value per option (pence) 230 267 During the year, a total number of 7.4 million shares were exercised (2022: 5.0 million shares). The weighted average share price during the year for options exercised was 232 pence (2022: 248 pence). c) Deferred Share Award This plan is closed to new participants, the last awards made under this plan were in 2020/21. The Deferred Share Award targets a diverse range of financial and strategic scorecard measures. These are intended to reward the Directors in the Company, including Executive Directors, for driving the short-term objectives that will directly lead to building the sustainable, long-term growth of the Company. Awards are structured as nil cost options. Share-based awards are made to participants subject to performance against a basket of measures. At least 50 per cent of the awards are based on the delivery of financial performance and returns to shareholders. The balance is based on measures which will assess the Company\u2019s performance relative to its competitors as well as key strategic goals. Performance against the target is measured over one financial year. Any shares awarded are deferred for a further two years to ensure that management\u2019s interests continue to be aligned with those of shareholders. The shares are subject to forfeiture if the participant resigns or is dismissed. Dividends accrue on the shares that vest in the form of additional shares. A reconciliation of the number of shares granted over the year is shown below: 2023 Million 2022 Million Outstanding at beginning of year 1.7 3.6 Granted 1 0.1 0.2 Lapsed \u2013 (0.1) Exercised (1.7) (2.0) Outstanding at end of year 0.1 1.7 1. The awards granted in the current and comparative period relate to dividend shares awarded. The number of shares allocated at the end of the year is set out below: 2023 Million 2022 Million 09 May 2019 \u2013 0.1 07 May 2020 0.1 1.6 0.1 1.7 The weighted average remaining contractual life of share options outstanding at 4 March 2023 was nil years (2022: nil years). The weighted average share price during the year for options exercised was 236 pence (2022: 241 pence). d) Bonus Share Award Senior Managers and supermarket managers receive 60 per cent of their bonus in cash and 40 per cent of the award in shares. Director level managers receive 50 per cent of their bonus in cash and 50 per cent of the award in shares. Before 2021 awards had a three-year deferral period, however awards granted from 2021 now have a deferral period of two years (except for certain colleagues who are subject to a deferral period due to financial services regulations). Dividends accrue on these shares and are released at the end of the deferral period. A reconciliation of the number of shares granted over the year is shown below: 2023 Million 2022 Million Outstanding at beginning of year 17.2 10.6 Granted 14.4 12.6 Exercised in the period (5.9) (4.3) Lapsed (1.3) (1.7) Outstanding at end of year 24.4 17. 2 36 Share-based payments continued The number of shares allocated at the end of the year is set out below: 2023 Million 2022 Million 09 May 2019 \u2013 5.1 07 May 2020 1.0 1.1 07 May 2021 10.3 11.0 01 June 2022 13.1 \u2013 24.4 17. 2 The weighted average remaining contractual life of share options outstanding at 4 March 2023 was 0.6 years (2022: 0.7 years). The weighted average share price during the year for options exercised was 251 pence (2022: 242 pence). 37 Capital commitments At 4 March 2023, capital commitments contracted, but not provided for by the Group, amounted to \u00a3159 million (5 March 2022: \u00a3108 million). In addition, the Group is committed to payments totalling \u00a3101 million (2022: \u00a3nil) in relation to leases that have been signed but not yet commenced. 38 Contingent liabilities The Group has a number of contingent liabilities in respect of historic lease guarantees, particularly in relation to the disposal of assets, which if the current tenant and their ultimate parents become insolvent, may expose the Group to a material liability. This liability decreases over time as the leases expire. The Group has considered a number of factors, including past history of default as well as the profitability and cash generation of the current leaseholders, and has concluded that the likelihood of pay out is remote. Along with other retailers, the Group is currently subject to claims from current and ex-employees in the Employment Tribunal for equal pay under the Equality Act 2010 and/or the Equal Pay Act 1970. There are currently circa 13,000 equal pay claims from circa 8,100 claimants and the Group believes that further claims may be served. The claimants are alleging that their work within Sainsbury\u2019s stores is or was of equal value to that of colleagues working in Sainsbury\u2019s distribution centres, and that differences in terms and conditions relating to pay are not objectively justifiable. The claimants are seeking the differential back pay based on the higher wages in distribution depots, and the equalisation of wages and terms and conditions on an ongoing basis. There are three stages in the tribunal procedure for equal value claims of this nature and the claimants will need to succeed in all three. The first stage is whether store claimants have the legal right to make the comparison with depot workers. Following European and Supreme Court decisions in other litigation, Sainsbury\u2019s has conceded this point. The second stage is the lengthy process to determine whether any of the claimants\u2019 roles are of equal value to their chosen comparators. In the event that any of the claimants succeed at the second stage, there will be a third stage comprising further hearings, in the following years, to consider Sainsbury\u2019s material factor defences, relating to non-discriminatory reasons for any pay differential. Completion of these two stages is likely to take many years which may involve hearings and appeals. It is not possible to predict a final date with any certainty. If the Group is unsuccessful at the end of the litigation the liability could be material but due to the complexity and multitudinous factual and legal uncertainties we are not in a position to predict an outcome, quantum or impact at this stage. There are substantial factual and legal defences to these claims and the Group intends to defend them vigorously. 36 Share-based payments continued 39 Related party transactions a) Key management personnel The key management personnel of the Group comprise members of the J Sainsbury plc Board of Directors and the Operating Board. The key management personnel compensation is as follows: 2023 \u00a3m 2022 \u00a3m Short-term employee benefits 15 12 Post-employment employee benefits 1 1 Share-based payments 6 6 22 19 Five key management personnel had credit card balances with Financial Services (2022: three). These arose in the normal course of business and were immaterial to the Group and the individuals. Two key management personnel held saving deposit accounts with Financial Services (2022: one). These balances arose in the normal course of business and were immaterial to the Group and the individuals. b) Joint ventures and associates Transactions with joint ventures and associates For the 52 weeks to 4 March 2023, the Group entered into various transactions with joint ventures and associates as set out below. All transactions with joint ventures and associates are at arms-length. 2023 \u00a3m 2022 \u00a3m Dividends and distributions received 1 2 Rental expenses paid (6) (8) Year-end balances arising from transactions with joint ventures and associates 2023 \u00a3m 2022 \u00a3m Other payables (2) (1) c) Retirement benefit obligations As discussed in note 35, the Group has entered into an arrangement with the Pension Scheme Trustee as part of the funding plan for the actuarial deficit in the Scheme. Full details of this arrangement are set out in note 35 to these financial statements. 40 Post balance sheet events Subsequent to the Group\u2019s balance sheet date, on 14 March 2023 the Group exchanged contracts for the purchase of Supermarket Income REIT\u2019s beneficial interest in a commercial property investment pool, in which the Group already held a beneficial interest, refer to note 29. The purchase has been implemented through the acquisition of Cornerford Limited, Horndrift Limited, Avenell Property PLC and Hobart Property PLC. The transaction completed on 17 March 2023 for a total consideration of \u00a3431 million (excluding costs), which is being paid in three tranches. \u00a3279 million was paid on 17 March 2023 and \u00a3117 million will be paid on 10 July 2023, whilst the third tranche of \u00a335 million is conditional on the sale of five stores from the property pool by the Group. Additionally, the Group will fully fund the bond redemptions attached to the property pool, of which \u00a3170.5 million was paid on 20 March 2023 and \u00a3130.4 million will be paid on 13 July 2023. The total consideration and bond redemptions are to be funded by utilising the Group\u2019s cash resources and also by drawing under the committed unsecured term facility, from which the Group drew \u00a3200 million on 14 March 2023. As this transaction took place subsequent to the Group\u2019s balance sheet date, no adjustments are required to be made to the Group\u2019s financial statements. As the transaction exchanged and completed after the balance sheet date, control of the entities acquired only passed to the Group after the balance sheet date and therefore the initial accounting for this transaction has not yet been completed. 41 Details of related undertakings All companies listed below are owned by the Group and all interests are in ordinary share capital, except where otherwise indicated. All subsidiaries have been consolidated. a) Subsidiary undertakings The Group holds a majority of the voting rights of the following undertakings: Entity Country of incorporation Interest Holding Registered office address* ARG Personal Loans Limited UK 100% Indirect Avebury Argos Business Solutions Limited UK 100% Indirect Avebury Argos Card Transactions Limited UK 100% Indirect 33 Holborn Argos Direct Limited UK 100% Indirect 33 Holborn Argos Distributors (Ireland) Limited Ireland 100% Indirect Unit 7, Ashbourne Retail Park Argos Holdings Limited UK 100% Indirect Avebury Argos Limited UK 100% Indirect Avebury Argos (N.I.) Ltd UK 100% Indirect Forestside Shopping Centre Argos Surbs Investments Limited UK 100% Indirect Avebury Avenell Property plc UK 100% Indirect 33 Holborn Barleygold Limited UK 100% Indirect 50 Bedford Street Bells Stores Limited UK 100% Direct 33 Holborn BLSSP (PHC 7) Limited UK 100% Indirect 33 Holborn Braemar Castle Limited** UK 100% Direct 33 Holborn Brand-Leader's Limited UK 100% Indirect 33 Holborn Chad Valley Limited UK 100% Indirect 33 Holborn Clearance Bargains Limited UK 100% Indirect 33 Holborn Cliffrange Limited UK 100% Indirect 33 Holborn Coolidge Investments Limited UK 100% Indirect 33 Holborn Cornerford Limited**** UK 100% Indirect 33 Holborn Financial Recovery Services Limited UK 100% Indirect Avebury First Stop Stores Limited UK 100% Indirect 33 Holborn Flint Castle Limited** UK 100% Direct 33 Holborn Global (Guernsey) Limited Guernsey 100% Indirect PO Box 33, Dorey Court Habitat Retail Limited UK 100% Indirect Avebury Holborn UK Investments Limited UK 100% Direct 33 Holborn Home Retail Group Limited UK 100% Indirect Avebury Home Retail Group (Cyprus) Limited Cyprus 100% Indirect 5 Anastasios Leventis Street Home Retail Group (Finance) LLP UK 100% Indirect Avebury Home Retail Group (Guernsey) LP Guernsey 100% Indirect PO Box 33, Dorey Court Home Retail Group (Jersey) Limited Jersey 100% Indirect 44 Esplanade Home Retail Group (UK) Limited UK 100% Indirect Avebury Home Retail Group Card Services Limited UK 100% Indirect Avebury Home Retail Group Holdings (Overseas) Limited UK 100% Indirect 33 Holborn Home Retail Group Insurance Services Limited UK 100% Indirect Avebury Home Retail Group Nominees Limited UK 100% Indirect 33 Holborn Home Retail Group UK Service Company Limited UK 100% Indirect 33 Holborn Horndrift Limited**** UK 100% Indirect 33 Holborn J Sainsbury Common Investment Fund Limited UK 100% Indirect 33 Holborn J Sainsbury Distribution Limited UK 100% Direct 33 Holborn J Sainsbury Pension Scheme Trustees Limited UK 100% Direct 33 Holborn J Sainsbury Trustees Limited UK 100% Indirect 33 Holborn Jacksons Stores Limited UK 100% Direct 33 Holborn Jacksons Stores 2002 Limited UK 100% Indirect 33 Holborn JS Information Systems Limited UK 100% Direct 33 Holborn JS Insurance Limited Isle of Man 100% Direct Third Floor, St George's Court JSD (London) Limited UK 100% Indirect 33 Holborn Jungle Online UK 100% Indirect 33 Holborn Jungle.com Limited UK 100% Indirect 33 Holborn Jungle.com Holdings Limited UK 100% Indirect 33 Holborn * See full addresses on page 209. ** Dissolved on 28 March 2023. *** An application has been made to strike off this company from the Companies Register. **** Acquired subsequent to year-end. 41 Details of related undertakings continued
Entity Country of incorporation Interest Holding Registered office address*
Nash Court (Kenton) Limited UK 100% Indirect 33 Holborn
Nectar 360 Limited UK 100% Indirect 33 Holborn
Nectar 360 Services LLP UK 100% Indirect 33 Holborn
Nectar EMEA Limited UK 100% Indirect 33 Holborn
Nectar Loyalty Holding Limited UK 100% Direct 33 Holborn
Ramheath Properties Limited UK 100% Direct 33 Holborn
Sainsbury Bridgeco Holdco Limited UK 100% Direct 33 Holborn
Sainsbury Holdco A Limited UK 100% Direct 33 Holborn
Sainsbury Holdco B Limited UK 100% Direct 33 Holborn
Sainsbury Propco A Limited UK 100% Indirect 33 Holborn
Sainsbury Propco B Limited UK 100% Indirect 33 Holborn
Sainsbury Propco C Limited UK 100% Direct 33 Holborn
Sainsbury Propco D Limited UK 100% Direct 33 Holborn
Sainsbury Property Investments Limited UK 100% Direct 33 Holborn
Sainsbury's Argos Asia Limited Hong Kong 100% Indirect Unit 904, 9/F, Tower 2
Sainsbury\u2019s Argos Asia Commercial Limited Hong Kong 100% Indirect Unit 904, 9/F, Tower 2
Sainsbury\u2019s Argos Asia Sourcing Limited Hong Kong 100% Indirect Unit 904, 9/F, Tower 2
Sainsbury's Argos Asia Technical Limited Hong Kong 100% Indirect Unit 904, 9/F, Tower 2
Sainsbury\u2019s Argos Commercial Consulting (Shanghai) Limited China 100% Indirect 26/F, Tower 1
Sainsbury's Bank plc UK 100% Direct 33 Holborn
Sainsburys Corporate Director Limited UK 100% Direct 33 Holborn
Sainsbury\u2019s Corporate Healthcare Trustee Limited UK 100% Indirect 33 Holborn
Sainsbury\u2019s Corporate Secretary Limited UK 100% Direct 33 Holborn
Sainsbury\u2019s Group Holdings Limited UK 100% Direct 33 Holborn
Sainsbury's Heather GP Limited UK 100% Indirect 3 Lochside Avenue
Sainsbury's Intermediate Holdings Limited UK 100% Direct 33 Holborn
Sainsbury's Manor GP Limited UK 100% Direct 3 Lochside Avenue
Sainsbury's Manor II Property Limited UK 100% Direct 3 Lochside Avenue
Sainsbury's Manor Property Limited UK 100% Direct 3 Lochside Avenue
Sainsburys (NI) Ltd UK 100% Indirect Forestside Shopping Centre
Sainsbury's Rose LP Limited UK 100% Indirect 33 Holborn
Sainsbury\u2019s SL Limited UK 100% Indirect 33 Holborn
Sainsbury's Supermarkets Ltd UK 100% Direct 33 Holborn
Sainsbury\u2019s Thistle Scottish Limited Partnership UK 100% Indirect 3 Lochside Avenue
Sainsbury\u2019s Tyne Property Holdings Limited UK 100% Indirect 33 Holborn
Software Warehouse Holdings Limited UK 100% Indirect 33 Holborn
Stamford House Investments Limited UK 100% Direct 33 Holborn
Stamford Properties One Limited UK 100% Direct 33 Holborn
Stamford Properties Three Limited UK 100% Direct 33 Holborn
Stamford Properties Two Limited UK 100% Direct 33 Holborn
Stanhope Finance Limited UK 100% Indirect 33 Holborn
Tintagel Castle Limited*** UK 100% Direct 33 Holborn
Town Centre Retail (Bicester) Limited UK 100% Indirect 33 Holborn
* See full addresses on page 209.
** Dissolved on 28 March 2023.
*** An application has been made to strike off this company from the Companies Register.
**** Acquired subsequent to year-end.
b) Associated undertakings The Group has a participating interest in the following undertakings: Entity Country of incorporation Interest Holding Registered office address* 3BW Limited UK 50% Indirect 5 St John\u2019s Lane Harvest 2 GP Limited UK 50% Indirect 100 Victoria Street Harvest 2 Limited Partnership UK 50% Indirect 100 Victoria Street Harvest Development Management Limited UK 50% Indirect 100 Victoria Street Harvest GP Limited UK 50% Indirect 100 Victoria Street Hedge End Park Limited UK 50% Direct 33 Holborn c) Undertakings other than subsidiaries and associated undertakings The direct or indirect holder of 100 per cent of the voting interests in the following undertakings is an associate of the Group: Entity Country of incorporation Interest Holding Registered office address* Harvest 2 Selly Oak Limited UK 50% Indirect 100 Victoria Street BL Sainsbury Superstores Limited** UK 50% Indirect York House British Land Superstores (Non-Securitised)** UK 50% Indirect York House Pencilscreen Limited** UK 50% Indirect York House d) Overseas branches The Group has the following branches overseas: Entity Country of incorporation Holding Registered office address* Sainsbury\u2019s Argos Asia Limited \u2013 Bangladesh Liaison Office Bangladesh Indirect Level 10, Simpletree Anarkali Sainsbury\u2019s Argos Asia Limited \u2013 India Branch Office India Indirect Unit No. 1, 1st Floor, Ambience Corporate Tower II * See full addresses on page 209. ** Currently in liquidation. e) Subsidiary undertakings exempt from audit The following subsidiaries are exempt from the requirements of the Companies Act 2006 relating to the audit of individual accounts by virtue of section 479A of the Act: Entity Company registered number Argos Holdings Limited 5860214 Argos Surbs Investments Limited 5716474 BLSSP (PCH 7) Limited 04104076 Cliffrange Limited 1967242 Coolidge Investments Limited 07697101 Habitat Retail Limited 7445750 Home Retail Group (Jersey) Limited 106184 Home Retail Group Limited 5863533 Home Retail Group Holdings (Overseas) Limited 0872776 Home Retail Group (UK) Limited 5844516 Manor Property Scottish Partnership N/A Manor Scottish Limited Partnership SL013661 Nash Court (Kenton) Limited 3447714 Nectar EMEA Limited 05821446 Nectar Loyalty Holding Limited 06436907 Ramheath Properties Limited 01762921 Sainsbury\u2019s Bridgeco HoldCo Limited 5644629 Sainsbury\u2019s Group Holdings Limited 11833110 Sainsbury\u2019s Intermediate Holdings Limited 10125892 Sainsbury\u2019s Rose LP Limited 11837174 Sainsbury\u2019s Manor GP Limited SC453278 Sainsbury\u2019s Manor Property Limited SC453263 Sainsbury Property Investments Limited 02184043 Stanhope Finance Limited 4288193 Town Centre Retail (Bicester) Limited 5564905 41 Details of related undertakings continued 41 Details of related undertakings continued
f) Full registered office addresses
Address Full address
3 Lochside Avenue 3 Lochside Avenue, Edinburgh, EH12 9DJ, United Kingdom
5 Anastasios Leventis Street 5 Anastasios Leventis Street, Leventis Gallery Tower, 8th Floor, 1097 Nicosia, Cyprus
5 St John\u2019s Lane 5 St John\u2019s Lane, London, EC1M 4BH, United Kingdom
Unit 904, 9/F, Tower 2 Unit 904, 9/F, Tower 2, The Quayside, 77 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong
26/F, Tower 1 26/F, Tower 1, Kerry Everbright City Phase III-Enterprise Centre, No.128, West Tian Mu Road,
Shanghai 200070, People\u2019s Republic of China
33 Holborn 33 Holborn, London, EC1N 2HT, United Kingdom
44 Esplanade 44 Esplanade, St Helier, Jersey, JE4 9WG, Channel Islands
50 Bedford Street 50 Bedford Street, Belfast, BT2 7FN, United Kingdom
100 Victoria Street 100 Victoria Street, London, SW1E 5JL, United Kingdom
Avebury Avebury, 489-499 Avebury Boulevard, Milton Keynes, MK9 2NW, United Kingdom
Forestside Shopping Centre Forestside Shopping Centre, Upper Galwally, Belfast, BT8 6FX, United Kingdom
Level 10, Simpletree Anarkali Level 10, Simpletree Anarkali, 89 Gulshan Avenue Plot 03, Block \u2013 CWS(A), Dhaka \u2013 1212 Bangladesh
PO Box 33, Dorey Court PO Box 33, Dorey Court, Admiral Park, St Peter Port, Guernsey, GY1 4AT
Third Floor, St George\u2019s Court Third Floor, St George\u2019s Court, Upper Church Street, Douglas, IM1 1EE, Isle of Man
Unit 7, Ashbourne Retail Park Unit 7, Ashbourne Retail Park, Ballybin Road, Ashbourne, Co. Meath, Ireland
Unit No. 1, 1st Floor, Ambience Corporate Tower II Unit No. 1, 1st Floor, Ambience Corporate Tower II, Ambience Island, NH-8, Gurgaon \u2013
122011, Haryana, India
York House York House, 45 Seymour Street, London, W1H 7LX, United Kingdom
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"value": "2 Significant accounting policies
2.1 Basis of preparation
The Group\u2019s financial statements have been prepared in accordance with
UK-adopted international accounting standards.
The financial statements are presented in pound sterling, rounded to the
nearest million (\u2018\u00a3m\u2019) unless otherwise stated. They have been prepared
under the historical cost convention, except for derivative financial
instruments, defined benefit pension scheme assets and financial assets
at fair value through other comprehensive income.
Sainsbury\u2019s Bank plc and its subsidiaries have been consolidated for the
twelve months to 28 February 2023 being the Bank\u2019s year-end date (prior
financial year: 28 February 2022). There have been no significant transactions
or events that occurred between this date and the Group\u2019s balance sheet
date, and therefore no adjustments have been made to reflect the difference
in year-end dates.
Significant accounting policies have been included in the relevant notes to
which the policies relate, and those relating to the financial statements
as a whole can be read further below. Unless otherwise stated, significant
accounting policies have been applied consistently to all periods presented
in the financial statements.
Impairment of financial assets disclosure
In accordance with IAS 1 Presentation of Financial Statements, Impairment
loss on financial assets has been separately disclosed within the
Consolidated income statement. Previously, this amount was included
within Cost of sales, which has therefore been restated from \u00a327,538 million
to \u00a327,523 million before non-underlying items; and from \u00a327,529 million to
\u00a327,514 million in total. There is no impact to Gross profit, Operating profit or
Profit before tax.
Climate change considerations
In preparing the Group\u2019s financial statements, consideration has been given
to the impact of both physical and transition climate change risks, as
described within the Task Force on Climate-Related Financial Disclosures
section on page 18, and how these impact the financial statements. The
Group has implemented processes to identify, assess and manage these
risks, including scenario analysis and stress testing to understand the
potential financial impact on our operations and assets. We have also
considered the potential impact of policy, technology and market
changes that are being developed in response to climate change, and their
interdependence on each other. While it is not believed that these climate
change risks have a material impact on the Group\u2019s financial statements, we
recognise that the uncertainty and complexity of these issues may make it
challenging to fully capture their potential impact. Our ongoing assessment
of these risks will be included in future financial statements as they become
clearer, taking into account the requirements of UK adopted international
accounting standards. We also continue to monitor and assess the
regulatory environment and any new standards that may be developed in
the future. Further narrative disclosure has been provided in the following
disclosure notes:
\u2014 Going Concern \u2013 note 2.2
\u2014 Significant accounting judgements, estimates and assumptions \u2013 note 4
\u2014 Property, plant and equipment \u2013 note 14
\u2014 Impairment of non-financial assets \u2013 note 17
\u2014 Provisions \u2013 note 25
\u2014 Retirement benefit obligations \u2013 note 35
The policy, technology and market changes in response to climate change
are still developing, and these are interdependent upon each other, and
consequently the financial statements cannot capture all possible future
outcomes as these are not yet known. The degree of certainty of these
changes may also mean that they cannot be taken into account when
determining asset and liability valuations and the timing of future cash flows
under the requirements of UK adopted international accounting standards.
2.2 Going concern
The Directors are satisfied that the Group has sufficient resources to continue
in operation for a period of at least 12 months from the date of approval.
Accordingly, they continue to adopt the going concern basis in preparing the
financial statements. The assessment period for the purposes of considering
going concern is the 12 months to 26 April 2024.
In assessing the Group\u2019s ability to continue as a going concern, the Directors
have considered the Group\u2019s most recent corporate planning and budgeting
processes. This includes an annual review which considers profitability, the
Group\u2019s cash flows, committed funding and liquidity positions and
forecasted future funding requirements over three years, with a further two
years of indicative movements.
The Group manages its financing by diversifying funding sources,
structuring core borrowings with phased maturities to manage refinancing
risk and maintaining sufficient levels of standby liquidity via the Revolving
Credit Facility. This seeks to minimise liquidity risk by maintaining a suitable
level of undrawn additional funding capacity.
The Group successfully reduced net debt over the past year as part of the
continued focus on deleveraging. Furthermore, the committed Revolving
Credit Facility, which enables the Group to maintain sufficient levels of
contingent funding, has been successfully refinanced and right-sized during
the year with a new \u00a31,000 million facility comprising two \u00a3500 million
tranches. Tranche A has a final maturity of December 2026 and Tranche B
has a final maturity of December 2027. As at 4 March 2023, the Revolving
Credit Facility was undrawn. In addition, the Group successfully arranged
a \u00a3575 million committed term loan facility with maturity of March 2026
in order to part fund the acquisition of a property portfolio (refer note 33).
In assessing going concern, scenarios in relation to the Group\u2019s principal risks
have been considered in line with those disclosed in the viability statement
on page 58 by overlaying them into the corporate plan and assessing the
impact on cash flows, net debt, funding headroom and financial covenants.
These severe but plausible scenarios included modelling inflationary pressures
on both food margins and general recession-related risks, the impact of any
regulatory fines, and the failure to deliver planned cost savings.
In performing the above analysis, the Directors have made certain assumptions
around the availability and effectiveness of the mitigating actions available
to the Group. These include reducing any non-essential capital expenditure
and operating expenditure on projects, bonuses and dividend payments.
The Group\u2019s most recent corporate planning and budgeting processes
includes assumed cashflows to address climate change risks, including costs
associated with initiatives in place as part of the Plan for Better commitment
which include reducing environmental impacts and meeting customer
expectations in this area, notably through reducing packaging and reducing
energy usage across the estate. Climate-related risks do not result in any
material uncertainties affecting the Group\u2019s ability to continue as a going
concern.
As a consequence of the work performed, the Directors considered it
appropriate to adopt the going concern basis in preparing the Financial
Statements with no material uncertainties to disclose.
2.3 Basis of consolidation
a) Subsidiaries
Subsidiaries are all entities, including structured entities (see below) over
which the Group has control. This is when the Group is exposed to, or has
rights to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity. The results
of subsidiaries are included in the income statement from the date of
acquisition or, in the case of disposals, up to the effective date of disposal.
Intercompany transactions and balances between Group companies are
eliminated upon consolidation.
Sainsbury\u2019s Property Scottish Partnership, Sainsbury\u2019s Property Scottish
Limited Partnership, Sainsbury\u2019s Thistle Scottish Limited Partnership and
Nectar 360 Services LLP, are partnerships which are fully consolidated into
these Group accounts. The Group has taken advantage of the exemption
conferred by Regulation 7 of the Partnerships (\u2018Accounts\u2019) Regulations 2008
and has therefore not appended the accounts of these qualifying
partnerships to these accounts.
Significant judgement \u2013 Consolidation of structured entities
Sainsbury\u2019s Thistle Scottish Limited Partnership (\u201cthe Partnership\u201d) is a
structured entity which the Group fully consolidates.
A structured entity is one in which the Group does not hold the majority
interest but for which management has concluded that voting rights are not
the dominant factor in deciding who controls the entity. The Partnership,
in which both the Group and Pension Scheme Trustee hold an interest, was
established following the 2018 triennial valuation of the Group\u2019s defined
benefit scheme.
The Group has determined that the relevant activities of the Partnership are
the funding of the Scheme and whether the funding targets have been met.
Furthermore, a general partner wholly owned by the Group has exclusive
responsibility for the management and control of the Partnership and sole
authority to exercise the Partnership\u2019s rights. This includes the ability to
make additional contributions to the Scheme such that the funding targets
are met. As the Group can direct the Partnership\u2019s relevant activities and
affect its returns (through reaching the Scheme\u2019s funding targets), it has
been concluded that the Group controls the Partnership, despite not having
a majority interest. It is therefore consolidated in the Group accounts. Further
information is included in note 35.
b) Joint ventures and associates
The Group applies IFRS 11 to all joint arrangements. Under IFRS 11,
investments in joint arrangements are classified as either joint operations or
joint ventures depending on the contractual rights and obligations of each
investor. The Group has assessed the nature of its joint arrangements and
determined them to be joint ventures. Associates are entities over which the
Group has significant influence but not control.
Investments in joint ventures and associates are carried in the Group balance
sheet at historical cost plus post-acquisition changes in the Group\u2019s share of
net assets of the entity, less any provision for impairment. Where the Group
transacts with a joint venture or associate, profits and losses are eliminated
to the extent of the Group\u2019s interest in the joint venture or associate.
A full list of the Group\u2019s joint ventures is included in note 41. Joint ventures
with a different year-end date to the Group are reported to include the
results up to 28 February 2023, the nearest month-end to the Group\u2019s
year-end. Adjustments are made for the effects of significant transactions or
events that occurred between 28 February and the Group\u2019s balance sheet
date. No joint venture arrangements are considered significant to the Group.
c) Foreign currencies
The consolidated financial statements are presented in pound sterling,
which is the ultimate parent company\u2019s functional currency.
Foreign operations
The Group has operations in Asia that source and purchase certain general
merchandise and clothing inventory. In addition the Group has a trading
entity in Ireland. On consolidation, assets and liabilities of foreign operations
are translated into pound sterling at year-end exchange rates. The results of
foreign operations are translated into pound sterling at average rates of
exchange for the year. Exchange differences arising are recognised in the
Group statement of comprehensive income/(loss) and are included in the
Group\u2019s translation reserve.
Foreign currency transactions
Transactions denominated in foreign currencies are translated at the
exchange rate at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are translated
at the exchange rate ruling at that date. Foreign exchange differences arising
on translation are recognised in the income statement.
2.4 Amendments to published standards
Effective for the Group and Company in these financial statements:
The Group has considered the following amendments to published standards
that are effective for the Group for the financial year beginning 6 March 2022
and concluded that they are either not relevant to the Group or that they do
not have a significant impact on the Group\u2019s financial statements other than
disclosures.
\u2014 Amendments to IFRS 3 \u2018Business Combinations\u2019 \u2013 Reference to the
Conceptual Framework
\u2014 Amendments to IAS 16 \u2018Property, Plant and Equipment\u2019 \u2013 Proceeds
before Intended Use
\u2014 Amendments to IAS 37 \u2018Provisions, Contingent Assets and Contingent
Liabilities\u2019 \u2013 Onerous Contracts \u2013 Costs of Fulfilling a Contract
\u2014 Amendments to IFRS 1 \u2018First-time Adoption of International Financial
Reporting Standards\u2019 \u2013 Subsidiary as a first-time adopter
\u2014 Amendments to IFRS 9 \u2018Financial Instruments\u2019 \u2013 Fees in the \u201910 per cent\u2019
test for derecognition of financial liabilities
\u2014 Amendments to IAS 41 \u2018Agriculture\u2019 \u2013 Taxation in fair value
measurements
The accounting policies have remained unchanged from those disclosed in
the Annual Report for the year ended 5 March 2022.
Standards and revisions effective for future periods:
The following standards and revisions will be effective for future periods:
\u2014 Amendments to IAS 1 \u2018Presentation of Financial Statements\u2019 on the
classification of liabilities as current or non-current
\u2014 Amendments to IAS 1 \u2018Presentation of Financial Statements\u2019 and IFRS
Practice Statement 2 \u2018Making Materiality Judgements\u2019 on the disclosure
of accounting policies
\u2014 Amendments to IAS 8 \u2018Accounting Policies, Changes in Accounting
Estimates and Errors\u2019 on the definition of accounting estimates
\u2014 Amendments to IAS 12 \u2018Income Taxes\u2019 on Deferred Tax Related to Assets
and Liabilities Arising from a Single Transaction
\u2014 IFRS 17 \u2018Insurance Contracts\u2019
\u2014 Amendments to IFRS 16 \u2018Leases\u2019 on Lease Liability in a Sale and
Leaseback
\u2014 Amendments to IAS 1 \u2018Presentation of Financial Statements\u2019 on
Non-current Liabilities with Covenants
The Group has considered the impact of the remaining above standards and
revisions and have concluded that they will not have a significant impact on
the Group\u2019s financial statements.
2 Significant accounting policies continued
Accounting policies Revenue is income arising from the sale of goods and services in the course of the Group\u2019s ordinary activities, net of returns, related discounts and excluding Value Added Tax (VAT) and, in the case of Financial Services, interest receivable, fees and commissions. Revenue is recognised when the Group has a contract with a customer and a performance obligation has been satisfied, at the transaction price allocated to that performance obligation. Retail sales a) Sale of goods Revenue from the sale of goods is recognised at point of sale or, where later, upon collection by, or delivery to, the customer as this is the point in which control has passed. Where consideration has been received in advance of the performance obligation being satisfied, a contract liability is recognised. b) Other revenue items Other revenue items comprise income from commissions and concessions, and wholesale sales made directly to third-party customers. Commission revenue relates to the sale of third-party products where it has been determined that the Group is acting as an agent. When assessing whether the Group should recognise revenue as a principal, or as an agent, management will assess whether there is control of the related goods prior to sale to the end consumer. Sales commission from third-parties is recognised when the related goods or services are sold as the net amount to be retained. The Group\u2019s relevant contracts are not complex and therefore the level of judgement involved is not considered significant to the Group. Wholesale revenue is recognised when the goods are delivered to the customer. c) Nectar points The issuance of Nectar points within the Group creates a separate performance obligation and therefore a portion of the transaction price is allocated to the loyalty programme using the relative standalone selling price of points issued, and the corresponding revenue deferred. The deferral is treated as a deduction from revenue and recognised as a contract liability within deferred income (see note 23). The fair value of the points awarded is determined with reference to the value per point to a customer and considers expected redemption rates (breakage) and the money off that each point entitles a customer to. The revenue deferred is subsequently recognised when the Nectar points are redeemed by the customer. Significant estimate \u2013 Fair value of Nectar points The Group estimates the fair value of points awarded under the Nectar programme by reference to the value per point to a customer, multiplied by expected breakage assumptions. Breakage represents management\u2019s estimate of points issued that will never be redeemed and is therefore subject to uncertainty. Breakage is estimated by management based on the terms and conditions of membership and historical accumulation and redemption patterns. As at the year-end, if the breakage estimate used in determining the deferred revenue for the Group had been 1.0 per cent lower, the deferred points liability would have been \u00a350 million higher. If the breakage estimate had been 1.0 per cent higher, the deferred points liability would have been \u00a351 million lower. Financial Services Financial services revenue consists of interest, fees and commission income from the provision of retail banking and insurance related activities. a) Interest income Interest income is recognised in the income statement for all instruments measured at amortised cost using the effective interest method. The effective interest rate of a financial asset is calculated on initial recognition and is applied to the gross carrying amount of the asset. For financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset net of impairment. If the asset is no longer credit impaired, then the calculation of interest income reverts to the gross basis. In calculating the effective interest rate of a financial instrument the Group takes into account all amounts that are integral to the yield of a financial instrument as well as incremental transaction costs. b) Fees and commission income Fees and commissions that are not integral to the effective interest rate calculation relate primarily to certain credit card and storecard fees, ATM interchange fees, insurance introduction commission and warranty commission receivable. These are recognised in the income statement on an accruals basis as performance obligations are satisfied. Where in the case of insurance commissions the income comprises an initial commission and profit share, both are recognised on completion of the service to the extent reliably measurable. Where there is a risk of potential clawback, an appropriate element of the commission receivable is deferred and amortised over the clawback period. These are recognised in the income statement on an accruals basis as performance obligations are satisfied in accordance with IFRS 15. Margin from the sale of travel money, representing the difference between the cost price and the selling price, is recognised when the sale to the customer takes place. Other income Other income generally consists of profits and losses on disposal of assets. Accounting policies Cost of sales Cost of sales consists of all costs that are directly attributable to the point of sale including warehouse, transportation costs and all the costs of operating retail outlets. In the case of Financial Services, cost of sales includes interest expense on operating activities, calculated using the effective interest method. Accounting policies Finance income and costs, excluding those arising from Financial Services, are recognised in the income statement for financial assets and liabilities measured at amortised cost using the effective interest method. For Financial Services, finance income and finance costs are recognised in revenue and cost of sales. Fair value remeasurements relate to net fair value movements on derivative financial instruments not designated in a hedging relationship. Accounting policies Current tax Current tax is accounted for on the basis of tax laws enacted or substantively enacted at the balance sheet date. Current tax is charged or credited to the income statement, except when it relates to items charged to equity or other comprehensive income. Deferred tax Deferred tax is accounted for on the basis of temporary differences arising from differences between the tax base and accounting base of assets and liabilities. Deferred tax is recognised for all temporary differences, except to the extent where it arises from the initial recognition of an asset or a liability in a transaction that is not a business combination and, at the time of transaction, affects neither accounting profit nor taxable profit. It is determined using tax rates (and laws) that have been enacted or substantively enacted at the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity or other comprehensive income. Deferred tax is provided on temporary differences associated with investments in subsidiaries, branches and joint ventures except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Accounting policies a) Land and buildings Land and buildings are held at historical cost less accumulated depreciation and any recognised provision for impairment. Capital work in progress is held at cost less any recognised provision for impairment. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for intended use. b) Fixtures and equipment Fixtures, equipment and vehicles are held at cost less accumulated depreciation and any recognised provision for impairment. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition and its intended use. c) Depreciation Depreciation is calculated to write down the cost of the assets to their residual values, on a straight-line basis over their useful economic life, using the following rates: \u2014 Freehold buildings and leasehold improvements \u2013 50 years, or the lease term if shorter \u2014 Fixtures, equipment and vehicles \u2013 three to 15 years \u2014 Freehold land is not depreciated Capital work in progress is not depreciated prior to being available for its intended commercial use. Capital work in progress does not include land. d) Disposals and retirement Disposals of property, plant and equipment are recognised when the control over the asset is transferred to another party and the company has no further obligations or involvement with the asset. The gain or loss on disposal is determined by comparing proceeds less any associated costs of disposal with the asset\u2019s carrying amount and is recognised within operating profit. e) Impairment The carrying amount of PPE is reviewed on an ongoing basis to determine whether there is any indication of impairment \u2013 See note 17. f) Climate Change Impacts The assets\u2019 residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. This includes consideration over climate change related risks which may impact the useful lives or residual values of the Group\u2019s assets, such as the impact of flood risks on store and non-store assets, changes in regulations related to carbon emissions and any anticipated replacement of existing assets with new technologies. During the year, no changes were made to the remaining useful lives or residual values of the Group\u2019s assets as a result of climate change risks. g) Capitalisation of interest Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalised to the cost of the asset, gross of tax relief. Accounting policies Right-of-use assets Right-of-use assets are recognised at the commencement date of the lease, when the underlying asset is available for use. The cost of right-of-use assets comprises the amount of lease liabilities recognised, any initial direct costs incurred, lease payments made at or before the commencement date and less any lease incentives received. Right-of-use assets are subsequently measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any subsequent remeasurement of lease liabilities. The recognised right-of-use assets are depreciated on a straight-line basis over the shorter of the estimated useful life and the lease term. Lease liabilities Lease liabilities are recognised at the commencement date of the lease and are measured at the present value of lease payments to be made over the lease term, discounted using the incremental borrowing rate (IBR) at the lease commencement date if the interest rate implicit in the lease is not readily determinable. The lease payments include fixed payments and variable lease payments that depend on an index or a rate (using the relevant rate at the commencement date of the lease), less any lease incentives receivable. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period in which the event or condition that triggers the payment occurs. For agreements which contain both lease and non-lease components, such as cleaning and maintenance services, the non-lease component is excluded from the lease payments used to measure the lease liabilities. The IBRs depend on the start date and term of the lease, and are determined based on a reference (risk free) rate and adjustments to reflect the Group\u2019s credit risk. The reference rates are based on UK overnight swap rates and the credit risk adjustments are based on the prices of instruments issued by the group and quoted credit default swaps (CDS). IBRs are determined quarterly. The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease (a break clause), if it is reasonably certain not to be exercised. After the commencement date of the lease, the lease liability is subsequently measured at amortised cost using the effective interest rate method. The carrying amount of lease liabilities is remeasured when there is a change in the future lease payments due to a change in the lease term such as a recognition of an extension or break option, a change in the fixed lease payments or a change in the assessment to purchase the underlying asset. Short-term leases and leases of low-value assets The Group applies the short-term lease recognition exemption to those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option. It also applies the low-value asset recognition exemption to groups of underlying leases where the underlying assets leased are considered uniformly low value (i.e. below \u00a35,000). Lease payments on short-term leases and leases of low-value assets are expensed to the income statement. Lessor accounting The Group leases out owned properties and sublets leased properties under operating and finance leases. Such properties include mall units, stores and units within stores. Where the Group subleases assets, the sublease classification is assessed with reference to the head lease right-of-use asset. This assessment considers, among other factors, whether the sublease represents the majority of the remaining life of the head lease. The ratio of rental income to head lease rental payments is used to determine how much of the right-of-use asset should be derecognised, or analysis of square foot leased in the head lease and sublease where appropriate. This assessment takes into consideration whether the sublease/head lease are above or below market rate. Amounts due from lessees under finance leases are recorded as a receivable at an amount equal to the net investment in the lease. This is initially calculated and recognised using the IBR prevalent in the underlying headlease at the recognition date. Any difference between the derecognised right-of-use asset and the newly recognised amounts due for leases under finance leases is immediately recognised in the income statement. The Group recognises finance income over the lease term, reflecting a constant periodic rate of return on the Group\u2019s net investment in the lease. Operating lease income is recognised as earned on a straight-line basis over the lease term. Accounting policies a) Goodwill Goodwill represents the excess of the fair value of the consideration of an acquisition over the fair value of the Group\u2019s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is considered to have an indefinite useful life. Goodwill is tested for impairment annually and again whenever indicators of impairment are detected and is carried at cost less any provision for impairment. b) Computer software Computer software is carried at cost less accumulated amortisation and any provision for impairment. Externally acquired computer software and software licences are amortised on a straight-line basis over their useful economic lives of five to fifteen years. Costs relating to development of computer software for internal use are capitalised once the recognition criteria of IAS 38, \u2018Intangible Assets\u2019 are met. Other development expenditures that do not meet these criteria are expensed as incurred. When the software is available for its intended use, these costs are amortised on a straight-line basis over their useful economic lives of five to fifteen years within administrative expenses. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. Costs associated with maintaining computer software are recognised as an expense as incurred. c) Cloud computing arrangements Software as a Service (SaaS) arrangements are service contracts providing the Group with the right to access a cloud provider\u2019s application software over the contract period. Typically such arrangements involve ongoing licence fees to obtain access to the cloud provider\u2019s application software, as well as upfront costs incurred to configure or customise the SaaS solution. Configuration and customisation costs are capitalised in the following instances as intangible assets: \u2014 The Group has both a contractual right to take possession of the software at any time without significant penalty, and the ability to run the software independently of the host vendor. \u2014 The costs incurred meet the definition of and recognition criteria for an intangible asset. This includes for example the development of software code that enhances or modifies, or creates additional capability to, existing systems controlled by Sainsbury\u2019s. Where these conditions are not met, costs incurred to configure or customise, and the ongoing fees to obtain access to the cloud provider\u2019s application software, are recognised as operating expenses when the services are received. Where the configuration or customisation of a SaaS solution is performed by the SaaS vendor, consideration is given to whether this activity is distinct from the provision of the solution itself. This assessment considers the nature of the activities, and whether Sainsbury\u2019s can benefit from any of the services in isolation. Where the activity is not considered distinct, the costs are capitalised as a prepayment and amortised over the expected useful life of the solution. d) Acquired intangible assets Intangible assets acquired in a business combination are recognised at fair value at the acquisition date. Intangible assets with finite useful economic lives are carried at cost less accumulated amortisation and any provision for impairment and are amortised on a straight-line basis over their estimated useful economic lives, ranging from five to ten years, within administrative expenses. Refer to note 17 for details of impairment policies. Accounting policies Goodwill Goodwill is not amortised but tested for impairment annually or more frequently where there is an indication that the asset may be impaired. At the acquisition date goodwill is allocated to the CGU or group of CGUs within the Retail or Financial Services segments that are expected to benefit from the combination. Impairment is assessed by measuring the recoverable amount of the CGU, calculated as the higher of fair value less cost to dispose and value-in-use, at the level at which this is monitored by management. Where the carrying value of the CGU exceeds the recoverable amount an impairment loss is recognised in the income statement. The impairment charge is allocated first against goodwill and then pro-rata over other assets within the CGU by reference to the carrying amount of each remaining asset in the unit. Impairment losses recognised for goodwill are not subsequently reversed. Property, plant and equipment, right-of-use assets, and finite lived intangible assets Property, plant and equipment (PPE), right-of-use assets, and finite-lived intangible assets are assessed on an ongoing basis to determine whether there is an indication that the net book value is no longer supportable. If any such indication exists, the recoverable amount of the asset, being the higher of its fair value less costs to dispose and its value-in-use, is estimated in order to determine the extent of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the CGU to which the asset belongs. If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its recoverable amount and an impairment loss is recognised immediately in the income statement. Where there has been a change in the estimates used to determine the recoverable amount and an impairment loss subsequently reverses, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, not to exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset or CGU in prior years. An impairment loss reversal is recognised in the income statement. Identification of cash generating units Cash generating units are deemed the smallest group of assets that independently generate cash inflows and are independent of the cash flows generated by other assets. The CGUs identified within the respective reportable operating segments are as follows: Retail Cash generating units are deemed to be corporate level business units, trading stores, store pipeline development sites or in certain cases for Argos, a cluster of stores. PPE, intangible assets and right-of-use assets are allocated to the store CGU they are associated with. For non-store assets, including depots and IT assets, these are allocated to store CGUs where it can be done on a reasonable and consistent basis, otherwise these are allocated to the CGU corporate level to which they relate. Goodwill recognised on acquisition of retail chains of stores (Bells and Jacksons) is allocated to its respective store CGUs. Goodwill arising on the purchase of Home Retail Group is allocated to the Home Retail Group CGU. Nectar is a separate CGU. Financial Services Cash generating units are deemed to be each respective product or product group that is capable of generating cash flows independent of other products. Non-product assets are reviewed separately as collective CGUs with the products that they support. Goodwill arising on the purchase of Sainsbury\u2019s Bank plc is allocated to the Financial Services CGU. Identification of a triggering event Management considered whether the level of uncertainty within the wider macroeconomic environment, including sustained increases in the Bank of England gilt rates, represented an indicator of impairment at the reporting date. It was determined that the increase in discount rates was a significant impairment indicator and therefore a full impairment review was undertaken. Approach and assumptions The recoverable amount for CGUs have been determined based on the fair value less cost to dispose and a value-in-use calculation which is based upon the cash flows expected to be generated, derived from the latest budget and forecast data which are reviewed by the Board. Budget and forecast data reflects both past experience and future expectations of market conditions. A vacant possession valuation basis is used to approximate the fair value less costs to dispose. This is not considered to be a significant accounting judgement. The key assumptions in measuring the value-in-use are as follows: Assumption Retail Segment Financial Services Segment Cash flow years/ assumptions \u2014 Derived from the Board approved cash flow projections for four years and then for owned stores, extrapolated into perpetuity with an assumed growth rate of 2.0%. \u2014 For leased stores, cash flows are taken to lease end with an assumed growth rate of 2.0% beyond the four-year forecast period. \u2014 In the case of properties identified for closure, cash flow years relate to the remaining period that the store will trade for. \u2014 Online grocery sales are fulfilled by individual stores and therefore these cash flows are allocated to the individual store CGUs which fulfil the online sales. In Argos, online GM&C sales for Click & Collect are allocated to the individual store CGUs which fulfil the online sales. \u2014 Derived from the Board approved cash flow projections for four years and then extrapolated over the remaining useful lives of the assets being tested for impairment with no assumed growth rate. Discount rate \u2014 A post-tax discount rate representing the Retail segment\u2019s weighted average cost of capital (WACC), subsequently grossed up to a pre-tax rate of 9.1%. \u2014 The post-tax WACC has been calculated using the capital asset pricing model, the inputs of which include a 20-year average risk-free rate for the UK, a UK equity risk premium, levered debt premium and risk adjustment and an average beta for the Group. \u2014 The discount rate is applied consistently to all individual store CGUs and the Group of CGUs supported by Sainsbury\u2019s or Argos stores. \u2014 A post-tax discount rate representing the Financial Services segment\u2019s weighted average cost of capital (WACC), subsequently grossed up to a pre-tax rate of 15.1%. \u2014 The post-tax WACC has been calculated using a combination of adjusted market analysis and the actual cost of debt on Tier 2 capital instruments. \u2014 The discount rate is applied consistently to all individual product CGUs and the collective CGUs which support the products. For store pipeline development sites, where there are plans to develop the store, the carrying value of the asset is compared with its value-in-use using a methodology consistent with the store CGU approach described above. Future cash flows include the estimated costs to completion. For sites where there is no plan to develop a store, the recoverable amount is based on its fair value less costs to dispose. Climate change considerations The Group\u2019s scenario analysis performed as part of the Task Force on Climate-Related Financial Disclosures (TCFD) report (refer to page 18) identified that the most material climate-related risks were heat events, labour capacity, drought, flooding, regulation and changes in consumer preferences. Produce, Cotton, Coffee, Tea, Clothing, Meat, Fish and Poultry (MFP), and Fuel were the product categories most exposed to the climate-related risks. The most material transitional climate risk was in fuel. As such, the Group\u2019s current year impairment review included cash flow assumptions in relation to the expected future revenue loss within the fuel category. As such, the impairment conclusions reached have incorporated the expected climate-related risks associated with fuel sales. Other than fuel, changes in consumer preferences in MFP was identified as the risk most vulnerable to transitional risks and modelling this risk in isolation to 2030 in a 1.5\u00b0C scenario calculated a \u00a3300 million to \u00a3350 million loss in revenue. The Group has considered what the impact that this revenue loss (if unmitigated) could have on the carrying value of the Group\u2019s store assets. In doing so, a corresponding reduction in margin and therefore cash flows has been modelled. Immaterial impairment risks were identified. As such, all other climate change related risks do not have a material impact on the Group\u2019s impairment considerations. Accounting policies Financial assets that are held for both the purpose of collecting contractual cash flows and to sell are classified as fair value through other comprehensive income (FVOCI). They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. Equity investments have been irrevocably designated as fair value through other comprehensive income. Subsequent to initial recognition at fair value plus transaction costs, these assets are recorded at fair value at each period end with the movements recognised in other comprehensive income until derecognition or impaired. On derecognition, the cumulative gain or loss previously recognised in other comprehensive income reserves is recognised in the income statement for debt instruments. Gains and losses on equity instruments are never recycled to the income statement. Dividends on financial assets at fair value through other comprehensive income are recognised in the income statement when the entity\u2019s right to receive payment is established. Interest on financial assets at fair value through other comprehensive income debt instruments is recognised using the effective interest method. Accounting policies Inventories comprise goods held for resale and are valued on a standard cost or weighted average cost basis which approximates to actual cost, and carried at the lower of cost or net realisable value. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Cost includes all direct expenditure and other appropriate attributable costs incurred in bringing inventories to their present location and condition. Provision is made for obsolete, slow moving or damaged items where appropriate. Accounting policies Trade and other receivables are non-interest bearing and are on commercial terms. They are initially recognised at fair value and subsequently measured at amortised cost less allowances for expected credit losses, using the simplified approach under IFRS 9, with adjustments for factors specific to each receivable. Accounting policies Loans and advances are initially recognised at fair value and subsequently held at amortised cost, using the effective interest method, less provision for impairment and recognised on the balance sheet when cash is advanced. Refer to note 29 for a detailed description of the accounting policies applicable to financial assets and note 28 for the accounting policies applicable to impairment of financial assets. Accounting policies
Assets are classified as held for sale if their carrying amount is to be recovered principally through a sale transaction rather than through continuing use. This
condition is regarded as met only when the sale is highly probable within one year from the date of classification and the assets are available for sale in their
present condition. Assets held for sale are stated at the lower of the carrying amount and fair value less costs to dispose.
Accounting policies
Trade payables are initially recognised at fair value and subsequently measured at amortised cost. Amounts are presented net of supplier arrangements due
where there is a contractual right of offset.
Accounting policies
With the exception of fixed rate bonds, amounts due to Financial Services customers are generally repayable on demand and accrue interest at retail
deposit rates.
Accounting policies and key information
Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic
recourses will be required to settle the obligation and where the amount can be reliably estimated.
Provisions are measured at managements best estimate of the consideration required to settle the obligation at the reporting date and discounted using
a pre-tax rate that reflects current market assessments where the time value of money is deemed material. An increase in the provision due to the passage
of time is recognised as an interest expense.
Provisions for onerous contracts are recognised when the Group believes that the unavoidable costs of meeting or novating the contract exceed the economic
benefits expected to be received under it. Where assets are dedicated to the fulfilment of a contract that cannot be redirected to other parts of the Group,
an impairment charge would be recognised to reduce the carrying value of the assets to nil before recognising a separate onerous contract.
A restructuring provision is recognised when the Group has developed a detailed formal plan and has raised a valid expectation in those affected that it will
carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measurement of a restructuring
provision includes only the direct expenditures arising from the restructuring.
Property provisions
Where the Group no longer operates from a leased property, onerous property contract provisions are recognised for the least net cost of exiting from the
contract. The amounts provided are based on the Group\u2019s best estimates of the likely committed outflows and site closure dates. These provisions do not
include rent in accordance with IFRS 16, however do include unavoidable costs related to the lease such as service charges and insurance.
Property provisions also include provisions for dilapidations which are recognised where the Group has the obligation to make-good its leased properties,
which is when a decision to exit a lease has been made. This is the point at which a reliable estimate of the expected cost for dilapidations can be made.
These provisions are recognised based on historically settled dilapidations which form the basis of the estimated future cash outflows. Any difference
between amounts expected to be settled and the actual cash outflow will be accounted for in the period when such determination is made.
Where the Group is able to exit lease contracts before the expiry date or agree sublets, this results in the release of any associated property provisions. Such
events are subject to the agreement of landlords, therefore the Group makes no assumptions on the ability to either exit or sublet a property until a position is
agreed. Utilisation of the above amounts is expected to be incurred in conjunction with the profile of the leases to which they relate.
Insurance provisions
The provision relates to the Group\u2019s outstanding insurance claims liabilities in relation to public and employer\u2019s liability claims, and third party motor claims.
Claims provisions are based on assumptions regarding past claims experience and on assessments by an independent actuary and are intended to provide
a best estimate of the most likely or expected outcome.
Restructuring provisions
The current year charge relates to redundancies announced as part of Argos store closures, depot closures, and the exit of operations in Ireland. Utilisation of
restructuring provisions is expected to be incurred in line with the closure date of the site to which the provision relates.
Financial Services related provisions
Financial Services loan commitment provisions reflect expected credit losses modelled in relation to loan commitments not yet recognised on the balance
sheet, including on credit cards and Argos store cards.
Other Financial Services related provisions are primarily in relation to Argos Financial Services customers in respect of potential redress payable arising from
the historic sales of Payment Protection Insurance (PPI).
The eventual cost is dependent on response rates, uphold rates, complaint rates, redress costs and claim handling costs. The provision represents management\u2019s
best estimate of future costs. These assumptions are inherently uncertain and the ultimate financial impact may differ from the amount provided.
Accounting policies
Ordinary shares are classified as equity instruments. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity
as a deduction, net of tax, from the proceeds.
Accounting policies Impairments on financial assets are accounted for using a 3-stage forward-looking expected credit loss (ECL) approach in line with IFRS 9. The Group is required to record an allowance for ECL for all loans and other debt financial assets not held at FVTPL, together with loan commitments and financial guarantee contracts. ECLs are based on the difference between the cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. For Financial Services portfolios of loans, such as credit card lending, storecard lending and personal loans, impairment provisions are calculated for groups of assets, otherwise impairment is identified at a counterparty specific level. The allowance is calculated by reference to the estimated probability of default (PD), exposure at default (EAD) and loss given default (LGD). \u2014 The probability of default represents the likelihood of a borrower defaulting within 12 months from the balance sheet date or within the expected lifetime of the borrower. \u2014 Exposure at default represents the expected amount due from the borrower at the point of default by reference to exposure at the balance sheet date adjusted for expected future changes including repayments and utilisation of undrawn facilities. \u2014 Loss given default represents the expected percentage loss at the point of default relative to the EAD. The estimate takes into account utilisation of any expected collections and recoveries strategies, debt sale arrangements and collateral. ECL 3 stage model \u2014 Stage 1 \u2013 Impairment allowance on financial assets that have not significantly increased in credit risk since origination, nor are credit impaired, is calculated using the probability that a borrower will default within 12 months from the balance sheet date. Interest income is recognised on the gross carrying value of the financial asset. \u2014 Stage 2 \u2013 Where a financial asset exhibits a significant increase in credit risk (SICR) but is not yet considered to be credit impaired, the probability of default considered in the impairment allowance is based upon the lifetime probability of the borrower defaulting. Interest income continues to be recognised on the gross carrying value of the financial asset. \u2014 Stage 3 \u2013 Assets considered to be credit impaired resulting from one or more events that have occurred that has resulted in a detrimental impact on the estimated future cash flows of the asset. Stage 3 assets will continue to recognise lifetime expected impairment losses (with a 100% probability of default) and interest income will be recognised on the net carrying amount (i.e. gross amount less impairment allowance). Significant increases in credit risk The Group determines whether there has been a significant increase in credit risk by reference to quantitative thresholds, qualitative indicators and the backstop presumption that credit risk has significantly increased if contractual payments are more than 30 days past due. Quantitative thresholds have been determined that when the lifetime PD of an instrument as at the reporting date has increased to greater than a specified multiple of the origination lifetime PD, a significant increase in credit risk is deemed to have occurred. Qualitative tests are based around the Group\u2019s credit origination policy rules for Financial Services customers. These rules are in place at account origination in order to decline accounts that may demonstrate risk factors outside of risk appetite that are not yet reflected in PD measures. At the reporting date, if an account satisfies any policy decline rules that it had not at the point of origination, it will be considered to have significantly increased in credit risk. There is no probationary period applied in respect of accounts that cure from stage 2 to stage 1. Transfer criteria have been subject to extensive analysis to ensure that they appropriately reflect the flow of accounts from origination to default so as to maximise the number of accounts that flow through the stages and minimise accounts that jump from stage 1 to stage 3, or that fail to enter stage 3 from stage 2. The Group has applied the low credit risk exemption in respect of its high quality treasury portfolio held for liquidity purposes. This exemption permits low credit risk debt securities (i.e. those considered investment grade) to remain in Stage 1 without an assessment of significant increase in credit risk. Definition of default The Group\u2019s definition of default is used in determining those accounts classified as stage 3 (i.e. credit impaired). The Group has chosen not to rebut the backstop presumption prescribed by IFRS 9 that where an account is 90 days or more past its due date then default has occurred. The Group has also defined a number of unlikeliness-to-pay criteria that result in an account being deemed to have defaulted. These include: \u2014 Where operational collections activities have been exhausted on accounts that are less than 90 days past due and the account is subject to recoveries processes \u2014 If any forbearance has been granted on the account (see forbearance definition below). \u2014 Where the customer is subject to insolvency proceedings \u2014 Where the customer is deceased Where an account no longer meets any of the default criteria, such as by bringing payments back up to date, the Group will continue to consider the account as being in default for the probation period (24 months for Loans and Cards, and 12 months for Storecards) from the date when it last met the definition of default. Write-off Loans and advances to customers are written off (either partially or in full) when there is no realistic prospect of recovery. This is generally the case when the Group determines that the borrower does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to write-off. Subsequent recoveries of amounts previously written off result in impairment gains recorded in the statement of comprehensive income. Expected lifetime For the purposes of considering the lifetime probability of default, the expected lifetime of a financial asset is the contractual term where this is fixed within the contract, or in the case of revolving products such as credit cards a behavioural life is determined by reference to historic trends. Modified financial assets When the contractual cash flows of a financial asset have been renegotiated or modified and the financial asset was not derecognised, its gross carrying amount is recalculated as the present value of the modified contractual cash flows, discounted at the original effective interest rate with a gain or loss recognised in the income statement. Accounting policies
a) Financial assets
The Group classifies all of its financial assets as either amortised cost, fair value through other comprehensive income (FVOCI) or fair value through profit
or loss (FVTPL).
The Group\u2019s non-derivative financial assets comprise:
\u2014 Cash and cash equivalents (note 31)
\u2014 Trade and other receivables, excluding prepayments and accrued income (note 20)
\u2014 Amounts due from Financial Services customers and other banks (note 21)
\u2014 Financial assets at FVOCI (note 18)
To determine their classification and measurement category, IFRS 9 requires all financial assets, except equity instruments and derivatives, to be assessed
based on a combination of the entity\u2019s business model for managing the assets and the instruments\u2019 contractual cash flow characteristics.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are \u2018solely payments
of principal and interest (SPPI)\u2019 on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.
The business model assessment reflects how the Group manages the risks relating to the underlying financial assets, including whether the Group\u2019s principal
objective is to collect the contractual cash flows arising from the instruments (amortised cost), to sell the financial instruments (FVTPL) or a combination
thereof (FVOCI).
Financial instruments at amortised cost
Financial assets that are principally held for the collection of contractual cash flows and which pass the SPPI test are classified as amortised cost. For the
Group this includes cash, receivables and amounts due from Financial Services customers and other banks. The Group has no intention of trading these
assets. With the exception of trade receivables that do not contain a significant financing component, the Group initially measures these financial assets at
fair value plus transaction costs. Subsequently these assets are carried at amortised cost less impairment using the effective interest rate method. Income
from these financial assets is calculated on an effective interest rate basis and is recognised in the income statement.
Financial assets at fair value through other comprehensive income
Accounting policies are detailed in note 18.
Financial assets at fair value through profit and loss
The Group\u2019s derivatives are classified as fair value through profit or loss. They are carried in the statement of financial position at fair value with net changes
in fair value recognised in the income statement.
Financial assets are derecognised when the contractual cash flows from the asset have expired or have been transferred, usually by sale, and with them
either substantially all the risks and rewards of the asset or significant risks and rewards, along with the unconditional ability to sell or pledge the asset.
b) Financial liabilities
The Group recognises all of its financial liabilities at amortised cost and all derivative financial liabilities are classified as FVTPL. Financial liabilities costs,
including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accrual basis in the income statement using the
effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.
The Group\u2019s non-derivative financial liabilities comprise:
\u2014 Borrowings (note 33)
\u2014 Trade and other payables, excluding deferred income, other taxes and social security costs payable, and other accruals (note 23)
\u2014 Amounts due to Financial Services customers and banks (note 24)
\u2014 Lease liabilities (note 15)
Interest-bearing bank loans, overdrafts, other deposits and amounts due to Sainsbury\u2019s Bank customers are recorded initially at fair value, which is generally
the proceeds received, net of direct issue costs. Subsequently, these liabilities are held at amortised cost using the effective interest rate method.
Financial liabilities are derecognised when the obligation under the liability is discharged, cancelled, or expires.
d) Offsetting financial instruments Financial assets and liabilities are offset, and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty. The following table sets out the Group\u2019s financial assets and financial liabilities that are subject to counterparty offsetting or a master netting agreement. The master netting agreements regulate settlement amounts in the event a party defaults on their obligations. Accounting policies
The Group uses derivative financial instruments to hedge its exposure to foreign exchange, interest rate and commodity risks. All derivative financial
instruments are initially measured at fair value on the contract date and are also measured at fair value at subsequent reporting dates. Where derivatives do
not qualify for hedge accounting, any changes in the fair value of the derivative financial instrument are recognised in the income statement as they arise.
To qualify for hedge accounting, the Group documents, at the inception of the hedge, the hedging risk management strategy, the relationship between the
hedging instrument and the hedged item or transaction, the nature of the risks being hedged and an assessment of the effectiveness of the hedging
relationship to ensure it is highly effective on an ongoing basis.
Where a derivative does qualify for hedge accounting, any changes in fair value are recognised depending on the nature of the hedge relationship and the
item being hedged as follows:
i) Cash flow hedges
Hedge relationships are classified as cash flow hedges where the derivative financial instruments hedge the Group\u2019s exposure to variability in cash flows
resulting from a highly probable forecasted transaction. These include the exchange rate risk of inventory purchases denominated in foreign currency,
interest rate risk and commodity risk on purchases of power and fuel. Changes in the fair value of derivative financial instruments that are designated and
effective as hedges of future cash flows are recognised directly in other comprehensive income and the ineffective portion is recognised immediately in the
income statement.
If a cash flow hedge is hedging a firm commitment or forecast transaction that results in the recognition of a non-financial asset or liability, then, at the time
the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in other comprehensive income are
included in the initial measurement of the asset or liability. This applies to the Group\u2019s foreign currency hedges in relation to inventory purchases.
ii) Fair value hedges
The Group designates certain derivatives as fair value hedges where the derivative financial instrument hedges the change in fair value of the particular risks
inherent in recognised assets or liabilities (fair value hedges).
The Group has adopted IFRS 9 hedge accounting requirements for its fair value hedges of investment securities and its one-for-one hedge on Tier 2 Debt
issuance within Sainsbury\u2019s Bank. The Group continues to adopt IAS 39 for its macro portfolio fair value hedges of fixed rate personal loans and residential
mortgages, as it is permitted to do so under IFRS 9 and until the point that the new macro hedge accounting standard is finalised and adopted.
Fair value hedging matches the change in fair value of designated hedged items against the corresponding change in value of the hedging derivative. The
designated hedged item can be a recognised asset or liability, a firm commitment, or an identified portion of an asset.
The effective part of any gain or loss on the hedged item adjusts the balance of the hedged item and is recognised in the income statement, offsetting the
gain or loss on the hedging derivative. Should circumstances arise where the hedge relationship subsequently proves ineffective, is early settled, or is
terminated the adjustment to the balance of the hedged item is amortised over the remaining life of the hedged item and to the income statement.
Micro fair value hedging \u2013 IFRS 9
The Group has purchased a number of fixed rate debt investment securities and has issued fixed rate subordinated debt within Sainsbury\u2019s Bank. These
instruments are hedged via plain vanilla interest rate swaps, with the critical economic terms of both the hedging instrument and hedged item matching.
The notional amount, fixed interest legs and maturity dates are economically matched.
Portfolio fair value hedging \u2013 IAS 39
The Group uses portfolio fair value hedging as a risk management tool for hedging interest rate risk on the Personal Loans and Mortgage portfolios. Portfolio
fair value hedging allows the designation of the whole or part of a portfolio of assets or liabilities with similar risk exposures. The hedged item can be
designated based on expected maturities to match the hedging derivative maturity. Hedge effectiveness is considered to have been met where the change in
fair value of the hedged item offsets the change in fair value of hedging instruments, within the 80 to 125 per cent ratio corridor.
Accounting policies Cash and cash equivalents Cash and bank balances comprise cash in hand and at bank, deposits at central banks, investments in money market funds and deposits and other short-term highly liquid investments. To be classified as cash and cash equivalents, an asset must: \u2014 Be readily convertible into cash; \u2014 Have an insignificant risk of changes in value; and \u2014 Have a maturity period of typically three months or less at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Group\u2019s cash management are included as a component of cash and cash equivalents for the purposes of the cash flow statement. Cash flow statement The Group presents its cash flow statement using the indirect method, whereby profit is reconciled to net cash from operating activities by adjusting profit and loss for non-cash items. Interest, dividends and taxes The Group has chosen to present interest received on bank deposits and other financial assets as well as dividends received as cash flows from investing activities because they are returns on the Group\u2019s investments. Dividends paid are presented as financing cash flows as they are considered a cost of obtaining financial resources. Interest paid on borrowings is presented within cash flows from operating activities as they are held for cash management purposes. Lease payments and receipts Lease payments are presented as follows in the Group cash flow statement: \u2014 Cash payments for the principal element of the lease liabilities are presented as cash flows from financing activities \u2014 Cash payments for the interest element of lease liabilities are presented as interest paid within cash flows from operating activities consistent with presentation of interest payments \u2014 Short-term lease payments, payments for leases of low-value assets and variable lease payments that are not included in the measurement of the lease liabilities as cash flows from operating activities \u2014 Cash receipts in relation to sub-leases (both operating and finance leases) are included within operating cash flows Accounting policies \u2013 defined contribution pension schemes
The Group contributions to defined contribution pension schemes are charged to the income statement as incurred. Any contributions unpaid at the balance
sheet date are included as an accrual as at that date. The Group has no further payment obligations once the contributions have been paid.
Accounting policies \u2013 defined benefit pension scheme (Sainsbury\u2019s Pension Scheme)
The surplus or deficit recognised in the balance sheet for defined benefit schemes represents the difference between the fair value of the plan assets and the
present value of the defined benefit obligation at the balance sheet date. The defined benefit obligation is actuarially calculated on an annual basis using the
projected unit credit method.
Actuarial gains and losses are reported in the statement of other comprehensive income as incurred, and comprise both the effects of changes in actuarial
assumptions and experience adjustments arising because of differences between the previous actuarial assumptions and what has actually occurred.
The income statement charge consists of a financing charge, which is the net of interest cost on pension scheme liabilities and interest income on plan assets
and defined benefit pension scheme expenses.
The financing charge is determined by applying the discount rate used to measure the defined benefit obligation to the pension scheme liabilities and plan
assets at the beginning of the financial year.
Accounting policies
The Group provides benefits to employees (including Directors) of the Group in the form of equity-settled and cash-settled share-based payment
transactions, whereby employees render services in exchange for shares, rights over shares or the value of those shares in cash terms.
For equity-settled share-based payments, the fair value of the employee services rendered is determined by reference to the fair value of the shares awarded
or options granted, excluding the impact of any non-market vesting conditions. All share options are valued using an option-pricing model (Black-Scholes).
This fair value is charged to the income statement over the vesting period of the share-based payment scheme with a corresponding increase in equity.
For cash-settled share-based payments, the fair value of the employee services rendered is determined at each balance sheet date and the charge
recognised through the income statement over the vesting period of the share-based payment scheme, with a corresponding increase in accruals.
The value of the charge is adjusted in the income statement over the remainder of the vesting period to reflect expected and actual levels of options vesting,
with the corresponding adjustments made in equity and accruals.
The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital
contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an
increase to investment in subsidiary undertakings, with a corresponding credit to equity.
The Group recognised \u00a359 million (2022: \u00a358 million) of employee costs (note 34) related to share-based payment transactions made during the financial year.
The Group operates several share-based payment schemes as set out below:
",
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"fact-492": {
"value": "2.1 Basis of preparation The Group\u2019s financial statements have been prepared in accordance with UK-adopted international accounting standards. The financial statements are presented in pound sterling, rounded to the nearest million (\u2018\u00a3m\u2019) unless otherwise stated. They have been prepared under the historical cost convention, except for derivative financial instruments, defined benefit pension scheme assets and financial assets at fair value through other comprehensive income. Sainsbury\u2019s Bank plc and its subsidiaries have been consolidated for the twelve months to 28 February 2023 being the Bank\u2019s year-end date (prior financial year: 28 February 2022). There have been no significant transactions or events that occurred between this date and the Group\u2019s balance sheet date, and therefore no adjustments have been made to reflect the difference in year-end dates. Significant accounting policies have been included in the relevant notes to which the policies relate, and those relating to the financial statements as a whole can be read further below. Unless otherwise stated, significant accounting policies have been applied consistently to all periods presented in the financial statements. Impairment of financial assets disclosure In accordance with IAS 1 Presentation of Financial Statements, Impairment loss on financial assets has been separately disclosed within the Consolidated income statement. Previously, this amount was included within Cost of sales, which has therefore been restated from \u00a327,538 million to \u00a327,523 million before non-underlying items; and from \u00a327,529 million to \u00a327,514 million in total. There is no impact to Gross profit, Operating profit or Profit before tax. Climate change considerations In preparing the Group\u2019s financial statements, consideration has been given to the impact of both physical and transition climate change risks, as described within the Task Force on Climate-Related Financial Disclosures section on page 18, and how these impact the financial statements. The Group has implemented processes to identify, assess and manage these risks, including scenario analysis and stress testing to understand the potential financial impact on our operations and assets. We have also considered the potential impact of policy, technology and market changes that are being developed in response to climate change, and their interdependence on each other. While it is not believed that these climate change risks have a material impact on the Group\u2019s financial statements, we recognise that the uncertainty and complexity of these issues may make it challenging to fully capture their potential impact. Our ongoing assessment of these risks will be included in future financial statements as they become clearer, taking into account the requirements of UK adopted international accounting standards. We also continue to monitor and assess the regulatory environment and any new standards that may be developed in the future. Further narrative disclosure has been provided in the following disclosure notes: \u2014 Going Concern \u2013 note 2.2 \u2014 Significant accounting judgements, estimates and assumptions \u2013 note 4 \u2014 Property, plant and equipment \u2013 note 14 \u2014 Impairment of non-financial assets \u2013 note 17 \u2014 Provisions \u2013 note 25 \u2014 Retirement benefit obligations \u2013 note 35 The policy, technology and market changes in response to climate change are still developing, and these are interdependent upon each other, and consequently the financial statements cannot capture all possible future outcomes as these are not yet known. The degree of certainty of these changes may also mean that they cannot be taken into account when determining asset and liability valuations and the timing of future cash flows under the requirements of UK adopted international accounting standards. ",
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},
"fact-493": {
"value": "2.2 Going concern The Directors are satisfied that the Group has sufficient resources to continue in operation for a period of at least 12 months from the date of approval. Accordingly, they continue to adopt the going concern basis in preparing the financial statements. The assessment period for the purposes of considering going concern is the 12 months to 26 April 2024. In assessing the Group\u2019s ability to continue as a going concern, the Directors have considered the Group\u2019s most recent corporate planning and budgeting processes. This includes an annual review which considers profitability, the Group\u2019s cash flows, committed funding and liquidity positions and forecasted future funding requirements over three years, with a further two years of indicative movements. The Group manages its financing by diversifying funding sources, structuring core borrowings with phased maturities to manage refinancing risk and maintaining sufficient levels of standby liquidity via the Revolving Credit Facility. This seeks to minimise liquidity risk by maintaining a suitable level of undrawn additional funding capacity. The Group successfully reduced net debt over the past year as part of the continued focus on deleveraging. Furthermore, the committed Revolving Credit Facility, which enables the Group to maintain sufficient levels of contingent funding, has been successfully refinanced and right-sized during the year with a new \u00a31,000 million facility comprising two \u00a3500 million tranches. Tranche A has a final maturity of December 2026 and Tranche B has a final maturity of December 2027. As at 4 March 2023, the Revolving Credit Facility was undrawn. In addition, the Group successfully arranged a \u00a3575 million committed term loan facility with maturity of March 2026 in order to part fund the acquisition of a property portfolio (refer note 33). In assessing going concern, scenarios in relation to the Group\u2019s principal risks have been considered in line with those disclosed in the viability statement on page 58 by overlaying them into the corporate plan and assessing the impact on cash flows, net debt, funding headroom and financial covenants. These severe but plausible scenarios included modelling inflationary pressures on both food margins and general recession-related risks, the impact of any regulatory fines, and the failure to deliver planned cost savings. In performing the above analysis, the Directors have made certain assumptions around the availability and effectiveness of the mitigating actions available to the Group. These include reducing any non-essential capital expenditure and operating expenditure on projects, bonuses and dividend payments. The Group\u2019s most recent corporate planning and budgeting processes includes assumed cashflows to address climate change risks, including costs associated with initiatives in place as part of the Plan for Better commitment which include reducing environmental impacts and meeting customer expectations in this area, notably through reducing packaging and reducing energy usage across the estate. Climate-related risks do not result in any material uncertainties affecting the Group\u2019s ability to continue as a going concern. As a consequence of the work performed, the Directors considered it appropriate to adopt the going concern basis in preparing the Financial Statements with no material uncertainties to disclose. ",
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"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
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},
"fact-494": {
"value": "2.3 Basis of consolidation a) Subsidiaries Subsidiaries are all entities, including structured entities (see below) over which the Group has control. This is when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The results of subsidiaries are included in the income statement from the date of acquisition or, in the case of disposals, up to the effective date of disposal. Intercompany transactions and balances between Group companies are eliminated upon consolidation. Sainsbury\u2019s Property Scottish Partnership, Sainsbury\u2019s Property Scottish Limited Partnership, Sainsbury\u2019s Thistle Scottish Limited Partnership and Nectar 360 Services LLP, are partnerships which are fully consolidated into these Group accounts. The Group has taken advantage of the exemption conferred by Regulation 7 of the Partnerships (\u2018Accounts\u2019) Regulations 2008 and has therefore not appended the accounts of these qualifying partnerships to these accounts. Significant judgement \u2013 Consolidation of structured entities Sainsbury\u2019s Thistle Scottish Limited Partnership (\u201cthe Partnership\u201d) is a structured entity which the Group fully consolidates. A structured entity is one in which the Group does not hold the majority interest but for which management has concluded that voting rights are not the dominant factor in deciding who controls the entity. The Partnership, in which both the Group and Pension Scheme Trustee hold an interest, was established following the 2018 triennial valuation of the Group\u2019s defined benefit scheme. The Group has determined that the relevant activities of the Partnership are the funding of the Scheme and whether the funding targets have been met. Furthermore, a general partner wholly owned by the Group has exclusive responsibility for the management and control of the Partnership and sole authority to exercise the Partnership\u2019s rights. This includes the ability to make additional contributions to the Scheme such that the funding targets are met. As the Group can direct the Partnership\u2019s relevant activities and affect its returns (through reaching the Scheme\u2019s funding targets), it has been concluded that the Group controls the Partnership, despite not having a majority interest. It is therefore consolidated in the Group accounts. Further information is included in note 35. b) Joint ventures and associates The Group applies IFRS 11 to all joint arrangements. Under IFRS 11, investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Group has assessed the nature of its joint arrangements and determined them to be joint ventures. Associates are entities over which the Group has significant influence but not control. Investments in joint ventures and associates are carried in the Group balance sheet at historical cost plus post-acquisition changes in the Group\u2019s share of net assets of the entity, less any provision for impairment. Where the Group transacts with a joint venture or associate, profits and losses are eliminated to the extent of the Group\u2019s interest in the joint venture or associate. A full list of the Group\u2019s joint ventures is included in note 41. Joint ventures with a different year-end date to the Group are reported to include the results up to 28 February 2023, the nearest month-end to the Group\u2019s year-end. Adjustments are made for the effects of significant transactions or events that occurred between 28 February and the Group\u2019s balance sheet date. No joint venture arrangements are considered significant to the Group. c) Foreign currencies The consolidated financial statements are presented in pound sterling, which is the ultimate parent company\u2019s functional currency. Foreign operations The Group has operations in Asia that source and purchase certain general merchandise and clothing inventory. In addition the Group has a trading entity in Ireland. On consolidation, assets and liabilities of foreign operations are translated into pound sterling at year-end exchange rates. The results of foreign operations are translated into pound sterling at average rates of exchange for the year. Exchange differences arising are recognised in the Group statement of comprehensive income/(loss) and are included in the Group\u2019s translation reserve. Foreign currency transactions Transactions denominated in foreign currencies are translated at the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. 2.4 Amendments to published standards Effective for the Group and Company in these financial statements: The Group has considered the following amendments to published standards that are effective for the Group for the financial year beginning 6 March 2022 and concluded that they are either not relevant to the Group or that they do not have a significant impact on the Group\u2019s financial statements other than disclosures. \u2014 Amendments to IFRS 3 \u2018Business Combinations\u2019 \u2013 Reference to the Conceptual Framework \u2014 Amendments to IAS 16 \u2018Property, Plant and Equipment\u2019 \u2013 Proceeds before Intended Use \u2014 Amendments to IAS 37 \u2018Provisions, Contingent Assets and Contingent Liabilities\u2019 \u2013 Onerous Contracts \u2013 Costs of Fulfilling a Contract \u2014 Amendments to IFRS 1 \u2018First-time Adoption of International Financial Reporting Standards\u2019 \u2013 Subsidiary as a first-time adopter \u2014 Amendments to IFRS 9 \u2018Financial Instruments\u2019 \u2013 Fees in the \u201910 per cent\u2019 test for derecognition of financial liabilities \u2014 Amendments to IAS 41 \u2018Agriculture\u2019 \u2013 Taxation in fair value measurements The accounting policies have remained unchanged from those disclosed in the Annual Report for the year ended 5 March 2022. Standards and revisions effective for future periods: The following standards and revisions will be effective for future periods: \u2014 Amendments to IAS 1 \u2018Presentation of Financial Statements\u2019 on the classification of liabilities as current or non-current \u2014 Amendments to IAS 1 \u2018Presentation of Financial Statements\u2019 and IFRS Practice Statement 2 \u2018Making Materiality Judgements\u2019 on the disclosure of accounting policies \u2014 Amendments to IAS 8 \u2018Accounting Policies, Changes in Accounting Estimates and Errors\u2019 on the definition of accounting estimates \u2014 Amendments to IAS 12 \u2018Income Taxes\u2019 on Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction \u2014 IFRS 17 \u2018Insurance Contracts\u2019 \u2014 Amendments to IFRS 16 \u2018Leases\u2019 on Lease Liability in a Sale and Leaseback \u2014 Amendments to IAS 1 \u2018Presentation of Financial Statements\u2019 on Non-current Liabilities with Covenants The Group has considered the impact of the remaining above standards and revisions and have concluded that they will not have a significant impact on the Group\u2019s financial statements. ",
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"language": "en",
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"fact-530": {
"value": "a) Subsidiaries Subsidiaries are all entities, including structured entities (see below) over which the Group has control. This is when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The results of subsidiaries are included in the income statement from the date of acquisition or, in the case of disposals, up to the effective date of disposal. Intercompany transactions and balances between Group companies are eliminated upon consolidation. Sainsbury\u2019s Property Scottish Partnership, Sainsbury\u2019s Property Scottish Limited Partnership, Sainsbury\u2019s Thistle Scottish Limited Partnership and Nectar 360 Services LLP, are partnerships which are fully consolidated into these Group accounts. The Group has taken advantage of the exemption conferred by Regulation 7 of the Partnerships (\u2018Accounts\u2019) Regulations 2008 and has therefore not appended the accounts of these qualifying partnerships to these accounts. Significant judgement \u2013 Consolidation of structured entities Sainsbury\u2019s Thistle Scottish Limited Partnership (\u201cthe Partnership\u201d) is a structured entity which the Group fully consolidates. A structured entity is one in which the Group does not hold the majority interest but for which management has concluded that voting rights are not the dominant factor in deciding who controls the entity. The Partnership, in which both the Group and Pension Scheme Trustee hold an interest, was established following the 2018 triennial valuation of the Group\u2019s defined benefit scheme. The Group has determined that the relevant activities of the Partnership are the funding of the Scheme and whether the funding targets have been met. Furthermore, a general partner wholly owned by the Group has exclusive responsibility for the management and control of the Partnership and sole authority to exercise the Partnership\u2019s rights. This includes the ability to make additional contributions to the Scheme such that the funding targets are met. As the Group can direct the Partnership\u2019s relevant activities and affect its returns (through reaching the Scheme\u2019s funding targets), it has been concluded that the Group controls the Partnership, despite not having a majority interest. It is therefore consolidated in the Group accounts. Further information is included in note 35. ",
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}
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"fact-588": {
"value": "b) Joint ventures and associates The Group applies IFRS 11 to all joint arrangements. Under IFRS 11, investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Group has assessed the nature of its joint arrangements and determined them to be joint ventures. Associates are entities over which the Group has significant influence but not control. Investments in joint ventures and associates are carried in the Group balance sheet at historical cost plus post-acquisition changes in the Group\u2019s share of net assets of the entity, less any provision for impairment. Where the Group transacts with a joint venture or associate, profits and losses are eliminated to the extent of the Group\u2019s interest in the joint venture or associate. A full list of the Group\u2019s joint ventures is included in note 41. Joint ventures with a different year-end date to the Group are reported to include the results up to 28 February 2023, the nearest month-end to the Group\u2019s year-end. Adjustments are made for the effects of significant transactions or events that occurred between 28 February and the Group\u2019s balance sheet date. No joint venture arrangements are considered significant to the Group. ",
"dimensions": {
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"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-572": {
"value": "b) Joint ventures and associates The Group applies IFRS 11 to all joint arrangements. Under IFRS 11, investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Group has assessed the nature of its joint arrangements and determined them to be joint ventures. Associates are entities over which the Group has significant influence but not control. Investments in joint ventures and associates are carried in the Group balance sheet at historical cost plus post-acquisition changes in the Group\u2019s share of net assets of the entity, less any provision for impairment. Where the Group transacts with a joint venture or associate, profits and losses are eliminated to the extent of the Group\u2019s interest in the joint venture or associate. A full list of the Group\u2019s joint ventures is included in note 41. Joint ventures with a different year-end date to the Group are reported to include the results up to 28 February 2023, the nearest month-end to the Group\u2019s year-end. Adjustments are made for the effects of significant transactions or events that occurred between 28 February and the Group\u2019s balance sheet date. No joint venture arrangements are considered significant to the Group. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentsInJointVentures",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-531": {
"value": "b) Joint ventures and associates The Group applies IFRS 11 to all joint arrangements. Under IFRS 11, investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Group has assessed the nature of its joint arrangements and determined them to be joint ventures. Associates are entities over which the Group has significant influence but not control. Investments in joint ventures and associates are carried in the Group balance sheet at historical cost plus post-acquisition changes in the Group\u2019s share of net assets of the entity, less any provision for impairment. Where the Group transacts with a joint venture or associate, profits and losses are eliminated to the extent of the Group\u2019s interest in the joint venture or associate. A full list of the Group\u2019s joint ventures is included in note 41. Joint ventures with a different year-end date to the Group are reported to include the results up to 28 February 2023, the nearest month-end to the Group\u2019s year-end. Adjustments are made for the effects of significant transactions or events that occurred between 28 February and the Group\u2019s balance sheet date. No joint venture arrangements are considered significant to the Group. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-532": {
"value": "c) Foreign currencies The consolidated financial statements are presented in pound sterling, which is the ultimate parent company\u2019s functional currency. Foreign operations The Group has operations in Asia that source and purchase certain general merchandise and clothing inventory. In addition the Group has a trading entity in Ireland. On consolidation, assets and liabilities of foreign operations are translated into pound sterling at year-end exchange rates. The results of foreign operations are translated into pound sterling at average rates of exchange for the year. Exchange differences arising are recognised in the Group statement of comprehensive income/(loss) and are included in the Group\u2019s translation reserve. Foreign currency transactions Transactions denominated in foreign currencies are translated at the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-573": {
"value": "The consolidated financial statements are presented in pound sterling, which is the ultimate parent company\u2019s functional currency. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFunctionalCurrencyExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-533": {
"value": "2.4 Amendments to published standards Effective for the Group and Company in these financial statements: The Group has considered the following amendments to published standards that are effective for the Group for the financial year beginning 6 March 2022 and concluded that they are either not relevant to the Group or that they do not have a significant impact on the Group\u2019s financial statements other than disclosures. \u2014 Amendments to IFRS 3 \u2018Business Combinations\u2019 \u2013 Reference to the Conceptual Framework \u2014 Amendments to IAS 16 \u2018Property, Plant and Equipment\u2019 \u2013 Proceeds before Intended Use \u2014 Amendments to IAS 37 \u2018Provisions, Contingent Assets and Contingent Liabilities\u2019 \u2013 Onerous Contracts \u2013 Costs of Fulfilling a Contract \u2014 Amendments to IFRS 1 \u2018First-time Adoption of International Financial Reporting Standards\u2019 \u2013 Subsidiary as a first-time adopter \u2014 Amendments to IFRS 9 \u2018Financial Instruments\u2019 \u2013 Fees in the \u201910 per cent\u2019 test for derecognition of financial liabilities \u2014 Amendments to IAS 41 \u2018Agriculture\u2019 \u2013 Taxation in fair value measurements The accounting policies have remained unchanged from those disclosed in the Annual Report for the year ended 5 March 2022. Standards and revisions effective for future periods: The following standards and revisions will be effective for future periods: \u2014 Amendments to IAS 1 \u2018Presentation of Financial Statements\u2019 on the classification of liabilities as current or non-current \u2014 Amendments to IAS 1 \u2018Presentation of Financial Statements\u2019 and IFRS Practice Statement 2 \u2018Making Materiality Judgements\u2019 on the disclosure of accounting policies \u2014 Amendments to IAS 8 \u2018Accounting Policies, Changes in Accounting Estimates and Errors\u2019 on the definition of accounting estimates \u2014 Amendments to IAS 12 \u2018Income Taxes\u2019 on Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction \u2014 IFRS 17 \u2018Insurance Contracts\u2019 \u2014 Amendments to IFRS 16 \u2018Leases\u2019 on Lease Liability in a Sale and Leaseback \u2014 Amendments to IAS 1 \u2018Presentation of Financial Statements\u2019 on Non-current Liabilities with Covenants The Group has considered the impact of the remaining above standards and revisions and have concluded that they will not have a significant impact on the Group\u2019s financial statements. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-574": {
"value": "Effective for the Group and Company in these financial statements: The Group has considered the following amendments to published standards that are effective for the Group for the financial year beginning 6 March 2022 and concluded that they are either not relevant to the Group or that they do not have a significant impact on the Group\u2019s financial statements other than disclosures. \u2014 Amendments to IFRS 3 \u2018Business Combinations\u2019 \u2013 Reference to the Conceptual Framework \u2014 Amendments to IAS 16 \u2018Property, Plant and Equipment\u2019 \u2013 Proceeds before Intended Use \u2014 Amendments to IAS 37 \u2018Provisions, Contingent Assets and Contingent Liabilities\u2019 \u2013 Onerous Contracts \u2013 Costs of Fulfilling a Contract \u2014 Amendments to IFRS 1 \u2018First-time Adoption of International Financial Reporting Standards\u2019 \u2013 Subsidiary as a first-time adopter \u2014 Amendments to IFRS 9 \u2018Financial Instruments\u2019 \u2013 Fees in the \u201910 per cent\u2019 test for derecognition of financial liabilities \u2014 Amendments to IAS 41 \u2018Agriculture\u2019 \u2013 Taxation in fair value measurements The accounting policies have remained unchanged from those disclosed in the Annual Report for the year ended 5 March 2022. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfInitialApplicationOfStandardsOrInterpretations",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-575": {
"value": "Standards and revisions effective for future periods: The following standards and revisions will be effective for future periods: \u2014 Amendments to IAS 1 \u2018Presentation of Financial Statements\u2019 on the classification of liabilities as current or non-current \u2014 Amendments to IAS 1 \u2018Presentation of Financial Statements\u2019 and IFRS Practice Statement 2 \u2018Making Materiality Judgements\u2019 on the disclosure of accounting policies \u2014 Amendments to IAS 8 \u2018Accounting Policies, Changes in Accounting Estimates and Errors\u2019 on the definition of accounting estimates \u2014 Amendments to IAS 12 \u2018Income Taxes\u2019 on Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction \u2014 IFRS 17 \u2018Insurance Contracts\u2019 \u2014 Amendments to IFRS 16 \u2018Leases\u2019 on Lease Liability in a Sale and Leaseback \u2014 Amendments to IAS 1 \u2018Presentation of Financial Statements\u2019 on Non-current Liabilities with Covenants The Group has considered the impact of the remaining above standards and revisions and have concluded that they will not have a significant impact on the Group\u2019s financial statements. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfExpectedImpactOfInitialApplicationOfNewStandardsOrInterpretations",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-495": {
"value": "3 Alternative Performance Measures (APMs) In the reporting of financial information, the Directors use various APMs. These APMs should be considered in addition to, and are not intended to be a substitute for, IFRS measurements. As they are not defined by International Financial Reporting Standards, they may not be directly comparable with other companies\u2019 APMs. The Directors believe that these APMs provide additional useful information for understanding the financial performance and health of the Group. They are also used to enhance the comparability of information between reporting periods (such as like-for-like sales and underlying profit) by adjusting for non-recurring factors which affect IFRS measures, and to aid users in understanding the Group\u2019s performance. Consequently, APMs are used by the Directors and management for performance analysis, planning, reporting and incentive setting purposes. The APMs used by the Group are detailed on pages 219 to 223 of this report. This includes further information on the definition, purpose and reconciliation to the closest IFRS measure. All APMs relate to the current and comparative periods and are consistent with those used previously. There have been no changes to APMs in the year. ",
"dimensions": {
"concept": "jsainsburyplc:DisclosureOfAlternativePerformanceMeasuresAPMs",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-595": {
"value": "4 Significant accounting judgements, estimates and assumptions The preparation of financial statements requires the use of judgements, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Those which are significant to the Group are discussed separately below: Judgements In the process of applying the Group\u2019s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the consolidated financial statements: \u2014 Consolidation of structured entities \u2013 refer to note 2.3 \u2014 Non-underlying items \u2013 refer to note 5 \u2014 Aggregation of operating segments \u2013 refer to note 7 \u2014 Lease term \u2013 refer to note 15 Sources of estimation uncertainty The areas where estimates and assumptions are significant to the financial statements are as listed below. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. \u2014 Nectar accounting (breakage estimates) \u2013 refer to note 6 \u2014 Lease liabilities (derivation of discount rates) \u2013 refer to note 15 \u2014 Impairment of non-financial assets \u2013 refer to note 17 \u2014 Provisions \u2013 refer to note 25 \u2014 Impairment of financial assets \u2013 refer to note 28 \u2014 Post-employment benefits (assets and liabilities) \u2013 refer to note 35 In assessing the Group\u2019s judgements and sources of estimation uncertainty, consideration has been given to the impact of climate change risk on these. Aside from impairment of non-financial assets (refer to note 17) and post-employment benefits (refer to note 35), climate change risks do not have any impacts on the Group\u2019s judgements or sources of estimation uncertainty. Significant estimate \u2013 Fair value of Nectar points The Group estimates the fair value of points awarded under the Nectar programme by reference to the value per point to a customer, multiplied by expected breakage assumptions. Breakage represents management\u2019s estimate of points issued that will never be redeemed and is therefore subject to uncertainty. Breakage is estimated by management based on the terms and conditions of membership and historical accumulation and redemption patterns. As at the year-end, if the breakage estimate used in determining the deferred revenue for the Group had been 1.0 per cent lower, the deferred points liability would have been \u00a350 million higher. If the breakage estimate had been 1.0 per cent higher, the deferred points liability would have been \u00a351 million lower. Significant judgement \u2013 aggregation of operating segments The CODM is presented information for the following operating segments: \u2014 Retail \u2013 Food \u2014 Retail \u2013 General Merchandise and Clothing \u2014 Financial Services In determining the Group\u2019s reportable segments, management have considered the economic characteristics, in particular average gross margin, similarity of products, production processes, customers, sales methods and regulatory environment of its two Retail segments. In doing so it has been concluded that they should be aggregated into one \u2018Retail\u2019 segment within the financial statements given the similar economic characteristics between the two. This aggregated information provides users the financial information needed to evaluate the business and the environment in which it operates. Significant judgement \u2013 lease terms The inclusion of a lease extension period or lease break period in the lease term is a key judgement for the Group and considers all relevant factors that create an economic incentive for it to exercise them. For leased properties, this includes the current and expected profitability of the respective site, as well as the length of time until the option can be exercised. Any changes to the Group\u2019s judgement over lease terms will impact both the right-of-use asset and lease liability. Set out below are the undiscounted future rental payments not currently included within the reported lease liability for where lease extensions have not been included, or where lease breaks have been assumed: 2023 \u00a3m 2022 \u00a3m Extension options expected to not be exercised 4,781 4,681 Lease breaks expected to be exercised 425 458 Significant estimate \u2013 discount rates As noted above, lease liabilities are measured at the present value of lease payments to be made over the lease term, discounted using the IBR at the lease commencement date (for additions) or at the lease modification date (for modifications). The IBRs depend on the start date and term of the lease, and are determined based on a number of inputs including a reference (risk free) rate and adjustments to reflect the Group\u2019s credit risk. The reference rates are based on UK overnight swap rates and the credit risk adjustments are based on the prices of instruments issued by the Group and quoted credit default swaps (CDS). Significant estimate \u2013 provisions The Group\u2019s provisions are estimates of the actual costs and timing of future cash flows, which are dependent on future events and market conditions. Thus there is inherently an element of estimation uncertainty within the provisions recognised by the Group. Any difference between expectations and the actual future liability will be accounted for in the period when such determination is made. The provisions are most sensitive to estimates of the future cash outflows. The following table summarises the impact that a reasonable possible change in expenditure required to settle the present obligation at the end of the reporting period would have had on the amounts recognised during the year. Increase/(decrease) in provisions recognised Property provisions \u00a3m Insurance provisions \u00a3m Restructuring \u00a3m Other provisions \u00a3m Total \u00a3m Increase in cash outflow of 5% 6 3 3 1 13 Decrease in cash outflows of 5% (6) (3) (3) (1) (13) Sensitivities on Financial Services ECL provisions are included in note 28, therefore not included in the above. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-496": {
"value": "5 Profit before non-underlying items In order to provide shareholders with additional insight into the year-on-year performance of the business, an adjusted measure of profit (underlying profit before tax) is provided to supplement the reported IFRS numbers, which reflects how the business measures performance internally. This adjusted measure excludes items recognised in reported profit or loss before tax which, if included, could distort comparability between periods. Determining which items are to be adjusted requires judgement, in which the Group considers items which are significant either by virtue of their size and/or nature, or that are non-recurring. The same assessment is applied consistently to any reversals of prior non-underlying items. Underlying profit is not an IFRS measure and therefore not directly comparable to other companies. Below highlights the grouping in which non-underlying items have been allocated and provides further detail on why such items have been recognised within non-underlying items. Cost of sales \u00a3m Administrative expenses \u00a3m Other income \u00a3m Net finance income/ (costs) \u00a3m Total adjustments before tax \u00a3m Tax \u00a3m Total adjustments \u00a3m Income recognised in relation to legal disputes \u2013 \u2013 30 \u2013 30 (6) 24 Restructuring and impairment Restructuring programmes (103) (14) 11 \u2013 (106) 7 (99) Impairment of non-financial assets (281) \u2013 \u2013 \u2013 (281) 38 (243) Total restructuring and impairment (384) (14) 11 \u2013 (387) 45 (342) Property, finance, pension and acquisition adjustments ATM business rates reimbursement 3 \u2013 \u2013 \u2013 3 (1) 2 Property related transactions (3) (3) (3) \u2013 (9) 2 (7) Non-underlying finance and fair value movements (29) \u2013 \u2013 (9) (38) 7 (31) IAS 19 pension income \u2013 2 \u2013 56 58 (11) 47 Acquisition adjustments \u2013 (20) \u2013 \u2013 (20) 4 (16) Total property, finance, pension and acquisition adjustments (29) (21) (3) 47 (6) 1 (5) Tax adjustments Over provision in prior years \u2013 \u2013 \u2013 \u2013 \u2013 2 2 Difference due to change in applicable rate of deferred tax \u2013 \u2013 \u2013 \u2013 \u2013 (5) (5) Total adjustments (413) (35) 38 47 (363) 37 (326) Income recognised in relation to legal disputes In the prior year, agreements were reached in relation to overcharges from payment card processing fees, which largely reflect inter-bank \u201cinterchange fees\u201d. This led to net income of \u00a3167 million being recognised. During the current period a further agreement has been reached resulting in net income of \u00a330 million being recognised. Net cash of \u00a330 million was received during the year. Restructuring programmes In the year ended 6 March 2021, the Group announced a restructuring programme to accelerate the structural integration of Sainsbury\u2019s and Argos and further simplify the Argos business; create a new supply chain and logistics operating model, moving to a single integrated supply chain and logistics network across Sainsbury\u2019s and Argos; and further rationalise/repurpose the Group\u2019s supermarkets and convenience estate. The programme also considered the Group\u2019s Store Support Centre ways of working. The programme is a multi-year activity and has continued into the current year. Total cumulative costs to 4 March 2023 are \u00a3(746) million split between \u00a3(640) million in the prior years and \u00a3(106) million in the current period as detailed in the table below. Total expected costs are still in the range of \u00a3900 million to \u00a31 billion to March 2024, with the majority in the period to March 2024. (Costs)/gains recognised in the current year are as follows: 52 weeks to 4 March 2023 \u00a3m 52 weeks to 5 March 2022 \u00a3m Write downs of property, plant and equipment (a) (8) (6) Write downs of leased assets (a) (21) (3) Write downs of intangible assets (5) \u2013 Closure provisions (b) 1 (24) Accelerated depreciation of assets (c) (20) (33) Redundancy provisions (d) (54) (40) Consultancy costs (12) (18) Gain on lease terminations (e) 2 9 Property profits (f) 11 12 Recognition of sub lease debtor \u2013 11 Total restructuring costs (106) (92) a) Write down of assets associated with Argos stores and IT assets as a result of the overall restructuring programme to accelerate the structural integration of Sainsbury\u2019s and Argos and further simplify the Argos business. b) Closure provisions relate to onerous contract costs, dilapidations and strip out costs on leased sites that have been identified for closure. Upon initial recognition of closure provisions, management uses its best estimates of the relevant costs to be incurred as well as expected closure dates. Business rates on leased property where the Group no longer operates from are recognised in the period they are incurred. The current year includes amounts reversed in relation to sites no longer being exited as part of the programme. c) The remaining useful economic lives of corresponding sites have been reassessed to align with closure dates, resulting in an acceleration in depreciation of these assets. The existing depreciation of these assets (depreciation that would have been recognised absent of a closure decision) is recognised within underlying expenses, whereas accelerated depreciation above this is recognised within non-underlying expenses. d) Redundancy costs are recognised as the plan is announced and a valid expectation raised with the affected colleagues. The current year charge relates to redundancies announced as part of Argos store closures, depot closures, and the exit of operations in Ireland. e) Gains on lease terminations relate to sites impaired in the prior year for which it has been negotiated to exit the leases before the contractual end date. This includes the release of any lease liabilities, as well as any closure provisions previously recognised. f) Property profits relate to profits recognised in the period as sites previously impaired as part of the restructuring programmes have been sold. As the costs incurred facilitate future underlying cost savings, it was considered whether it was appropriate to report these costs within underlying profit. Whilst they arise from changes in the Group\u2019s underlying operations, they can be separately identified, are material in size and do not relate to ordinary in-year trading activity. In addition, the areas being closed or restructured no longer relate to the Group\u2019s remaining underlying operations and their exclusion provides meaningful comparison between financial years. Impairment of non-financial assets In addition to the above, in line with IAS 36 \u2018Impairment of Non-financial Assets\u2019, the Group is required to assess whether there is any indication that an asset (or cash-generating unit (CGU)) may be impaired. Management considered whether the level of uncertainty within the wider macroeconomic environment, including sustained increases in the Bank of England gilt rates, represented an indicator of impairment at the reporting date. It was determined that the increase in discount rates was a significant impairment indicator and therefore a full impairment review was undertaken. A non-cash impairment charge of \u00a3281 million has been recognised in the period and comprises the below amounts, and has all been recognised within the Retail segment. Further details of the impairment charge are included within note 17. \u00a3m Write downs of property, plant and equipment (141) Write downs of leased assets (122) Write downs of intangible assets (18) Impairment of non-financial assets (281) 5 Profit before non-underlying items continued Property, finance, pension and acquisition adjustments \u2014 A further \u00a33 million of ATM rates reimbursement income is due to be received from the Valuation Office following the Supreme Court\u2019s ruling that ATMs outside stores should not be assessed for additional business rates on top of normal store rates. The total cumulative amount recognised to 4 March 2023 is \u00a345 million. \u2014 Property related transactions relate to the loss on disposal of non-trading properties, which comprised of \u00a3(3) million in the financial period, and \u00a3(6) million of costs relating to a property transaction. These are excluded from underlying profit as such profit is not related to the ongoing operating activities of the Group. \u2014 Non-underlying finance movements for the financial period comprised \u00a3(38) million for the Group. These include fair value remeasurements on derivatives not in a hedging relationship and lease interest on impaired non-trading sites, including site closures. The fair value movements are driven by external market factors and can significantly fluctuate year-on-year. They are therefore excluded to ensure consistency between periods. Lease interest on impaired, non-trading sites is excluded as they do not contribute to the operating activities of the Group. Included within cost of sales is \u00a3(29) million in relation to unfavourable movements on long-term, fixed price power purchase arrangements (PPAs) with independent producers. These are accounted for as derivative financial instruments, however are not designated in hedging relationships, therefore gains and losses are recognised in the income statement. Decreases in electricity forward prices in the year have led to losses on the related derivative financial instruments. Non-underlying finance and fair value movements also includes lease interest on impaired non-trading sites, including site closures. Lease interest on impaired, non-trading sites is excluded as they do not contribute to the operating activities of the Group. The remaining movements of \u00a3(9) million within finance income and costs are analysed further in note 10. \u2014 Defined benefit pension interest and expenses comprises pension finance income of \u00a357 million, settlement credit of \u00a38 million and scheme expenses of \u00a3(6) million (see note 35). Although a recurring item, the Group has chosen to exclude net retirement benefit income and costs from underlying profit as, following closure of the defined benefit scheme to future accrual, it is not part of the ongoing operating activities of the Group and its exclusion is consistent with how the Directors assess the performance of the business. \u2014 Acquisition adjustments of \u00a3(20) million reflect the unwind of non-cash fair value adjustments arising from Home Retail Group and Nectar UK acquisitions. The Group would not normally recognise these as assets outside of a business combination. Therefore the unwinds are classified as non-underlying and are recognised as follows: 52 weeks to 4 March 2023 52 weeks to 5 March 2022 Argos \u00a3m Nectar \u00a3m Total Group \u00a3m Argos \u00a3m Nectar \u00a3m Total Group \u00a3m Cost of sales 1 \u2013 1 \u2013 \u2013 \u2013 Depreciation 1 \u2013 1 3 \u2013 3 Amortisation (18) (4) (22) (18) (5) (23) (16) (4) (20) (15) (5) (20) Comparative information Cost of sales \u00a3m Administrative expenses \u00a3m Other income \u00a3m Net finance income/ (costs) \u00a3m Total adjustments before tax \u00a3m Tax \u00a3m Total adjustments \u00a3m Income recognised in relation to legal disputes \u2013 13 167 \u2013 180 (35) 145 Restructuring and integration Restructuring programmes (69) (35) 12 \u2013 (92) 17 (75) Financial Services transition and other \u2013 (11) \u2013 \u2013 (11) 2 (9) Total restructuring and integration (69) (46) 12 \u2013 (103) 19 (84) Software as a service accounting adjustment \u2013 (21) \u2013 \u2013 (21) 4 (17) Property, finance, pension and acquisition adjustments ATM business rates reimbursement 2 \u2013 \u2013 \u2013 2 \u2013 2 Profit on disposal of properties \u2013 \u2013 7 \u2013 7 \u2013 7 Non-underlying finance and fair value movements 76 \u2013 \u2013 (8) 68 (13) 55 IAS 19 pension expenses \u2013 (4) \u2013 15 11 (2) 9 Acquisition adjustments \u2013 (20) \u2013 \u2013 (20) 4 (16) Total property, finance, pension and acquisition adjustments 78 (24) 7 7 68 (11) 57 Tax adjustments Over provision in prior years \u2013 \u2013 \u2013 \u2013 \u2013 (2) (2) Difference due to change in applicable rate of deferred tax \u2013 \u2013 \u2013 \u2013 \u2013 9 9 Other tax adjustments \u2013 \u2013 \u2013 \u2013 \u2013 (7) (7) Total adjustments 9 (78) 186 7 124 (23) 101 5 Profit before non-underlying items continued Cash flow statement The table below shows the impact of non-underlying items on the Group cash flow statement: 52 weeks to 4 March 2023 \u00a3m 52 weeks to 5 March 2022 \u00a3m Cash flows from operating activities IAS 19 pension expenses (7) (7) Financial Services transition and other \u2013 (13) Restructuring programmes (50) (114) Income recognised in relation to legal disputes 30 93 ATM rates reimbursement 3 14 Property related transactions (6) \u2013 Cash used in operating activities (30) (27) Cash flows from investing activities Proceeds from property disposals 1 29 46 Cash generated from investing activities 29 46 Net cash flows (1) 19 1. \u00a326 million of the current period proceeds from property disposals are a result of restructuring programmes (2022: \u00a319 million). 5 Profit before non-underlying items continued ",
"dimensions": {
"concept": "jsainsburyplc:DisclosureOfProfitFromNonUnderlyingItems",
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"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-497": {
"value": "6 Revenue
Accounting policies
Revenue is income arising from the sale of goods and services in the course of the Group\u2019s ordinary activities, net of returns, related discounts and excluding
Value Added Tax (VAT) and, in the case of Financial Services, interest receivable, fees and commissions. Revenue is recognised when the Group has a contract
with a customer and a performance obligation has been satisfied, at the transaction price allocated to that performance obligation.
Retail sales
a) Sale of goods
Revenue from the sale of goods is recognised at point of sale or, where later, upon collection by, or delivery to, the customer as this is the point in which
control has passed. Where consideration has been received in advance of the performance obligation being satisfied, a contract liability is recognised.
b) Other revenue items
Other revenue items comprise income from commissions and concessions, and wholesale sales made directly to third-party customers.
Commission revenue relates to the sale of third-party products where it has been determined that the Group is acting as an agent. When assessing whether
the Group should recognise revenue as a principal, or as an agent, management will assess whether there is control of the related goods prior to sale to the
end consumer. Sales commission from third-parties is recognised when the related goods or services are sold as the net amount to be retained. The Group\u2019s
relevant contracts are not complex and therefore the level of judgement involved is not considered significant to the Group.
Wholesale revenue is recognised when the goods are delivered to the customer.
c) Nectar points
The issuance of Nectar points within the Group creates a separate performance obligation and therefore a portion of the transaction price is allocated to the
loyalty programme using the relative standalone selling price of points issued, and the corresponding revenue deferred. The deferral is treated as a deduction
from revenue and recognised as a contract liability within deferred income (see note 23). The fair value of the points awarded is determined with reference to
the value per point to a customer and considers expected redemption rates (breakage) and the money off that each point entitles a customer to. The revenue
deferred is subsequently recognised when the Nectar points are redeemed by the customer.
Significant estimate \u2013 Fair value of Nectar points
The Group estimates the fair value of points awarded under the Nectar programme by reference to the value per point to a customer, multiplied by expected
breakage assumptions. Breakage represents management\u2019s estimate of points issued that will never be redeemed and is therefore subject to uncertainty.
Breakage is estimated by management based on the terms and conditions of membership and historical accumulation and redemption patterns.
As at the year-end, if the breakage estimate used in determining the deferred revenue for the Group had been 1.0 per cent lower, the deferred points liability
would have been \u00a350 million higher. If the breakage estimate had been 1.0 per cent higher, the deferred points liability would have been \u00a351 million lower.
Financial Services Financial services revenue consists of interest, fees and commission income from the provision of retail banking and insurance related activities. a) Interest income Interest income is recognised in the income statement for all instruments measured at amortised cost using the effective interest method. The effective interest rate of a financial asset is calculated on initial recognition and is applied to the gross carrying amount of the asset. For financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset net of impairment. If the asset is no longer credit impaired, then the calculation of interest income reverts to the gross basis. In calculating the effective interest rate of a financial instrument the Group takes into account all amounts that are integral to the yield of a financial instrument as well as incremental transaction costs. b) Fees and commission income Fees and commissions that are not integral to the effective interest rate calculation relate primarily to certain credit card and storecard fees, ATM interchange fees, insurance introduction commission and warranty commission receivable. These are recognised in the income statement on an accruals basis as performance obligations are satisfied. Where in the case of insurance commissions the income comprises an initial commission and profit share, both are recognised on completion of the service to the extent reliably measurable. Where there is a risk of potential clawback, an appropriate element of the commission receivable is deferred and amortised over the clawback period. These are recognised in the income statement on an accruals basis as performance obligations are satisfied in accordance with IFRS 15. Margin from the sale of travel money, representing the difference between the cost price and the selling price, is recognised when the sale to the customer takes place. Other income Other income generally consists of profits and losses on disposal of assets. Disaggregated revenue recognised 52 weeks to 4 March 2023 \u00a3m 52 weeks to 5 March 2022 \u00a3m Grocery and General Merchandise & Clothing (GM&C) 25,993 25,440 Fuel 4,967 4,023 Total retail sales 30,960 29,463 Financial Services interest receivable 394 322 Financial Services fees and commission 137 110 Total Financial Services income 531 432 Total revenue 31,491 29,895 6 Revenue continued ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfRevenueExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-534": {
"value": "Revenue is income arising from the sale of goods and services in the course of the Group\u2019s ordinary activities, net of returns, related discounts and excluding Value Added Tax (VAT) and, in the case of Financial Services, interest receivable, fees and commissions. Revenue is recognised when the Group has a contract with a customer and a performance obligation has been satisfied, at the transaction price allocated to that performance obligation. Retail sales a) Sale of goods Revenue from the sale of goods is recognised at point of sale or, where later, upon collection by, or delivery to, the customer as this is the point in which control has passed. Where consideration has been received in advance of the performance obligation being satisfied, a contract liability is recognised. b) Other revenue items Other revenue items comprise income from commissions and concessions, and wholesale sales made directly to third-party customers. Commission revenue relates to the sale of third-party products where it has been determined that the Group is acting as an agent. When assessing whether the Group should recognise revenue as a principal, or as an agent, management will assess whether there is control of the related goods prior to sale to the end consumer. Sales commission from third-parties is recognised when the related goods or services are sold as the net amount to be retained. The Group\u2019s relevant contracts are not complex and therefore the level of judgement involved is not considered significant to the Group. Wholesale revenue is recognised when the goods are delivered to the customer. c) Nectar points The issuance of Nectar points within the Group creates a separate performance obligation and therefore a portion of the transaction price is allocated to the loyalty programme using the relative standalone selling price of points issued, and the corresponding revenue deferred. The deferral is treated as a deduction from revenue and recognised as a contract liability within deferred income (see note 23). The fair value of the points awarded is determined with reference to the value per point to a customer and considers expected redemption rates (breakage) and the money off that each point entitles a customer to. The revenue deferred is subsequently recognised when the Nectar points are redeemed by the customer. Significant estimate \u2013 Fair value of Nectar points The Group estimates the fair value of points awarded under the Nectar programme by reference to the value per point to a customer, multiplied by expected breakage assumptions. Breakage represents management\u2019s estimate of points issued that will never be redeemed and is therefore subject to uncertainty. Breakage is estimated by management based on the terms and conditions of membership and historical accumulation and redemption patterns. As at the year-end, if the breakage estimate used in determining the deferred revenue for the Group had been 1.0 per cent lower, the deferred points liability would have been \u00a350 million higher. If the breakage estimate had been 1.0 per cent higher, the deferred points liability would have been \u00a351 million lower. Financial Services Financial services revenue consists of interest, fees and commission income from the provision of retail banking and insurance related activities. a) Interest income Interest income is recognised in the income statement for all instruments measured at amortised cost using the effective interest method. The effective interest rate of a financial asset is calculated on initial recognition and is applied to the gross carrying amount of the asset. For financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset net of impairment. If the asset is no longer credit impaired, then the calculation of interest income reverts to the gross basis. In calculating the effective interest rate of a financial instrument the Group takes into account all amounts that are integral to the yield of a financial instrument as well as incremental transaction costs. b) Fees and commission income Fees and commissions that are not integral to the effective interest rate calculation relate primarily to certain credit card and storecard fees, ATM interchange fees, insurance introduction commission and warranty commission receivable. These are recognised in the income statement on an accruals basis as performance obligations are satisfied. Where in the case of insurance commissions the income comprises an initial commission and profit share, both are recognised on completion of the service to the extent reliably measurable. Where there is a risk of potential clawback, an appropriate element of the commission receivable is deferred and amortised over the clawback period. These are recognised in the income statement on an accruals basis as performance obligations are satisfied in accordance with IFRS 15. Margin from the sale of travel money, representing the difference between the cost price and the selling price, is recognised when the sale to the customer takes place. Other income Other income generally consists of profits and losses on disposal of assets. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForRecognitionOfRevenue",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-498": {
"value": "7 Segment reporting Background The Group\u2019s operating segments have been determined based on the information regularly provided to the Chief Operating Decision Maker (CODM), which has been determined to be the Group Operating Board, which is used to make optimal decisions on the allocation of resources and assess performance. Significant judgement \u2013 aggregation of operating segments The CODM is presented information for the following operating segments: \u2014 Retail \u2013 Food \u2014 Retail \u2013 General Merchandise and Clothing \u2014 Financial Services In determining the Group\u2019s reportable segments, management have considered the economic characteristics, in particular average gross margin, similarity of products, production processes, customers, sales methods and regulatory environment of its two Retail segments. In doing so it has been concluded that they should be aggregated into one \u2018Retail\u2019 segment within the financial statements given the similar economic characteristics between the two. This aggregated information provides users the financial information needed to evaluate the business and the environment in which it operates. Operating segments The Group\u2019s reportable operating segments have therefore been identified as follows: \u2014 Retail; comprising the sale of food, household, general merchandise, clothing and fuel primarily through store and online channels. \u2014 Financial Services; comprising banking and insurance services through Sainsbury\u2019s Bank and Argos Financial Services. The CODM uses underlying profit before tax as the key measure of segmental performance as it represents the ongoing trading performance with additional insight into year-on-year performance that is more comparable over time. The use of underlying profit before tax aims to provide parity and transparency between users of the financial statements and the CODM in assessing the core performance of the business and performance of management. This is further disclosed in note 3 and within the glossary on page 224. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period. Segment revenue presents a disaggregation of revenue from customers consistent with the Group\u2019s primary revenue streams. Income statement and balance sheet 52 weeks to 4 March 2023 Retail \u00a3m Financial Services \u00a3m Group \u00a3m Segment revenue Retail sales to external customers 30,960 \u2013 30,960 Financial Services to external customers \u2013 531 531 Revenue 30,960 531 31,491 Underlying operating profit 926 46 972 Underlying finance income 18 \u2013 18 Underlying finance costs (300) \u2013 (300) Underlying profit before tax 644 46 690 Non-underlying expense (note 5) (363) Profit before tax 327 Income tax expense (note 11) (120) Profit for the financial year 207 Assets 18,925 7,231 26,156 Investment in joint ventures and associates 2 \u2013 2 Segment assets 18,927 7,231 26,158 Segment liabilities (12,584) (6,321) (18,905) Other segment items Additions to non-current assets Property, plant and equipment 532 2 534 Intangible assets 194 19 213 Right-of-use assets 398 \u2013 398 Depreciation expense 1 Property, plant and equipment 565 1 566 Right-of-use assets 469 1 470 Amortisation expense 2 Intangible assets 141 31 172 Impairment of non-financial assets 315 \u2013 315 Impairment loss on financial assets 2 76 78 Share based payments 54 5 59 1. Depreciation within the Retail segment includes a \u00a3(1) million credit in relation to the unwind of fair value adjustments recognised on acquisition of HRG. 2. Amortisation within the Retail segment includes a \u00a322 million charge in relation to the unwind of fair value adjustments recognised on acquisition of HRG and Nectar UK. 7 Segment reporting continued 52 weeks to 5 March 2022 Retail \u00a3m Financial Services \u00a3m Group \u00a3m Segment revenue Retail sales to external customers 29,463 \u2013 29,463 Financial Services to external customers \u2013 432 432 Revenue 29,463 432 29,895 Underlying operating profit 1,001 38 1,039 Underlying finance income 3 \u2013 3 Underlying finance costs (312) \u2013 (312) Underlying profit before tax 692 38 730 Non-underlying expense 124 Profit before tax 854 Income tax expense (177) Profit for the financial year 677 Assets 20,368 6,541 26,909 Investment in joint ventures and associates 3 \u2013 3 Segment assets 20,371 6,541 26,912 Segment liabilities (12,870) (5,619) (18,489) Other segment items Additions to non-current assets Property, plant and equipment 417 \u2013 417 Intangible assets 229 49 278 Right-of-use assets 1,294 \u2013 1,294 Depreciation expense 1 Property, plant and equipment 590 1 591 Right-of-use assets 477 1 478 Amortisation expense 2 Intangible assets 130 21 151 Impairment of non-financial assets 8 1 9 Impairment (reversal)/loss on financial assets (4) 19 15 Share based payments 53 5 58 1. Depreciation within the Retail segment includes a \u00a3(3) million credit in relation to the unwind of fair value adjustments recognised on acquisition of HRG. 2. Amortisation within the Retail segment includes a \u00a323 million charge in relation to the unwind of fair value adjustments recognised on acquisition of HRG and Nectar UK. Geographical segments The Group trades predominantly in the UK and the Republic of Ireland and consequently the majority of revenues, capital expenditure and segment net assets arise there. The profits, turnover and assets of the businesses in the Republic of Ireland are not material to the Group. 7 Segment reporting continued Cash flow 52 weeks to 4 March 2023 52 weeks to 5 March 2022 APM reference Retail \u00a3m Financial Services \u00a3m Group \u00a3m Retail \u00a3m Financial Services \u00a3m Group \u00a3m Profit before tax 284 43 327 833 21 854 Net finance costs 235 \u2013 235 304 (2) 302 Operating profit 519 43 562 1,137 19 1,156 Adjustments for: Depreciation and amortisation expense 1,175 33 1,208 1,197 23 1,220 Net impairment charge on property, plant and equipment, right-of-use assets and intangible assets 315 \u2013 315 8 1 9 Financial Services movement in loss allowance for loans and advances to customers \u2013 76 76 \u2013 19 19 Profit on sale of non-current assets and early termination of leases (15) \u2013 (15) (6) \u2013 (6) Non-underlying fair value movements 29 \u2013 29 (76) \u2013 (76) Share-based payments expense 54 5 59 53 5 58 Non-cash defined benefit scheme expenses (2) \u2013 (2) 4 \u2013 4 Cash contributions to defined benefit scheme (44) \u2013 (44) (71) \u2013 (71) Operating cash flows before changes in working capital 2,031 157 2,188 2,246 67 2,313 Changes in working capital Movements in working capital 185 231 416 (306) (646) (952) Cash generated from operations 2,216 388 2,604 1,940 (579) 1,361 Interest paid a (307) (9) (316) (319) (10) (329) Corporation tax paid (99) (4) (103) (23) \u2013 (23) Net cash generated from/(used in) operating activities 1,810 375 2,185 1,598 (589) 1,009 Cash flows from investing activities Purchase of property, plant and equipment (523) (2) (525) (416) \u2013 (416) Initial direct costs on new leases (16) \u2013 (16) (3) \u2013 (3) Purchase of intangible assets (194) (19) (213) (229) (49) (278) Proceeds from disposal of property, plant and equipment 29 \u2013 29 46 \u2013 46 Dividends and distributions received/(paid) e 51 (50) 1 2 \u2013 2 Net cash used in investing activities (653) (71) (724) (600) (49) (649) Cash flows from financing activities Proceeds from issuance of ordinary shares d 13 \u2013 13 21 \u2013 21 Repayment of borrowings c (40) (55) (95) (248) \u2013 (248) Repayment of perpetual capital securities c \u2013 \u2013 \u2013 (8) \u2013 (8) Purchase of own shares d (45) \u2013 (45) (48) \u2013 (48) Capital repayment of lease obligations b (512) (2) (514) (491) (2) (493) Dividends paid on ordinary shares (319) \u2013 (319) (238) \u2013 (238) Dividends paid on perpetual securities a \u2013 \u2013 \u2013 (4) \u2013 (4) Net cash used in financing activities (903) (57) (960) (1,016) (2) (1,018) Net increase/(decrease) in cash and cash equivalents 254 247 501 (18) (640) (658) 7 Segment reporting continued ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEntitysReportableSegmentsExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-535": {
"value": "Geographical segments The Group trades predominantly in the UK and the Republic of Ireland and consequently the majority of revenues, capital expenditure and segment net assets arise there. The profits, turnover and assets of the businesses in the Republic of Ireland are not material to the Group. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfGeographicalAreasExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-499": {
"value": "8 Supplier arrangements Supplier incentives, rebates and discounts, collectively known as \u2018supplier arrangements\u2019, represent a material deduction to cost of sales and directly affect the Group\u2019s reported margin. Income is recognised when earned by the Group when all obligations per the terms of the contract have been satisfied. Any supplier arrangements which are linked to inventory purchases are included within the cost of the related inventory, and therefore recognised within cost of sales once the inventory is sold. Unpaid amounts relating to supplier arrangements are recognised within trade and other receivables, unless there is a legal right of offset, in which case it is recognised within trade and other payables. Amounts which have been invoiced at the balance sheet date are categorised as supplier arrangements due and those not yet invoiced are categorised as accrued supplier arrangements. The types of supplier arrangements applicable to the Group are as follows: \u2014 Discounts and supplier incentives \u2013 these represent the majority of all supplier arrangements and are linked to individual unit sales. The incentive is typically based on an agreed sum per item sold on promotion for a period and therefore is considered part of the purchase price of that product. \u2014 Fixed amounts \u2013 these are agreed with suppliers primarily to support in-store activity including promotions, such as utilising specific space. \u2014 Supplier rebates \u2013 these are typically agreed on an annual basis, aligned with the Group\u2019s financial year. The rebate amount is linked to pre-agreed targets such as sales volumes. \u2014 Marketing and advertising income \u2013 advertising income from suppliers through the Group\u2019s subsidiary Nectar 360 Services LLP and online marketing and advertising campaigns within Argos. Amounts recognised in the income statement during the year for fixed amounts, volume-based rebates and marketing and advertising income are shown below. Discounts and supplier incentives are not shown as they are deemed to be part of the cost price of inventory. 52 weeks to 4 March 2023 \u00a3m 52 weeks to 5 March 2022 \u00a3m Fixed amounts 192 208 Supplier rebates 94 94 Marketing and advertising income 97 79 Total supplier arrangements 383 381 Of the above amounts, the following was outstanding and held on the balance sheet at the period-end: 4 March 2023 \u00a3m 5 March 2022 \u00a3m Within inventory (4) (4) Within current trade receivables Supplier arrangements due 45 39 Accrued supplier arrangements 43 37 Within current trade payables Supplier arrangements due 49 47 Accrued supplier arrangements 2 2 Total supplier arrangements 135 121 ",
"dimensions": {
"concept": "jsainsburyplc:DisclosureOfSupplierArrangements",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-500": {
"value": "9 Operating profit Accounting policies Cost of sales Cost of sales consists of all costs that are directly attributable to the point of sale including warehouse, transportation costs and all the costs of operating retail outlets. In the case of Financial Services, cost of sales includes interest expense on operating activities, calculated using the effective interest method. Operating profit is stated after charging/(crediting) the following items: 52 weeks to 4 March 2023 \u00a3m 52 weeks to 5 March 2022 \u00a3m Employee costs (note 34) 3,578 3,600 Depreciation expense 1 (note 14 and 15) 1,036 1,069 Amortisation expense 2 (note 16) 172 151 Profit on disposal of non-current assets 3 (note 31) (15) (6) Foreign exchange gains (18) (19) Impairment of non-financial assets (note 17) 315 9 1. Depreciation expense includes \u00a3(1) million credit (2022: \u00a3(3) million credit) in relation to the unwind of acquisition adjustments. 2. Amortisation expense includes \u00a322 million charge (2022: \u00a323 million) in relation to the unwind of fair value adjustments recognised on acquisition of HRG and Nectar UK. 3. Includes \u00a3(8) million in relation to disposals of property, plant and equipment (2022: \u00a3(19) million), gain on disposals of intangible assets of \u00a3(1) million (2022: loss of \u00a34 million), gains on lease terminations of \u00a3(6) million (2022: \u00a3(12) million) and adjustments in relation to software as a service accounting of \u00a3nil (2022: \u00a321 million). 52 weeks to 4 March 2023 \u00a3m 52 weeks to 5 March 2022 \u00a3m Auditor\u2019s remuneration Fees payable to the Company\u2019s auditor for the audit of the parent company and consolidated financial statements 1.2 1.1 Fees payable to the Company\u2019s auditor for other services: The audit of the Company\u2019s subsidiaries 2.6 2.4 Audit related assurance services 0.2 0.1 Non-audit services 0.1 0.9 Total fees 4.1 4.5 Non-audit services relate to services provided by the Group\u2019s auditor in relation to issuance of Sainsbury\u2019s Bank Tier 2 Capital in September 2022 (refer to note 33). In the prior year, non-audit services related to services provided by the Group\u2019s auditor in the capacity of reporting accountant. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfProfitLossFromOperatingActivitiesExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-577": {
"value": "Accounting policies Cost of sales Cost of sales consists of all costs that are directly attributable to the point of sale including warehouse, transportation costs and all the costs of operating retail outlets. In the case of Financial Services, cost of sales includes interest expense on operating activities, calculated using the effective interest method. ",
"dimensions": {
"concept": "jsainsburyplc:DescriptionOfAccountingPolicyForCostOfSales",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-536": {
"value": "Cost of sales Cost of sales consists of all costs that are directly attributable to the point of sale including warehouse, transportation costs and all the costs of operating retail outlets. In the case of Financial Services, cost of sales includes interest expense on operating activities, calculated using the effective interest method. Operating profit is stated after charging/(crediting) the following items: 52 weeks to 4 March 2023 \u00a3m 52 weeks to 5 March 2022 \u00a3m Employee costs (note 34) 3,578 3,600 Depreciation expense 1 (note 14 and 15) 1,036 1,069 Amortisation expense 2 (note 16) 172 151 Profit on disposal of non-current assets 3 (note 31) (15) (6) Foreign exchange gains (18) (19) Impairment of non-financial assets (note 17) 315 9 1. Depreciation expense includes \u00a3(1) million credit (2022: \u00a3(3) million credit) in relation to the unwind of acquisition adjustments. 2. Amortisation expense includes \u00a322 million charge (2022: \u00a323 million) in relation to the unwind of fair value adjustments recognised on acquisition of HRG and Nectar UK. 3. Includes \u00a3(8) million in relation to disposals of property, plant and equipment (2022: \u00a3(19) million), gain on disposals of intangible assets of \u00a3(1) million (2022: loss of \u00a34 million), gains on lease terminations of \u00a3(6) million (2022: \u00a3(12) million) and adjustments in relation to software as a service accounting of \u00a3nil (2022: \u00a321 million). ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfCostOfSalesExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-537": {
"value": "52 weeks to 4 March 2023 \u00a3m 52 weeks to 5 March 2022 \u00a3m Auditor\u2019s remuneration Fees payable to the Company\u2019s auditor for the audit of the parent company and consolidated financial statements 1.2 1.1 Fees payable to the Company\u2019s auditor for other services: The audit of the Company\u2019s subsidiaries 2.6 2.4 Audit related assurance services 0.2 0.1 Non-audit services 0.1 0.9 Total fees 4.1 4.5 Non-audit services relate to services provided by the Group\u2019s auditor in relation to issuance of Sainsbury\u2019s Bank Tier 2 Capital in September 2022 (refer to note 33). In the prior year, non-audit services related to services provided by the Group\u2019s auditor in the capacity of reporting accountant. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfAuditorsRemunerationExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-501": {
"value": "10 Finance income and finance costs Accounting policies Finance income and costs, excluding those arising from Financial Services, are recognised in the income statement for financial assets and liabilities measured at amortised cost using the effective interest method. For Financial Services, finance income and finance costs are recognised in revenue and cost of sales. Fair value remeasurements relate to net fair value movements on derivative financial instruments not designated in a hedging relationship. 52 weeks to 4 March 2023 52 weeks to 5 March 2022 Underlying \u00a3m Non- underlying \u00a3m Total \u00a3m Underlying \u00a3m Non-underlying \u00a3m Total \u00a3m Interest on bank deposits and other financial assets 16 \u2013 16 1 \u2013 1 Fair value measurements \u2013 \u2013 \u2013 \u2013 2 2 IAS 19 pension financing income \u2013 56 56 \u2013 15 15 Finance income on net investment in leases 2 \u2013 2 2 \u2013 2 Finance Income 18 56 74 3 17 20 Secured borrowings (41) \u2013 (41) (40) \u2013 (40) Unsecured borrowings (2) \u2013 (2) (2) \u2013 (2) Lease liabilities (258) (9) (267) (271) (10) (281) Provisions \u2013 amortisation of discount \u2013 \u2013 \u2013 (1) \u2013 (1) Interest capitalised \u2013 qualifying assets 1 \u2013 1 2 \u2013 2 Finance costs (300) (9) (309) (312) (10) (322) ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinanceIncomeExpenseExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-576": {
"value": "10 Finance income and finance costs Accounting policies Finance income and costs, excluding those arising from Financial Services, are recognised in the income statement for financial assets and liabilities measured at amortised cost using the effective interest method. For Financial Services, finance income and finance costs are recognised in revenue and cost of sales. Fair value remeasurements relate to net fair value movements on derivative financial instruments not designated in a hedging relationship. 52 weeks to 4 March 2023 52 weeks to 5 March 2022 Underlying \u00a3m Non- underlying \u00a3m Total \u00a3m Underlying \u00a3m Non-underlying \u00a3m Total \u00a3m Interest on bank deposits and other financial assets 16 \u2013 16 1 \u2013 1 Fair value measurements \u2013 \u2013 \u2013 \u2013 2 2 IAS 19 pension financing income \u2013 56 56 \u2013 15 15 Finance income on net investment in leases 2 \u2013 2 2 \u2013 2 Finance Income 18 56 74 3 17 20 Secured borrowings (41) \u2013 (41) (40) \u2013 (40) Unsecured borrowings (2) \u2013 (2) (2) \u2013 (2) Lease liabilities (258) (9) (267) (271) (10) (281) Provisions \u2013 amortisation of discount \u2013 \u2013 \u2013 (1) \u2013 (1) Interest capitalised \u2013 qualifying assets 1 \u2013 1 2 \u2013 2 Finance costs (300) (9) (309) (312) (10) (322) ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinanceIncomeExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-538": {
"value": "10 Finance income and finance costs Accounting policies Finance income and costs, excluding those arising from Financial Services, are recognised in the income statement for financial assets and liabilities measured at amortised cost using the effective interest method. For Financial Services, finance income and finance costs are recognised in revenue and cost of sales. Fair value remeasurements relate to net fair value movements on derivative financial instruments not designated in a hedging relationship. 52 weeks to 4 March 2023 52 weeks to 5 March 2022 Underlying \u00a3m Non- underlying \u00a3m Total \u00a3m Underlying \u00a3m Non-underlying \u00a3m Total \u00a3m Interest on bank deposits and other financial assets 16 \u2013 16 1 \u2013 1 Fair value measurements \u2013 \u2013 \u2013 \u2013 2 2 IAS 19 pension financing income \u2013 56 56 \u2013 15 15 Finance income on net investment in leases 2 \u2013 2 2 \u2013 2 Finance Income 18 56 74 3 17 20 Secured borrowings (41) \u2013 (41) (40) \u2013 (40) Unsecured borrowings (2) \u2013 (2) (2) \u2013 (2) Lease liabilities (258) (9) (267) (271) (10) (281) Provisions \u2013 amortisation of discount \u2013 \u2013 \u2013 (1) \u2013 (1) Interest capitalised \u2013 qualifying assets 1 \u2013 1 2 \u2013 2 Finance costs (300) (9) (309) (312) (10) (322) ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinanceCostExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-592": {
"value": "Accounting policies Finance income and costs, excluding those arising from Financial Services, are recognised in the income statement for financial assets and liabilities measured at amortised cost using the effective interest method. For Financial Services, finance income and finance costs are recognised in revenue and cost of sales. Fair value remeasurements relate to net fair value movements on derivative financial instruments not designated in a hedging relationship. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinanceCostsExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-589": {
"value": "Accounting policies Finance income and costs, excluding those arising from Financial Services, are recognised in the income statement for financial assets and liabilities measured at amortised cost using the effective interest method. For Financial Services, finance income and finance costs are recognised in revenue and cost of sales. Fair value remeasurements relate to net fair value movements on derivative financial instruments not designated in a hedging relationship. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinanceIncomeAndCostsExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-502": {
"value": "11 Taxation Accounting policies Current tax Current tax is accounted for on the basis of tax laws enacted or substantively enacted at the balance sheet date. Current tax is charged or credited to the income statement, except when it relates to items charged to equity or other comprehensive income. Deferred tax Deferred tax is accounted for on the basis of temporary differences arising from differences between the tax base and accounting base of assets and liabilities. Deferred tax is recognised for all temporary differences, except to the extent where it arises from the initial recognition of an asset or a liability in a transaction that is not a business combination and, at the time of transaction, affects neither accounting profit nor taxable profit. It is determined using tax rates (and laws) that have been enacted or substantively enacted at the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity or other comprehensive income. Deferred tax is provided on temporary differences associated with investments in subsidiaries, branches and joint ventures except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. 52 weeks to 4 March 2023 \u00a3m 52 weeks to 5 March 2022 \u00a3m Current year UK tax 105 131 Current year overseas tax 3 6 Over-provision in prior years 2 5 Total current tax expense 110 142 Origination and reversal of temporary differences 9 52 Under/(over)-provision in prior years 3 (35) Adjustment from change in applicable rate of deferred tax (2) 23 Derecognition of capital losses \u2013 (5) Total deferred tax expense 10 35 Total income tax expense in income statement 120 177 Analysed as: Underlying tax 157 154 Non-underlying tax (37) 23 Total income tax expense in income statement 120 177 Underlying tax rate 22.8% 21.1% Effective tax rate 36.7% 20.7% The effective tax rate of 36.7 per cent (2022: 20.7 per cent) is higher than (2022: higher than) the standard rate of corporation tax in the UK of 19 per cent. The differences are explained below: 52 weeks to 4 March 2023 \u00a3m 52 weeks to 5 March 2022 \u00a3m Profit before tax 327 854 Income tax at UK corporation tax rate of 19.00% 62 162 Effects of underlying items: Disallowed depreciation on UK properties 27 25 Under/(over)-provision in prior years 7 (28) Difference due to change in applicable rate of deferred tax (7) 14 Disallowed depreciation on right of use assets 3 5 Other (3) \u2013 Effects of non-underlying items: Loss on disposal of properties \u2013 (1) Over-provision in prior years (2) (2) Difference due to change in applicable rate of deferred tax 5 9 Restructuring programmes 13 \u2013 Impairment of non-financial assets 15 \u2013 Derecognition of capital losses \u2013 (5) Other \u2013 (2) Total income tax expense in income statement 120 177 It was announced in the UK Government\u2019s Budget on 3 March 2021 that the main UK corporation tax rate will increase to 25 per cent from 1 April 2023. This change was enacted during the previous accounting period, and deferred tax was revalued accordingly. The Spring Budget on 21 March 2023 confirmed the introduction of Pillar 2 reporting requirements for the UK. This has not been enacted to date, but the rules are expected to apply to the Group. Pillar 2 reporting will see the introduction of a global minimum 15 per cent tax rate by the end of 2023, and the Group will be required to file certain returns evidencing the payment of tax at this rate. The potential impact of this is currently being assessed, but the Group does not consider there to be a material exposure at this stage. Income tax charged or (credited) to equity and/or other comprehensive income during the year is as follows: Share-based payment reserve \u00a3m Actuarial reserve \u00a3m Fair value movements \u00a3m Total \u00a3m 52 weeks to 4 March 2023 Current tax in equity or other comprehensive income (3) (25) \u2013 (28) Deferred tax in equity or other comprehensive income (4) (322) (14) (340) (7) (347) (14) (368) 52 weeks to 5 March 2022 Current tax in equity or other comprehensive income (1) \u2013 \u2013 (1) Deferred tax in equity or other comprehensive income (2) 431 87 516 (3) 431 87 515 11 Taxation continued The current and deferred tax in relation to the Group\u2019s defined benefit pension scheme\u2019s remeasurements and available-for-sale fair value movements have been charged or credited through other comprehensive income where appropriate. The movements in deferred income tax assets and liabilities during the financial year, prior to the offsetting of the balances within the same tax jurisdiction, are shown below: Accelerated capital allowances \u00a3m Capital losses \u00a3m Fair value movements \u00a3m Rolled over capital gains \u00a3m Retirement benefit obligations \u00a3m Share-based payments \u00a3m Leases \u00a3m Other \u00a3m Total \u00a3m 6 March 2022 (173) 87 (133) (93) (640) 18 132 (4) (806) Prior year adjustment to income statement (9) \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 6 (3) Credit/(charge) to income statement 12 \u2013 13 \u2013 (11) 8 (20) (11) (9) Credit to equity or other comprehensive income \u2013 \u2013 14 \u2013 328 3 \u2013 \u2013 345 Revaluation adjustment to income statement 4 \u2013 4 \u2013 (1) 2 (3) (4) 2 Revaluation adjustment to equity or other comprehensive income \u2013 \u2013 \u2013 \u2013 (6) 1 \u2013 \u2013 (5) 4 March 2023 (166) 87 (102) (93) (330) 32 109 (13) (476) 7 March 2021 (141) 64 (48) (81) (192) 9 126 8 (255) Prior year adjustment to income statement (7) (3) 2 6 \u2013 \u2013 (1) 38 35 Credit/(charge) to income statement 16 5 4 4 (11) 4 (21) (48) (47) (Charge)/credit to equity or other comprehensive income \u2013 \u2013 (59) \u2013 (276) 2 \u2013 \u2013 (333) Revaluation adjustment to income statement (41) 21 (4) (22) (6) 3 28 (2) (23) Revaluation adjustment to equity or other comprehensive income \u2013 \u2013 (28) \u2013 (155) \u2013 \u2013 \u2013 (183) 5 March 2022 (173) 87 (133) (93) (640) 18 132 (4) (806) 2023 \u00a3m 2022 \u00a3m Total deferred income tax liabilities (704) (1,043) Total deferred income tax assets 228 237 Net deferred income tax liability recognised in non-current liabilities (476) (806) Deferred income tax assets have been recognised in respect of all income tax losses and other temporary differences giving rise to deferred income tax assets because it is probable that these assets will be recovered, with the exception unrecognised capital losses of \u00a3194 million (2022: \u00a3194 million) following Finance Act 2020 which restricts the amount of chargeable (capital) gains that a company can relieve with its carried-forward capital losses. These capital losses have no date of expiry. Deferred income tax assets and liabilities are only offset where there is a legally enforceable right of offset and the deferred income tax assets and the deferred income tax liabilities relate to income taxes levied by the same taxation authority. 11 Taxation continued ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfIncomeTaxExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-539": {
"value": "11 Taxation Accounting policies Current tax Current tax is accounted for on the basis of tax laws enacted or substantively enacted at the balance sheet date. Current tax is charged or credited to the income statement, except when it relates to items charged to equity or other comprehensive income. Deferred tax Deferred tax is accounted for on the basis of temporary differences arising from differences between the tax base and accounting base of assets and liabilities. Deferred tax is recognised for all temporary differences, except to the extent where it arises from the initial recognition of an asset or a liability in a transaction that is not a business combination and, at the time of transaction, affects neither accounting profit nor taxable profit. It is determined using tax rates (and laws) that have been enacted or substantively enacted at the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity or other comprehensive income. Deferred tax is provided on temporary differences associated with investments in subsidiaries, branches and joint ventures except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. 52 weeks to 4 March 2023 \u00a3m 52 weeks to 5 March 2022 \u00a3m Current year UK tax 105 131 Current year overseas tax 3 6 Over-provision in prior years 2 5 Total current tax expense 110 142 Origination and reversal of temporary differences 9 52 Under/(over)-provision in prior years 3 (35) Adjustment from change in applicable rate of deferred tax (2) 23 Derecognition of capital losses \u2013 (5) Total deferred tax expense 10 35 Total income tax expense in income statement 120 177 Analysed as: Underlying tax 157 154 Non-underlying tax (37) 23 Total income tax expense in income statement 120 177 Underlying tax rate 22.8% 21.1% Effective tax rate 36.7% 20.7% The effective tax rate of 36.7 per cent (2022: 20.7 per cent) is higher than (2022: higher than) the standard rate of corporation tax in the UK of 19 per cent. The differences are explained below: 52 weeks to 4 March 2023 \u00a3m 52 weeks to 5 March 2022 \u00a3m Profit before tax 327 854 Income tax at UK corporation tax rate of 19.00% 62 162 Effects of underlying items: Disallowed depreciation on UK properties 27 25 Under/(over)-provision in prior years 7 (28) Difference due to change in applicable rate of deferred tax (7) 14 Disallowed depreciation on right of use assets 3 5 Other (3) \u2013 Effects of non-underlying items: Loss on disposal of properties \u2013 (1) Over-provision in prior years (2) (2) Difference due to change in applicable rate of deferred tax 5 9 Restructuring programmes 13 \u2013 Impairment of non-financial assets 15 \u2013 Derecognition of capital losses \u2013 (5) Other \u2013 (2) Total income tax expense in income statement 120 177 It was announced in the UK Government\u2019s Budget on 3 March 2021 that the main UK corporation tax rate will increase to 25 per cent from 1 April 2023. This change was enacted during the previous accounting period, and deferred tax was revalued accordingly. The Spring Budget on 21 March 2023 confirmed the introduction of Pillar 2 reporting requirements for the UK. This has not been enacted to date, but the rules are expected to apply to the Group. Pillar 2 reporting will see the introduction of a global minimum 15 per cent tax rate by the end of 2023, and the Group will be required to file certain returns evidencing the payment of tax at this rate. The potential impact of this is currently being assessed, but the Group does not consider there to be a material exposure at this stage. Income tax charged or (credited) to equity and/or other comprehensive income during the year is as follows: Share-based payment reserve \u00a3m Actuarial reserve \u00a3m Fair value movements \u00a3m Total \u00a3m 52 weeks to 4 March 2023 Current tax in equity or other comprehensive income (3) (25) \u2013 (28) Deferred tax in equity or other comprehensive income (4) (322) (14) (340) (7) (347) (14) (368) 52 weeks to 5 March 2022 Current tax in equity or other comprehensive income (1) \u2013 \u2013 (1) Deferred tax in equity or other comprehensive income (2) 431 87 516 (3) 431 87 515 11 Taxation continued The current and deferred tax in relation to the Group\u2019s defined benefit pension scheme\u2019s remeasurements and available-for-sale fair value movements have been charged or credited through other comprehensive income where appropriate. The movements in deferred income tax assets and liabilities during the financial year, prior to the offsetting of the balances within the same tax jurisdiction, are shown below: Accelerated capital allowances \u00a3m Capital losses \u00a3m Fair value movements \u00a3m Rolled over capital gains \u00a3m Retirement benefit obligations \u00a3m Share-based payments \u00a3m Leases \u00a3m Other \u00a3m Total \u00a3m 6 March 2022 (173) 87 (133) (93) (640) 18 132 (4) (806) Prior year adjustment to income statement (9) \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 6 (3) Credit/(charge) to income statement 12 \u2013 13 \u2013 (11) 8 (20) (11) (9) Credit to equity or other comprehensive income \u2013 \u2013 14 \u2013 328 3 \u2013 \u2013 345 Revaluation adjustment to income statement 4 \u2013 4 \u2013 (1) 2 (3) (4) 2 Revaluation adjustment to equity or other comprehensive income \u2013 \u2013 \u2013 \u2013 (6) 1 \u2013 \u2013 (5) 4 March 2023 (166) 87 (102) (93) (330) 32 109 (13) (476) 7 March 2021 (141) 64 (48) (81) (192) 9 126 8 (255) Prior year adjustment to income statement (7) (3) 2 6 \u2013 \u2013 (1) 38 35 Credit/(charge) to income statement 16 5 4 4 (11) 4 (21) (48) (47) (Charge)/credit to equity or other comprehensive income \u2013 \u2013 (59) \u2013 (276) 2 \u2013 \u2013 (333) Revaluation adjustment to income statement (41) 21 (4) (22) (6) 3 28 (2) (23) Revaluation adjustment to equity or other comprehensive income \u2013 \u2013 (28) \u2013 (155) \u2013 \u2013 \u2013 (183) 5 March 2022 (173) 87 (133) (93) (640) 18 132 (4) (806) 2023 \u00a3m 2022 \u00a3m Total deferred income tax liabilities (704) (1,043) Total deferred income tax assets 228 237 Net deferred income tax liability recognised in non-current liabilities (476) (806) Deferred income tax assets have been recognised in respect of all income tax losses and other temporary differences giving rise to deferred income tax assets because it is probable that these assets will be recovered, with the exception unrecognised capital losses of \u00a3194 million (2022: \u00a3194 million) following Finance Act 2020 which restricts the amount of chargeable (capital) gains that a company can relieve with its carried-forward capital losses. These capital losses have no date of expiry. Deferred income tax assets and liabilities are only offset where there is a legally enforceable right of offset and the deferred income tax assets and the deferred income tax liabilities relate to income taxes levied by the same taxation authority. 11 Taxation continued ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-578": {
"value": "Current tax Current tax is accounted for on the basis of tax laws enacted or substantively enacted at the balance sheet date. Current tax is charged or credited to the income statement, except when it relates to items charged to equity or other comprehensive income. Deferred tax Deferred tax is accounted for on the basis of temporary differences arising from differences between the tax base and accounting base of assets and liabilities. Deferred tax is recognised for all temporary differences, except to the extent where it arises from the initial recognition of an asset or a liability in a transaction that is not a business combination and, at the time of transaction, affects neither accounting profit nor taxable profit. It is determined using tax rates (and laws) that have been enacted or substantively enacted at the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity or other comprehensive income. Deferred tax is provided on temporary differences associated with investments in subsidiaries, branches and joint ventures except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-590": {
"value": "Deferred tax Deferred tax is accounted for on the basis of temporary differences arising from differences between the tax base and accounting base of assets and liabilities. Deferred tax is recognised for all temporary differences, except to the extent where it arises from the initial recognition of an asset or a liability in a transaction that is not a business combination and, at the time of transaction, affects neither accounting profit nor taxable profit. It is determined using tax rates (and laws) that have been enacted or substantively enacted at the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity or other comprehensive income. Deferred tax is provided on temporary differences associated with investments in subsidiaries, branches and joint ventures except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDeferredIncomeTaxExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-503": {
"value": "12 Earnings per share Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders of J Sainsbury plc by the weighted average number of Ordinary shares in issue during the year, excluding own shares held by the J Sainsbury Employee Share Ownership Trust (ESOT). Diluted earnings per share amounts are calculated by dividing the profit attributable to ordinary shareholders of J Sainsbury plc by the weighted average number of Ordinary shares in issue during the year, excluding own shares held, and adjusted for the effects of potentially dilutive shares. The dilutive impact is calculated as the weighted average of all potentially diluted ordinary shares. These represent share options granted by the Group, including performance- based options, where the scheme to date performance is deemed to have been earned. For the comparative period, the weighted average number of dilutive shares includes the number of shares that would have been issued if all perpetual subordinated convertible bonds are assumed to be converted at the beginning of the period. In addition, underlying basic earnings per share and underlying diluted earnings per share are presented to reflect the underlying profit attributable to ordinary shareholders of J Sainsbury plc and the underlying trading performance of the Group. In calculating the APMs, the profit attributable is adjusted for items considered non-underlying as defined in note 5. No adjustments have been made to the weighted average number of Ordinary or potentially dilutive shares which continue to be determined in accordance with IAS. All operations are continuing for the periods presented. 2023 million 2022 million Weighted average number of shares in issue 2,312.6 2,271.8 Weighted average number of dilutive share options 39.6 39.6 Weighted average number of dilutive subordinated perpetual convertible bonds \u2013 39.6 Total number of shares for calculating diluted earnings per share 2,352.2 2,351.0 \u00a3m \u00a3m Profit for the financial period attributable to ordinary shareholders 207 677 Diluted earnings for calculating diluted earnings per share 207 677 Profit for the financial period attributable to ordinary shareholders of the parent 207 677 Adjusted for non-underlying items (note 5) 363 (124) Tax on non-underlying items (note 5) (37) 23 Underlying profit after tax attributable to ordinary shareholders of the parent 533 576 Diluted underlying profit after tax attributable to ordinary shareholders of the parent 533 576 Pence per share Pence per share Basic earnings 9.0 29.8 Diluted earnings 8.8 28.8 Underlying basic earnings 23.0 25.4 Underlying diluted earnings 22.7 24.5 ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEarningsPerShareExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-504": {
"value": "13 Dividends 2023 pence per share 2022 pence per share 2023 \u00a3m 2022 \u00a3m Amounts recognised as distributions to ordinary shareholders in the year: Final dividend of prior financial year 9.9 7.4 229 164 Interim dividend of current financial year 3.9 3.2 90 74 13.8 10.6 319 238 Proposed final dividend at financial year end 9.2 9.9 213 230 The proposed final dividend was approved by the Board on 26 April 2023 and is subject to shareholders\u2019 approval at the Annual General Meeting. If approved, it will be paid on 14 July 2023 to shareholders on the register as at 9 June 2023. No amount for the proposed final dividend has been recognised at the balance sheet date. Distributions to shareholders will have no tax consequences to the Group. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDividendsExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-505": {
"value": "14 Property, plant and equipment Accounting policies a) Land and buildings Land and buildings are held at historical cost less accumulated depreciation and any recognised provision for impairment. Capital work in progress is held at cost less any recognised provision for impairment. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for intended use. b) Fixtures and equipment Fixtures, equipment and vehicles are held at cost less accumulated depreciation and any recognised provision for impairment. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition and its intended use. c) Depreciation Depreciation is calculated to write down the cost of the assets to their residual values, on a straight-line basis over their useful economic life, using the following rates: \u2014 Freehold buildings and leasehold improvements \u2013 50 years, or the lease term if shorter \u2014 Fixtures, equipment and vehicles \u2013 three to 15 years \u2014 Freehold land is not depreciated Capital work in progress is not depreciated prior to being available for its intended commercial use. Capital work in progress does not include land. d) Disposals and retirement Disposals of property, plant and equipment are recognised when the control over the asset is transferred to another party and the company has no further obligations or involvement with the asset. The gain or loss on disposal is determined by comparing proceeds less any associated costs of disposal with the asset\u2019s carrying amount and is recognised within operating profit. e) Impairment The carrying amount of PPE is reviewed on an ongoing basis to determine whether there is any indication of impairment \u2013 See note 17. f) Climate Change Impacts The assets\u2019 residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. This includes consideration over climate change related risks which may impact the useful lives or residual values of the Group\u2019s assets, such as the impact of flood risks on store and non-store assets, changes in regulations related to carbon emissions and any anticipated replacement of existing assets with new technologies. During the year, no changes were made to the remaining useful lives or residual values of the Group\u2019s assets as a result of climate change risks. g) Capitalisation of interest Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalised to the cost of the asset, gross of tax relief. Land and buildings \u00a3m Fixtures and equipment \u00a3m Total \u00a3m Cost At 6 March 2022 9,693 5,288 14,981 Additions 250 284 534 Disposals (71) (540) (611) Transfer to assets held for sale (7) (3) (10) At 4 March 2023 9,865 5,029 14,894 Accumulated depreciation and impairment At 6 March 2022 2,917 3,662 6,579 Depreciation expense for the year 184 382 566 Impairment loss for the year 110 39 149 Disposals (56) (540) (596) Transfer to assets held for sale (2) (3) (5) At 4 March 2023 3,153 3,540 6,693 Net book value at 4 March 2023 6,712 1,489 8,201 Capital work-in-progress included above 206 314 520 Cost At 7 March 2021 9,655 5,288 14,943 Additions 87 330 417 Disposals (40) (330) (370) Transfer to assets held for sale (9) \u2013 (9) At 5 March 2022 9,693 5,288 14,981 Accumulated depreciation and impairment At 7 March 2021 2,793 3,563 6,356 Depreciation expense for the year 170 421 591 Impairment loss for the year \u2013 6 6 Disposals (37) (328) (365) Transfer to assets held for sale (9) \u2013 (9) At 5 March 2022 2,917 3,662 6,579 Net book value at 5 March 2022 6,776 1,626 8,402 Capital work-in-progress included above 103 314 417 Interest capitalised Interest capitalised included in additions amounted to \u00a31 million (2022: \u00a32 million) for the Group. Accumulated interest capitalised included in the cost of property, plant and equipment net of disposals amounted to \u00a3336 million (2022: \u00a3335 million) for the Group. Accumulated interest capitalised held at net book value in property, plant and equipment amounted to \u00a3281 million (2022: \u00a3284 million) for the Group. The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is 6.1 per cent (2022: 6.2 per cent). Security Property, plant and equipment pledged as security is as follows: 2023 2022 Number of properties Net book value \u00a3bn Number of properties Net book value \u00a3bn Loan due 2031 48 0.9 48 0.9 Revolving Credit Facility \u2013 \u2013 60 1.3 Asset backed pension contribution scheme 48 1.1 48 1.2 Other 6 0.1 6 0.1 102 2.1 162 3.5 14 Property, plant and equipment continued ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-540": {
"value": "a) Land and buildings Land and buildings are held at historical cost less accumulated depreciation and any recognised provision for impairment. Capital work in progress is held at cost less any recognised provision for impairment. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for intended use. b) Fixtures and equipment Fixtures, equipment and vehicles are held at cost less accumulated depreciation and any recognised provision for impairment. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition and its intended use. c) Depreciation Depreciation is calculated to write down the cost of the assets to their residual values, on a straight-line basis over their useful economic life, using the following rates: \u2014 Freehold buildings and leasehold improvements \u2013 50 years, or the lease term if shorter \u2014 Fixtures, equipment and vehicles \u2013 three to 15 years \u2014 Freehold land is not depreciated Capital work in progress is not depreciated prior to being available for its intended commercial use. Capital work in progress does not include land. d) Disposals and retirement Disposals of property, plant and equipment are recognised when the control over the asset is transferred to another party and the company has no further obligations or involvement with the asset. The gain or loss on disposal is determined by comparing proceeds less any associated costs of disposal with the asset\u2019s carrying amount and is recognised within operating profit. e) Impairment The carrying amount of PPE is reviewed on an ongoing basis to determine whether there is any indication of impairment \u2013 See note 17. f) Climate Change Impacts The assets\u2019 residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. This includes consideration over climate change related risks which may impact the useful lives or residual values of the Group\u2019s assets, such as the impact of flood risks on store and non-store assets, changes in regulations related to carbon emissions and any anticipated replacement of existing assets with new technologies. During the year, no changes were made to the remaining useful lives or residual values of the Group\u2019s assets as a result of climate change risks. g) Capitalisation of interest Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalised to the cost of the asset, gross of tax relief. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-579": {
"value": "e) Impairment The carrying amount of PPE is reviewed on an ongoing basis to determine whether there is any indication of impairment \u2013 See note 17. Goodwill Goodwill is not amortised but tested for impairment annually or more frequently where there is an indication that the asset may be impaired. At the acquisition date goodwill is allocated to the CGU or group of CGUs within the Retail or Financial Services segments that are expected to benefit from the combination. Impairment is assessed by measuring the recoverable amount of the CGU, calculated as the higher of fair value less cost to dispose and value-in-use, at the level at which this is monitored by management. Where the carrying value of the CGU exceeds the recoverable amount an impairment loss is recognised in the income statement. The impairment charge is allocated first against goodwill and then pro-rata over other assets within the CGU by reference to the carrying amount of each remaining asset in the unit. Impairment losses recognised for goodwill are not subsequently reversed. Property, plant and equipment, right-of-use assets, and finite lived intangible assets Property, plant and equipment (PPE), right-of-use assets, and finite-lived intangible assets are assessed on an ongoing basis to determine whether there is an indication that the net book value is no longer supportable. If any such indication exists, the recoverable amount of the asset, being the higher of its fair value less costs to dispose and its value-in-use, is estimated in order to determine the extent of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the CGU to which the asset belongs. If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its recoverable amount and an impairment loss is recognised immediately in the income statement. Where there has been a change in the estimates used to determine the recoverable amount and an impairment loss subsequently reverses, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, not to exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset or CGU in prior years. An impairment loss reversal is recognised in the income statement. Identification of cash generating units Cash generating units are deemed the smallest group of assets that independently generate cash inflows and are independent of the cash flows generated by other assets. The CGUs identified within the respective reportable operating segments are as follows: Retail Cash generating units are deemed to be corporate level business units, trading stores, store pipeline development sites or in certain cases for Argos, a cluster of stores. PPE, intangible assets and right-of-use assets are allocated to the store CGU they are associated with. For non-store assets, including depots and IT assets, these are allocated to store CGUs where it can be done on a reasonable and consistent basis, otherwise these are allocated to the CGU corporate level to which they relate. Goodwill recognised on acquisition of retail chains of stores (Bells and Jacksons) is allocated to its respective store CGUs. Goodwill arising on the purchase of Home Retail Group is allocated to the Home Retail Group CGU. Nectar is a separate CGU. Financial Services Cash generating units are deemed to be each respective product or product group that is capable of generating cash flows independent of other products. Non-product assets are reviewed separately as collective CGUs with the products that they support. Goodwill arising on the purchase of Sainsbury\u2019s Bank plc is allocated to the Financial Services CGU. Identification of a triggering event Management considered whether the level of uncertainty within the wider macroeconomic environment, including sustained increases in the Bank of England gilt rates, represented an indicator of impairment at the reporting date. It was determined that the increase in discount rates was a significant impairment indicator and therefore a full impairment review was undertaken. Approach and assumptions The recoverable amount for CGUs have been determined based on the fair value less cost to dispose and a value-in-use calculation which is based upon the cash flows expected to be generated, derived from the latest budget and forecast data which are reviewed by the Board. Budget and forecast data reflects both past experience and future expectations of market conditions. A vacant possession valuation basis is used to approximate the fair value less costs to dispose. This is not considered to be a significant accounting judgement. The key assumptions in measuring the value-in-use are as follows: Assumption Retail Segment Financial Services Segment Cash flow years/ assumptions \u2014 Derived from the Board approved cash flow projections for four years and then for owned stores, extrapolated into perpetuity with an assumed growth rate of 2.0%. \u2014 For leased stores, cash flows are taken to lease end with an assumed growth rate of 2.0% beyond the four-year forecast period. \u2014 In the case of properties identified for closure, cash flow years relate to the remaining period that the store will trade for. \u2014 Online grocery sales are fulfilled by individual stores and therefore these cash flows are allocated to the individual store CGUs which fulfil the online sales. In Argos, online GM&C sales for Click & Collect are allocated to the individual store CGUs which fulfil the online sales. \u2014 Derived from the Board approved cash flow projections for four years and then extrapolated over the remaining useful lives of the assets being tested for impairment with no assumed growth rate. Discount rate \u2014 A post-tax discount rate representing the Retail segment\u2019s weighted average cost of capital (WACC), subsequently grossed up to a pre-tax rate of 9.1%. \u2014 The post-tax WACC has been calculated using the capital asset pricing model, the inputs of which include a 20-year average risk-free rate for the UK, a UK equity risk premium, levered debt premium and risk adjustment and an average beta for the Group. \u2014 The discount rate is applied consistently to all individual store CGUs and the Group of CGUs supported by Sainsbury\u2019s or Argos stores. \u2014 A post-tax discount rate representing the Financial Services segment\u2019s weighted average cost of capital (WACC), subsequently grossed up to a pre-tax rate of 15.1%. \u2014 The post-tax WACC has been calculated using a combination of adjusted market analysis and the actual cost of debt on Tier 2 capital instruments. \u2014 The discount rate is applied consistently to all individual product CGUs and the collective CGUs which support the products. For store pipeline development sites, where there are plans to develop the store, the carrying value of the asset is compared with its value-in-use using a methodology consistent with the store CGU approach described above. Future cash flows include the estimated costs to completion. For sites where there is no plan to develop a store, the recoverable amount is based on its fair value less costs to dispose. Climate change considerations The Group\u2019s scenario analysis performed as part of the Task Force on Climate-Related Financial Disclosures (TCFD) report (refer to page 18) identified that the most material climate-related risks were heat events, labour capacity, drought, flooding, regulation and changes in consumer preferences. Produce, Cotton, Coffee, Tea, Clothing, Meat, Fish and Poultry (MFP), and Fuel were the product categories most exposed to the climate-related risks. The most material transitional climate risk was in fuel. As such, the Group\u2019s current year impairment review included cash flow assumptions in relation to the expected future revenue loss within the fuel category. As such, the impairment conclusions reached have incorporated the expected climate-related risks associated with fuel sales. Other than fuel, changes in consumer preferences in MFP was identified as the risk most vulnerable to transitional risks and modelling this risk in isolation to 2030 in a 1.5\u00b0C scenario calculated a \u00a3300 million to \u00a3350 million loss in revenue. The Group has considered what the impact that this revenue loss (if unmitigated) could have on the carrying value of the Group\u2019s store assets. In doing so, a corresponding reduction in margin and therefore cash flows has been modelled. Immaterial impairment risks were identified. As such, all other climate change related risks do not have a material impact on the Group\u2019s impairment considerations. ",
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"fact-506": {
"value": "15 Leases Group as lessee The Group\u2019s lease portfolio is principally comprised of property leases of land and buildings in relation to stores, distribution centres and support offices, but also includes other assets such as motor vehicles. The leases have varying terms and often include break clauses or options to renew beyond the non-cancellable periods. Accounting policies Right-of-use assets Right-of-use assets are recognised at the commencement date of the lease, when the underlying asset is available for use. The cost of right-of-use assets comprises the amount of lease liabilities recognised, any initial direct costs incurred, lease payments made at or before the commencement date and less any lease incentives received. Right-of-use assets are subsequently measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any subsequent remeasurement of lease liabilities. The recognised right-of-use assets are depreciated on a straight-line basis over the shorter of the estimated useful life and the lease term. Lease liabilities Lease liabilities are recognised at the commencement date of the lease and are measured at the present value of lease payments to be made over the lease term, discounted using the incremental borrowing rate (IBR) at the lease commencement date if the interest rate implicit in the lease is not readily determinable. The lease payments include fixed payments and variable lease payments that depend on an index or a rate (using the relevant rate at the commencement date of the lease), less any lease incentives receivable. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period in which the event or condition that triggers the payment occurs. For agreements which contain both lease and non-lease components, such as cleaning and maintenance services, the non-lease component is excluded from the lease payments used to measure the lease liabilities. The IBRs depend on the start date and term of the lease, and are determined based on a reference (risk free) rate and adjustments to reflect the Group\u2019s credit risk. The reference rates are based on UK overnight swap rates and the credit risk adjustments are based on the prices of instruments issued by the group and quoted credit default swaps (CDS). IBRs are determined quarterly. The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease (a break clause), if it is reasonably certain not to be exercised. After the commencement date of the lease, the lease liability is subsequently measured at amortised cost using the effective interest rate method. The carrying amount of lease liabilities is remeasured when there is a change in the future lease payments due to a change in the lease term such as a recognition of an extension or break option, a change in the fixed lease payments or a change in the assessment to purchase the underlying asset. Short-term leases and leases of low-value assets The Group applies the short-term lease recognition exemption to those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option. It also applies the low-value asset recognition exemption to groups of underlying leases where the underlying assets leased are considered uniformly low value (i.e. below \u00a35,000). Lease payments on short-term leases and leases of low-value assets are expensed to the income statement. Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period: Net book value Land and buildings \u00a3m Equipment \u00a3m Total \u00a3m At 6 March 2022 5,266 294 5,560 New leases and modifications 1 283 115 398 Depreciation charge (375) (95) (470) Impairment charge (142) (1) (143) At 4 March 2023 5,032 313 5,345 At 7 March 2021 4,414 333 4,747 New leases and modifications 1 1,244 50 1,294 Depreciation charge (389) (89) (478) Impairment charge (3) \u2013 (3) At 5 March 2022 5,266 294 5,560 1. Includes new leases, terminations, modifications and reassessments. Set out below are the carrying amounts of lease liabilities and the movements during the period: 2023 \u00a3m 2022 \u00a3m At 6 March 2022 and 7 March 2021 6,621 5,834 New leases and modifications 382 1,280 Interest expense 267 281 Payments (781) (774) At 4 March 2023 and 5 March 2022 6,489 6,621 Current 1,533 526 Non-current 4,956 6,095 Maturity analysis 2023 \u00a3m 2022 \u00a3m Contractual undiscounted cash flows Less than one year 1,798 773 One to two years 680 1,683 Two to three years 632 627 Three to four years 591 575 Four to five years 541 542 Total less than five years 4,242 4,200 Five to ten years 2,473 2,416 Ten to fifteen years 1,981 2,005 More than fifteen years 3,505 3,338 Total undiscounted lease liability 12,201 11,959 Lease liability included in the statement of financial position 6,489 6,621 Current 1,533 526 Non-current 4,956 6,095 The Group presents additions to lease liabilities and right-of-use assets in line with the disclosure requirements of IFRS 16 \u2018Leases\u2019. In doing so, additions to right-of-use assets and lease liabilities above include the net impact of new leases, terminations, modifications, and reassessments. In the prior year, the Group exercised purchase options on 21 leased supermarkets held by a property investment pool in which the Group holds an interest. The purchase options were first included within the lease liability in the prior financial year when the Group exercised them. During the current year, the Group reached an agreement on an acquisition price on these 21 supermarkets and thus this acquisition price was used to remeasure the lease liabilities. Significant judgement \u2013 lease terms The inclusion of a lease extension period or lease break period in the lease term is a key judgement for the Group and considers all relevant factors that create an economic incentive for it to exercise them. For leased properties, this includes the current and expected profitability of the respective site, as well as the length of time until the option can be exercised. Any changes to the Group\u2019s judgement over lease terms will impact both the right-of-use asset and lease liability. Set out below are the undiscounted future rental payments not currently included within the reported lease liability for where lease extensions have not been included, or where lease breaks have been assumed: 2023 \u00a3m 2022 \u00a3m Extension options expected to not be exercised 4,781 4,681 Lease breaks expected to be exercised 425 458 Significant estimate \u2013 discount rates As noted above, lease liabilities are measured at the present value of lease payments to be made over the lease term, discounted using the IBR at the lease commencement date (for additions) or at the lease modification date (for modifications). The IBRs depend on the start date and term of the lease, and are determined based on a number of inputs including a reference (risk free) rate and adjustments to reflect the Group\u2019s credit risk. The reference rates are based on UK overnight swap rates and the credit risk adjustments are based on the prices of instruments issued by the Group and quoted credit default swaps (CDS). The following table summarises the impact that a reasonable possible change in the IBR would have had on the lease liability additions and modifications recognised during the year: Increase/ (decrease) in lease liability recognised \u00a3m Increase in IBR of 3% (68) Decrease in IBR of 3% 65 15 Leases continued Amounts recognised in profit or loss The following are the amounts recognised in profit or loss: 2023 \u00a3m 2022 \u00a3m Depreciation of right-of-use assets (470) (478) Impairment of right-of-use assets (143) (3) Interest on lease liabilities (267) (281) Variable lease payments not included in the measurement of lease liabilities (1) \u2013 Finance income from sub-leasing of right-of-use assets 2 2 Operating sublet income 48 56 Expense relating to short-term leases (26) (32) Expense relating to leases of low-value assets (2) (2) Total amount recognised in profit or loss (859) (738) Total cash outflow for leases (excludes sublet income) (810) (808) There were no leases with residual value guarantees. There have been no sale or leaseback transactions during the period. All the right of use assets are recognised on a historic cost convention. Approximately \u00a32,795m (2022: \u00a32,807m) of the Group\u2019s lease liabilities are subject to inflation-linked rentals and a further \u00a3241m (2022: \u00a3255m) are subject to rent reviews. Rental changes linked to inflation or rent reviews typically occur on an annual or five-yearly basis. The Group is committed to payments totalling \u00a3101m (2022: \u00a3nil) in relation to leases that have been signed but not yet commenced. Group as lessor Lessor accounting The Group leases out owned properties and sublets leased properties under operating and finance leases. Such properties include mall units, stores and units within stores. Where the Group subleases assets, the sublease classification is assessed with reference to the head lease right-of-use asset. This assessment considers, among other factors, whether the sublease represents the majority of the remaining life of the head lease. The ratio of rental income to head lease rental payments is used to determine how much of the right-of-use asset should be derecognised, or analysis of square foot leased in the head lease and sublease where appropriate. This assessment takes into consideration whether the sublease/head lease are above or below market rate. Amounts due from lessees under finance leases are recorded as a receivable at an amount equal to the net investment in the lease. This is initially calculated and recognised using the IBR prevalent in the underlying headlease at the recognition date. Any difference between the derecognised right-of-use asset and the newly recognised amounts due for leases under finance leases is immediately recognised in the income statement. The Group recognises finance income over the lease term, reflecting a constant periodic rate of return on the Group\u2019s net investment in the lease. Operating lease income is recognised as earned on a straight-line basis over the lease term. The below table sets out the maturity analysis of lease receivables classified as finance leases: 2023 \u00a3m 2022 \u00a3m Contractual undiscounted cash flows Less than one year 10 7 One to five years 27 36 More than five years 9 5 Total undiscounted net investment in lease receivable 46 48 Lease receivable included in the statement of financial position 35 41 Current 8 5 Non-current 27 36 The below table sets out the maturity analysis of lease receivables classified as operating leases: 2023 \u00a3m 2022 \u00a3m Less than one year 19 18 One to two years 16 16 Two to three years 13 13 Three to four years 11 11 Four to five years 9 10 Five to ten years 31 30 Ten to fifteen years 9 9 More than fifteen years 12 10 Total undiscounted lease payments receivable 120 117 The net book value of property, plant and equipment subject to operating leases at year-end is not material to the accounts. 15 Leases continued ",
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"fact-541": {
"value": "Right-of-use assets Right-of-use assets are recognised at the commencement date of the lease, when the underlying asset is available for use. The cost of right-of-use assets comprises the amount of lease liabilities recognised, any initial direct costs incurred, lease payments made at or before the commencement date and less any lease incentives received. Right-of-use assets are subsequently measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any subsequent remeasurement of lease liabilities. The recognised right-of-use assets are depreciated on a straight-line basis over the shorter of the estimated useful life and the lease term. Lease liabilities Lease liabilities are recognised at the commencement date of the lease and are measured at the present value of lease payments to be made over the lease term, discounted using the incremental borrowing rate (IBR) at the lease commencement date if the interest rate implicit in the lease is not readily determinable. The lease payments include fixed payments and variable lease payments that depend on an index or a rate (using the relevant rate at the commencement date of the lease), less any lease incentives receivable. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period in which the event or condition that triggers the payment occurs. For agreements which contain both lease and non-lease components, such as cleaning and maintenance services, the non-lease component is excluded from the lease payments used to measure the lease liabilities. The IBRs depend on the start date and term of the lease, and are determined based on a reference (risk free) rate and adjustments to reflect the Group\u2019s credit risk. The reference rates are based on UK overnight swap rates and the credit risk adjustments are based on the prices of instruments issued by the group and quoted credit default swaps (CDS). IBRs are determined quarterly. The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease (a break clause), if it is reasonably certain not to be exercised. After the commencement date of the lease, the lease liability is subsequently measured at amortised cost using the effective interest rate method. The carrying amount of lease liabilities is remeasured when there is a change in the future lease payments due to a change in the lease term such as a recognition of an extension or break option, a change in the fixed lease payments or a change in the assessment to purchase the underlying asset. Short-term leases and leases of low-value assets The Group applies the short-term lease recognition exemption to those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option. It also applies the low-value asset recognition exemption to groups of underlying leases where the underlying assets leased are considered uniformly low value (i.e. below \u00a35,000). Lease payments on short-term leases and leases of low-value assets are expensed to the income statement. Lessor accounting The Group leases out owned properties and sublets leased properties under operating and finance leases. Such properties include mall units, stores and units within stores. Where the Group subleases assets, the sublease classification is assessed with reference to the head lease right-of-use asset. This assessment considers, among other factors, whether the sublease represents the majority of the remaining life of the head lease. The ratio of rental income to head lease rental payments is used to determine how much of the right-of-use asset should be derecognised, or analysis of square foot leased in the head lease and sublease where appropriate. This assessment takes into consideration whether the sublease/head lease are above or below market rate. Amounts due from lessees under finance leases are recorded as a receivable at an amount equal to the net investment in the lease. This is initially calculated and recognised using the IBR prevalent in the underlying headlease at the recognition date. Any difference between the derecognised right-of-use asset and the newly recognised amounts due for leases under finance leases is immediately recognised in the income statement. The Group recognises finance income over the lease term, reflecting a constant periodic rate of return on the Group\u2019s net investment in the lease. Operating lease income is recognised as earned on a straight-line basis over the lease term. ",
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"fact-507": {
"value": "16 Intangible assets Accounting policies a) Goodwill Goodwill represents the excess of the fair value of the consideration of an acquisition over the fair value of the Group\u2019s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is considered to have an indefinite useful life. Goodwill is tested for impairment annually and again whenever indicators of impairment are detected and is carried at cost less any provision for impairment. b) Computer software Computer software is carried at cost less accumulated amortisation and any provision for impairment. Externally acquired computer software and software licences are amortised on a straight-line basis over their useful economic lives of five to fifteen years. Costs relating to development of computer software for internal use are capitalised once the recognition criteria of IAS 38, \u2018Intangible Assets\u2019 are met. Other development expenditures that do not meet these criteria are expensed as incurred. When the software is available for its intended use, these costs are amortised on a straight-line basis over their useful economic lives of five to fifteen years within administrative expenses. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. Costs associated with maintaining computer software are recognised as an expense as incurred. c) Cloud computing arrangements Software as a Service (SaaS) arrangements are service contracts providing the Group with the right to access a cloud provider\u2019s application software over the contract period. Typically such arrangements involve ongoing licence fees to obtain access to the cloud provider\u2019s application software, as well as upfront costs incurred to configure or customise the SaaS solution. Configuration and customisation costs are capitalised in the following instances as intangible assets: \u2014 The Group has both a contractual right to take possession of the software at any time without significant penalty, and the ability to run the software independently of the host vendor. \u2014 The costs incurred meet the definition of and recognition criteria for an intangible asset. This includes for example the development of software code that enhances or modifies, or creates additional capability to, existing systems controlled by Sainsbury\u2019s. Where these conditions are not met, costs incurred to configure or customise, and the ongoing fees to obtain access to the cloud provider\u2019s application software, are recognised as operating expenses when the services are received. Where the configuration or customisation of a SaaS solution is performed by the SaaS vendor, consideration is given to whether this activity is distinct from the provision of the solution itself. This assessment considers the nature of the activities, and whether Sainsbury\u2019s can benefit from any of the services in isolation. Where the activity is not considered distinct, the costs are capitalised as a prepayment and amortised over the expected useful life of the solution. d) Acquired intangible assets Intangible assets acquired in a business combination are recognised at fair value at the acquisition date. Intangible assets with finite useful economic lives are carried at cost less accumulated amortisation and any provision for impairment and are amortised on a straight-line basis over their estimated useful economic lives, ranging from five to ten years, within administrative expenses. Refer to note 17 for details of impairment policies. Goodwill \u00a3m Computer software \u00a3m Acquired brands \u00a3m Customer relationships \u00a3m Total \u00a3m Cost At 6 March 2022 392 1,077 229 32 1,730 Additions \u2013 213 \u2013 \u2013 213 Disposals (1) (185) \u2013 \u2013 (186) At 4 March 2023 391 1,105 229 32 1,757 Accumulated amortisation and impairment At 6 March 2022 26 521 147 30 724 Amortisation expense for the year \u2013 150 20 2 172 Impairment loss for the year 14 9 \u2013 \u2013 23 Disposals (1) (185) \u2013 \u2013 (186) At 4 March 2023 39 495 167 32 733 Net book value at 4 March 2023 352 610 62 \u2013 1,024 Cost At 7 March 2021 394 899 229 32 1,554 Additions \u2013 278 \u2013 \u2013 278 Disposals 1 (2) (100) \u2013 \u2013 (102) At 5 March 2022 392 1,077 229 32 1,730 Accumulated depreciation and impairment At 7 March 2021 28 457 127 28 640 Amortisation expense for the year \u2013 129 20 2 151 Disposals (2) (65) \u2013 \u2013 (67) At 5 March 2022 26 521 147 30 724 Net book value at 5 March 2022 366 556 82 2 1,006 1. Disposals included write offs of software-as-a-service balances. Goodwill balances are detailed in note 17. 16 Intangible assets continued ",
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"fact-542": {
"value": "16 Intangible assets Accounting policies a) Goodwill Goodwill represents the excess of the fair value of the consideration of an acquisition over the fair value of the Group\u2019s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is considered to have an indefinite useful life. Goodwill is tested for impairment annually and again whenever indicators of impairment are detected and is carried at cost less any provision for impairment. b) Computer software Computer software is carried at cost less accumulated amortisation and any provision for impairment. Externally acquired computer software and software licences are amortised on a straight-line basis over their useful economic lives of five to fifteen years. Costs relating to development of computer software for internal use are capitalised once the recognition criteria of IAS 38, \u2018Intangible Assets\u2019 are met. Other development expenditures that do not meet these criteria are expensed as incurred. When the software is available for its intended use, these costs are amortised on a straight-line basis over their useful economic lives of five to fifteen years within administrative expenses. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. Costs associated with maintaining computer software are recognised as an expense as incurred. c) Cloud computing arrangements Software as a Service (SaaS) arrangements are service contracts providing the Group with the right to access a cloud provider\u2019s application software over the contract period. Typically such arrangements involve ongoing licence fees to obtain access to the cloud provider\u2019s application software, as well as upfront costs incurred to configure or customise the SaaS solution. Configuration and customisation costs are capitalised in the following instances as intangible assets: \u2014 The Group has both a contractual right to take possession of the software at any time without significant penalty, and the ability to run the software independently of the host vendor. \u2014 The costs incurred meet the definition of and recognition criteria for an intangible asset. This includes for example the development of software code that enhances or modifies, or creates additional capability to, existing systems controlled by Sainsbury\u2019s. Where these conditions are not met, costs incurred to configure or customise, and the ongoing fees to obtain access to the cloud provider\u2019s application software, are recognised as operating expenses when the services are received. Where the configuration or customisation of a SaaS solution is performed by the SaaS vendor, consideration is given to whether this activity is distinct from the provision of the solution itself. This assessment considers the nature of the activities, and whether Sainsbury\u2019s can benefit from any of the services in isolation. Where the activity is not considered distinct, the costs are capitalised as a prepayment and amortised over the expected useful life of the solution. d) Acquired intangible assets Intangible assets acquired in a business combination are recognised at fair value at the acquisition date. Intangible assets with finite useful economic lives are carried at cost less accumulated amortisation and any provision for impairment and are amortised on a straight-line basis over their estimated useful economic lives, ranging from five to ten years, within administrative expenses. Refer to note 17 for details of impairment policies. Goodwill \u00a3m Computer software \u00a3m Acquired brands \u00a3m Customer relationships \u00a3m Total \u00a3m Cost At 6 March 2022 392 1,077 229 32 1,730 Additions \u2013 213 \u2013 \u2013 213 Disposals (1) (185) \u2013 \u2013 (186) At 4 March 2023 391 1,105 229 32 1,757 Accumulated amortisation and impairment At 6 March 2022 26 521 147 30 724 Amortisation expense for the year \u2013 150 20 2 172 Impairment loss for the year 14 9 \u2013 \u2013 23 Disposals (1) (185) \u2013 \u2013 (186) At 4 March 2023 39 495 167 32 733 Net book value at 4 March 2023 352 610 62 \u2013 1,024 Cost At 7 March 2021 394 899 229 32 1,554 Additions \u2013 278 \u2013 \u2013 278 Disposals 1 (2) (100) \u2013 \u2013 (102) At 5 March 2022 392 1,077 229 32 1,730 Accumulated depreciation and impairment At 7 March 2021 28 457 127 28 640 Amortisation expense for the year \u2013 129 20 2 151 Disposals (2) (65) \u2013 \u2013 (67) At 5 March 2022 26 521 147 30 724 Net book value at 5 March 2022 366 556 82 2 1,006 1. Disposals included write offs of software-as-a-service balances. Goodwill balances are detailed in note 17. 16 Intangible assets continued ",
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"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
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},
"fact-580": {
"value": "16 Intangible assets Accounting policies a) Goodwill Goodwill represents the excess of the fair value of the consideration of an acquisition over the fair value of the Group\u2019s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is considered to have an indefinite useful life. Goodwill is tested for impairment annually and again whenever indicators of impairment are detected and is carried at cost less any provision for impairment. b) Computer software Computer software is carried at cost less accumulated amortisation and any provision for impairment. Externally acquired computer software and software licences are amortised on a straight-line basis over their useful economic lives of five to fifteen years. Costs relating to development of computer software for internal use are capitalised once the recognition criteria of IAS 38, \u2018Intangible Assets\u2019 are met. Other development expenditures that do not meet these criteria are expensed as incurred. When the software is available for its intended use, these costs are amortised on a straight-line basis over their useful economic lives of five to fifteen years within administrative expenses. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. Costs associated with maintaining computer software are recognised as an expense as incurred. c) Cloud computing arrangements Software as a Service (SaaS) arrangements are service contracts providing the Group with the right to access a cloud provider\u2019s application software over the contract period. Typically such arrangements involve ongoing licence fees to obtain access to the cloud provider\u2019s application software, as well as upfront costs incurred to configure or customise the SaaS solution. Configuration and customisation costs are capitalised in the following instances as intangible assets: \u2014 The Group has both a contractual right to take possession of the software at any time without significant penalty, and the ability to run the software independently of the host vendor. \u2014 The costs incurred meet the definition of and recognition criteria for an intangible asset. This includes for example the development of software code that enhances or modifies, or creates additional capability to, existing systems controlled by Sainsbury\u2019s. Where these conditions are not met, costs incurred to configure or customise, and the ongoing fees to obtain access to the cloud provider\u2019s application software, are recognised as operating expenses when the services are received. Where the configuration or customisation of a SaaS solution is performed by the SaaS vendor, consideration is given to whether this activity is distinct from the provision of the solution itself. This assessment considers the nature of the activities, and whether Sainsbury\u2019s can benefit from any of the services in isolation. Where the activity is not considered distinct, the costs are capitalised as a prepayment and amortised over the expected useful life of the solution. d) Acquired intangible assets Intangible assets acquired in a business combination are recognised at fair value at the acquisition date. Intangible assets with finite useful economic lives are carried at cost less accumulated amortisation and any provision for impairment and are amortised on a straight-line basis over their estimated useful economic lives, ranging from five to ten years, within administrative expenses. Refer to note 17 for details of impairment policies. Goodwill \u00a3m Computer software \u00a3m Acquired brands \u00a3m Customer relationships \u00a3m Total \u00a3m Cost At 6 March 2022 392 1,077 229 32 1,730 Additions \u2013 213 \u2013 \u2013 213 Disposals (1) (185) \u2013 \u2013 (186) At 4 March 2023 391 1,105 229 32 1,757 Accumulated amortisation and impairment At 6 March 2022 26 521 147 30 724 Amortisation expense for the year \u2013 150 20 2 172 Impairment loss for the year 14 9 \u2013 \u2013 23 Disposals (1) (185) \u2013 \u2013 (186) At 4 March 2023 39 495 167 32 733 Net book value at 4 March 2023 352 610 62 \u2013 1,024 Cost At 7 March 2021 394 899 229 32 1,554 Additions \u2013 278 \u2013 \u2013 278 Disposals 1 (2) (100) \u2013 \u2013 (102) At 5 March 2022 392 1,077 229 32 1,730 Accumulated depreciation and impairment At 7 March 2021 28 457 127 28 640 Amortisation expense for the year \u2013 129 20 2 151 Disposals (2) (65) \u2013 \u2013 (67) At 5 March 2022 26 521 147 30 724 Net book value at 5 March 2022 366 556 82 2 1,006 1. Disposals included write offs of software-as-a-service balances. Goodwill balances are detailed in note 17. 16 Intangible assets continued ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfGoodwillExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
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"fact-593": {
"value": "a) Goodwill Goodwill represents the excess of the fair value of the consideration of an acquisition over the fair value of the Group\u2019s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is considered to have an indefinite useful life. Goodwill is tested for impairment annually and again whenever indicators of impairment are detected and is carried at cost less any provision for impairment. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForGoodwillExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-591": {
"value": "a) Goodwill Goodwill represents the excess of the fair value of the consideration of an acquisition over the fair value of the Group\u2019s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is considered to have an indefinite useful life. Goodwill is tested for impairment annually and again whenever indicators of impairment are detected and is carried at cost less any provision for impairment. b) Computer software Computer software is carried at cost less accumulated amortisation and any provision for impairment. Externally acquired computer software and software licences are amortised on a straight-line basis over their useful economic lives of five to fifteen years. Costs relating to development of computer software for internal use are capitalised once the recognition criteria of IAS 38, \u2018Intangible Assets\u2019 are met. Other development expenditures that do not meet these criteria are expensed as incurred. When the software is available for its intended use, these costs are amortised on a straight-line basis over their useful economic lives of five to fifteen years within administrative expenses. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. Costs associated with maintaining computer software are recognised as an expense as incurred. c) Cloud computing arrangements Software as a Service (SaaS) arrangements are service contracts providing the Group with the right to access a cloud provider\u2019s application software over the contract period. Typically such arrangements involve ongoing licence fees to obtain access to the cloud provider\u2019s application software, as well as upfront costs incurred to configure or customise the SaaS solution. Configuration and customisation costs are capitalised in the following instances as intangible assets: \u2014 The Group has both a contractual right to take possession of the software at any time without significant penalty, and the ability to run the software independently of the host vendor. \u2014 The costs incurred meet the definition of and recognition criteria for an intangible asset. This includes for example the development of software code that enhances or modifies, or creates additional capability to, existing systems controlled by Sainsbury\u2019s. Where these conditions are not met, costs incurred to configure or customise, and the ongoing fees to obtain access to the cloud provider\u2019s application software, are recognised as operating expenses when the services are received. Where the configuration or customisation of a SaaS solution is performed by the SaaS vendor, consideration is given to whether this activity is distinct from the provision of the solution itself. This assessment considers the nature of the activities, and whether Sainsbury\u2019s can benefit from any of the services in isolation. Where the activity is not considered distinct, the costs are capitalised as a prepayment and amortised over the expected useful life of the solution. d) Acquired intangible assets Intangible assets acquired in a business combination are recognised at fair value at the acquisition date. Intangible assets with finite useful economic lives are carried at cost less accumulated amortisation and any provision for impairment and are amortised on a straight-line basis over their estimated useful economic lives, ranging from five to ten years, within administrative expenses. Refer to note 17 for details of impairment policies. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-594": {
"value": "b) Computer software Computer software is carried at cost less accumulated amortisation and any provision for impairment. Externally acquired computer software and software licences are amortised on a straight-line basis over their useful economic lives of five to fifteen years. Costs relating to development of computer software for internal use are capitalised once the recognition criteria of IAS 38, \u2018Intangible Assets\u2019 are met. Other development expenditures that do not meet these criteria are expensed as incurred. When the software is available for its intended use, these costs are amortised on a straight-line basis over their useful economic lives of five to fifteen years within administrative expenses. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. Costs associated with maintaining computer software are recognised as an expense as incurred. c) Cloud computing arrangements Software as a Service (SaaS) arrangements are service contracts providing the Group with the right to access a cloud provider\u2019s application software over the contract period. Typically such arrangements involve ongoing licence fees to obtain access to the cloud provider\u2019s application software, as well as upfront costs incurred to configure or customise the SaaS solution. Configuration and customisation costs are capitalised in the following instances as intangible assets: \u2014 The Group has both a contractual right to take possession of the software at any time without significant penalty, and the ability to run the software independently of the host vendor. \u2014 The costs incurred meet the definition of and recognition criteria for an intangible asset. This includes for example the development of software code that enhances or modifies, or creates additional capability to, existing systems controlled by Sainsbury\u2019s. Where these conditions are not met, costs incurred to configure or customise, and the ongoing fees to obtain access to the cloud provider\u2019s application software, are recognised as operating expenses when the services are received. Where the configuration or customisation of a SaaS solution is performed by the SaaS vendor, consideration is given to whether this activity is distinct from the provision of the solution itself. This assessment considers the nature of the activities, and whether Sainsbury\u2019s can benefit from any of the services in isolation. Where the activity is not considered distinct, the costs are capitalised as a prepayment and amortised over the expected useful life of the solution. d) Acquired intangible assets Intangible assets acquired in a business combination are recognised at fair value at the acquisition date. Intangible assets with finite useful economic lives are carried at cost less accumulated amortisation and any provision for impairment and are amortised on a straight-line basis over their estimated useful economic lives, ranging from five to ten years, within administrative expenses. Refer to note 17 for details of impairment policies. ",
"dimensions": {
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"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-508": {
"value": "17 Impairment of non-financial assets
Accounting policies
Goodwill
Goodwill is not amortised but tested for impairment annually or more frequently where there is an indication that the asset may be impaired.
At the acquisition date goodwill is allocated to the CGU or group of CGUs within the Retail or Financial Services segments that are expected to benefit from
the combination.
Impairment is assessed by measuring the recoverable amount of the CGU, calculated as the higher of fair value less cost to dispose and value-in-use, at the
level at which this is monitored by management. Where the carrying value of the CGU exceeds the recoverable amount an impairment loss is recognised in
the income statement. The impairment charge is allocated first against goodwill and then pro-rata over other assets within the CGU by reference to the
carrying amount of each remaining asset in the unit. Impairment losses recognised for goodwill are not subsequently reversed.
Property, plant and equipment, right-of-use assets, and finite lived intangible assets
Property, plant and equipment (PPE), right-of-use assets, and finite-lived intangible assets are assessed on an ongoing basis to determine whether there is an
indication that the net book value is no longer supportable. If any such indication exists, the recoverable amount of the asset, being the higher of its fair value
less costs to dispose and its value-in-use, is estimated in order to determine the extent of the impairment loss. Where it is not possible to estimate the
recoverable amount of an individual asset, the Group estimates the recoverable amount of the CGU to which the asset belongs.
If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its
recoverable amount and an impairment loss is recognised immediately in the income statement.
Where there has been a change in the estimates used to determine the recoverable amount and an impairment loss subsequently reverses, the carrying
amount of the asset or CGU is increased to the revised estimate of its recoverable amount, not to exceed the carrying amount that would have been
determined had no impairment loss been recognised for the asset or CGU in prior years. An impairment loss reversal is recognised in the income statement.
Identification of cash generating units
Cash generating units are deemed the smallest group of assets that independently generate cash inflows and are independent of the cash flows generated
by other assets. The CGUs identified within the respective reportable operating segments are as follows:
Retail
Cash generating units are deemed to be corporate level business units, trading stores, store pipeline development sites or in certain cases for Argos, a cluster
of stores.
PPE, intangible assets and right-of-use assets are allocated to the store CGU they are associated with. For non-store assets, including depots and IT assets,
these are allocated to store CGUs where it can be done on a reasonable and consistent basis, otherwise these are allocated to the CGU corporate level to which
they relate.
Goodwill recognised on acquisition of retail chains of stores (Bells and Jacksons) is allocated to its respective store CGUs. Goodwill arising on the purchase
of Home Retail Group is allocated to the Home Retail Group CGU. Nectar is a separate CGU.
Financial Services
Cash generating units are deemed to be each respective product or product group that is capable of generating cash flows independent of other products.
Non-product assets are reviewed separately as collective CGUs with the products that they support.
Goodwill arising on the purchase of Sainsbury\u2019s Bank plc is allocated to the Financial Services CGU.
Identification of a triggering event
Management considered whether the level of uncertainty within the wider macroeconomic environment, including sustained increases in the Bank of
England gilt rates, represented an indicator of impairment at the reporting date. It was determined that the increase in discount rates was a significant
impairment indicator and therefore a full impairment review was undertaken.
Approach and assumptions
The recoverable amount for CGUs have been determined based on the fair value less cost to dispose and a value-in-use calculation which is based upon the
cash flows expected to be generated, derived from the latest budget and forecast data which are reviewed by the Board. Budget and forecast data reflects
both past experience and future expectations of market conditions.
A vacant possession valuation basis is used to approximate the fair value less costs to dispose. This is not considered to be a significant accounting judgement.
The key assumptions in measuring the value-in-use are as follows:
Assumption Retail Segment Financial Services Segment
Cash flow years/
assumptions
\u2014 Derived from the Board approved cash flow projections for
four years and then for owned stores, extrapolated into
perpetuity with an assumed growth rate of 2.0%.
\u2014 For leased stores, cash flows are taken to lease end with an
assumed growth rate of 2.0% beyond the four-year forecast
period.
\u2014 In the case of properties identified for closure, cash flow years
relate to the remaining period that the store will trade for.
\u2014 Online grocery sales are fulfilled by individual stores and
therefore these cash flows are allocated to the individual store
CGUs which fulfil the online sales. In Argos, online GM&C sales
for Click & Collect are allocated to the individual store CGUs
which fulfil the online sales.
\u2014 Derived from the Board approved cash flow projections for
four years and then extrapolated over the remaining useful
lives of the assets being tested for impairment with no assumed
growth rate.
Discount rate \u2014 A post-tax discount rate representing the Retail segment\u2019s
weighted average cost of capital (WACC), subsequently
grossed up to a pre-tax rate of 9.1%.
\u2014 The post-tax WACC has been calculated using the capital asset
pricing model, the inputs of which include a 20-year average
risk-free rate for the UK, a UK equity risk premium, levered
debt premium and risk adjustment and an average beta for
the Group.
\u2014 The discount rate is applied consistently to all individual store
CGUs and the Group of CGUs supported by Sainsbury\u2019s or
Argos stores.
\u2014 A post-tax discount rate representing the Financial Services
segment\u2019s weighted average cost of capital (WACC),
subsequently grossed up to a pre-tax rate of 15.1%.
\u2014 The post-tax WACC has been calculated using a combination
of adjusted market analysis and the actual cost of debt on
Tier 2 capital instruments.
\u2014 The discount rate is applied consistently to all individual product
CGUs and the collective CGUs which support the products.
For store pipeline development sites, where there are plans to develop the store, the carrying value of the asset is compared with its value-in-use using a
methodology consistent with the store CGU approach described above. Future cash flows include the estimated costs to completion. For sites where there is
no plan to develop a store, the recoverable amount is based on its fair value less costs to dispose.
17 Impairment of non-financial assets continued
Climate change considerations
The Group\u2019s scenario analysis performed as part of the Task Force on Climate-Related Financial Disclosures (TCFD) report (refer to page 18) identified that the
most material climate-related risks were heat events, labour capacity, drought, flooding, regulation and changes in consumer preferences. Produce, Cotton,
Coffee, Tea, Clothing, Meat, Fish and Poultry (MFP), and Fuel were the product categories most exposed to the climate-related risks.
The most material transitional climate risk was in fuel. As such, the Group\u2019s current year impairment review included cash flow assumptions in relation to
the expected future revenue loss within the fuel category. As such, the impairment conclusions reached have incorporated the expected climate-related risks
associated with fuel sales.
Other than fuel, changes in consumer preferences in MFP was identified as the risk most vulnerable to transitional risks and modelling this risk in isolation to
2030 in a 1.5\u00b0C scenario calculated a \u00a3300 million to \u00a3350 million loss in revenue. The Group has considered what the impact that this revenue loss (if
unmitigated) could have on the carrying value of the Group\u2019s store assets. In doing so, a corresponding reduction in margin and therefore cash flows has been
modelled. Immaterial impairment risks were identified. As such, all other climate change related risks do not have a material impact on the Group\u2019s
impairment considerations.
Output and sensitivities
Impairment charges recognised in the Retail Segment relate to both sites identified for closure as part of the restructuring programme as well as
impairments on stores that will continue to trade but for which the cash flows no longer support the carrying amount of the assets. There were no charges
recognised in the Financial Services Segment. The overall charges are as follows:
Restructuring
programme
\u00a3m
Impairments
\u00a3m
Total
\u00a3m
Impairment of property, plant and equipment 8 141 149
Impairment of leased assets 21 122 143
Impairment of intangible assets 5 18 23
34 281 315
Of the above assumptions, the value-in-use calculations are most sensitive to changes in the discount rate, forecast cash flows, and the long-term growth
rate used beyond the forecast four-year forecast period. The table below sets out the key sensitivities performed on the value-in-use models and considered
the reasonable possible changes in these assumptions. The impact of changing one sensitivity does not have a consequential impact on other sensitivities.
Sensitivity area Sensitivities
Increase/(decrease) in impairment
\u00a3m
Discount rate Increase of 2%
Decrease of 2%
163
(105)
Cash flows Increase of 10%
Decrease of 10%
(77)
57
Long-term growth rate Increase of 0.5%
Decrease of 1%
(30)
58
Goodwill
Goodwill was separately tested at the year-end as required under IAS 36. Goodwill comprises the following:
2023
\u00a3m
2022
\u00a3m
Jacksons Stores Limited 18 28
Home Retail Group 119 119
Sainsbury\u2019s Bank plc 45 45
Nectar 147 147
Bells Stores Limited 5 9
Other 18 18
352 366
Value-in-use calculations used to derive the recoverable amount of the CGU to which the respective goodwill has been allocated are based on the following
key assumptions:
Assumption
Cash flow years/
assumptions
Cash flows relating to Home Retail Group, Sainsbury\u2019s Bank plc and Nectar are derived from Board approved cash flow projections for
four years and then extrapolated into perpetuity with an assumed growth rate of 2.0%.
Cash flows relating to goodwill attributable to stores are consistent with the assumptions detailed above.
Discount rate A post-tax discount rate representing the Retail segment\u2019s WACC, as detailed above, has been used for all goodwill balances, except
Sainsbury\u2019s Bank plc where the post-tax discount rate representing the Financial Services segment\u2019s WACC, as detailed above, has
been used.
17 Impairment of non-financial assets continued
Jackson Stores Limited and Bells Stores Limited goodwill balances are allocated to individual store CGUs to which they relate, within the Retail segment detailed above. Home Retail Group goodwill is allocated to the collective Argos store and non-store CGUs. Sainsbury\u2019s Bank plc goodwill is allocated to the Financial Services collective CGUs, as noted above. Nectar is a separate CGU. Goodwill impairments of \u00a314 million were recognised in the year as part of the year-end impairment review, detailed above. This impairment was in relation to the store CGUs to which Jacksons Stores Limited and Bells Stores Limited goodwill amounts are allocated to. There was no impairment identified at the collective CGU level for Argos nor Financial Services, thus there was nil impairment in the Home Retail Group or Sainsbury\u2019s Bank plc goodwill amounts. No impairments were recognised to Nectar goodwill. Sensitivity analysis on the impairment tests for each group of cash-generating units to which goodwill has been allocated has been performed. The valuations indicate sufficient headroom such that a reasonably possible change to key assumptions would not result in any impairment of goodwill. While goodwill impairments of \u00a314 million were noted on certain store CGUs to which Jacksons Stores Limited and Bells Stores Limited goodwill amounts are allocated to, any reasonable possible changes in assumptions would not lead to changes in this impairment amount of more or less than \u00a32 million. The headroom disclosed below for goodwill in Jacksons Stores Limited and Bells Stores Limited relates to all store CGUs to which these goodwill amounts are allocated. Overall, management are satisfied that there are no reasonable possible changes to assumptions that would lead to further impairments in Jacksons Stores Limited, or impairments in any other goodwill. Sensitivities (revised headroom) Carrying amount \u00a3m Headroom \u00a3m Discount rate Cash flows Decrease of 2% \u00a3m Increase of 2% \u00a3m Decrease of 10% \u00a3m Increase of 10% \u00a3m Jacksons Stores Limited 18 13 20 9 10 15 Home Retail Group 119 1,257 2,072 803 1,050 1,464 Sainsbury\u2019s Bank plc 45 418 525 338 358 477 Nectar UK 147 1,165 1,692 871 1,031 1,300 Bells Stores Limited 5 1 1 \u2013 \u2013 1 Other 18 21 41 10 16 27 17 Impairment of non-financial assets continued ",
"dimensions": {
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"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-581": {
"value": "18 Financial assets at fair value through other comprehensive income Accounting policies Financial assets that are held for both the purpose of collecting contractual cash flows and to sell are classified as fair value through other comprehensive income (FVOCI). They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. Equity investments have been irrevocably designated as fair value through other comprehensive income. Subsequent to initial recognition at fair value plus transaction costs, these assets are recorded at fair value at each period end with the movements recognised in other comprehensive income until derecognition or impaired. On derecognition, the cumulative gain or loss previously recognised in other comprehensive income reserves is recognised in the income statement for debt instruments. Gains and losses on equity instruments are never recycled to the income statement. Dividends on financial assets at fair value through other comprehensive income are recognised in the income statement when the entity\u2019s right to receive payment is established. Interest on financial assets at fair value through other comprehensive income debt instruments is recognised using the effective interest method. 4 March 2023 \u00a3m 5 March 2022 \u00a3m Non-current Equity Other financial assets 17 382 Debt Financial Services related investment securities 498 222 515 604 Current Equity Other financial assets 366 \u2013 Debt Financial Services related investment securities 128 196 494 196 1,009 800 The other financial assets predominantly represents the Group\u2019s beneficial interest in a commercial property investment pool. The fair value of the other financial asset is based on discounted cash flows assuming a property rental growth rate of 0 per cent (2022: 0 per cent) and a discount rate of nine per cent (2022: seven per cent). There were no disposals in the current year (2022: nil) and no impairment provisions in either the current or the previous financial year. Sensitivities are included in note 28. This is recognised as a current asset as the property investment pool ends in the next 12 months. c) Fair value estimation Set out below is a comparison of the carrying amount and the fair value of financial instruments that are carried in the financial statements at a value other than fair value. The fair values of financial assets and liabilities are based on prices available from the market on which the instruments are traded. Where market values are not available, the fair values of financial assets and liabilities have been calculated by discounting expected future cash flows at prevailing interest rates. The fair values of short-term deposits, trade receivables, other receivables, overdrafts and payables and lease liabilities are assumed to approximate to their book values. At 4 March 2023 Carrying amount \u00a3m Group fair value \u00a3m Financial assets Amounts due from Financial Services customers 1 5,392 5,340 Financial liabilities Loans due 2031 (539) (639) Tier 2 capital due 2028 (122) (131) Amounts due to Financial Services customers and other banks (5,946) (5,954) At 5 March 2022 Carrying amount \u00a3m Group fair value \u00a3m Financial assets Amounts due from Financial Services customers 1 5,189 5,216 Financial liabilities Loans due 2031 (575) (717) Tier 2 capital due 2023 (179) (180) Amounts due to Financial Services customers and other banks (5,259) (5,260) 1. Included within a portfolio fair value hedging relationship with \u00a33,033 million (2022: \u00a33,235 million) of interest rate swaps. The fair value of financial liabilities have been calculated by discounting cash flows at prevailing interest rates and are within Level 2 of the fair value hierarchy, with the exception of the Tier 2 Capital, where the fair value is calculated using prevailing market prices and is therefore Level 1. Fair value measurements recognised in the balance sheet The following table provides an analysis of financial instruments that are recognised at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable: \u2014 Level 1 fair value measurements are derived from quoted market prices (unadjusted) in active markets for identical assets or liabilities at the balance sheet date. This level includes listed equity securities and debt instrument on public exchanges; \u2014 Level 2 fair value measurements are derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). The fair value of financial instruments is determined by discounting expected cash flows at prevailing interest rates; and \u2014 Level 3 fair value measurements are derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). ",
"dimensions": {
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"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
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},
"fact-543": {
"value": "Financial assets that are held for both the purpose of collecting contractual cash flows and to sell are classified as fair value through other comprehensive income (FVOCI). They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. Equity investments have been irrevocably designated as fair value through other comprehensive income. Subsequent to initial recognition at fair value plus transaction costs, these assets are recorded at fair value at each period end with the movements recognised in other comprehensive income until derecognition or impaired. On derecognition, the cumulative gain or loss previously recognised in other comprehensive income reserves is recognised in the income statement for debt instruments. Gains and losses on equity instruments are never recycled to the income statement. Dividends on financial assets at fair value through other comprehensive income are recognised in the income statement when the entity\u2019s right to receive payment is established. Interest on financial assets at fair value through other comprehensive income debt instruments is recognised using the effective interest method. ",
"dimensions": {
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"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-509": {
"value": "19 Inventories Accounting policies Inventories comprise goods held for resale and are valued on a standard cost or weighted average cost basis which approximates to actual cost, and carried at the lower of cost or net realisable value. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Cost includes all direct expenditure and other appropriate attributable costs incurred in bringing inventories to their present location and condition. Provision is made for obsolete, slow moving or damaged items where appropriate. 4 March 2023 \u00a3m 5 March 2022 \u00a3m Gross finished goods 2,026 1,930 Inventory provision (127) (133) Inventory recognised on Group balance sheet 1,899 1,797 The amount of inventories recognised as an expense and charged to cost of sales for the 52 weeks to 4 March 2023 was \u00a325,198 million (2022: \u00a322,499 million). Inventory losses and provisions recognised as an expense for the year were \u00a3613 million (2022: \u00a3511 million). ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfInventoriesExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-544": {
"value": "Inventories comprise goods held for resale and are valued on a standard cost or weighted average cost basis which approximates to actual cost, and carried at the lower of cost or net realisable value. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Cost includes all direct expenditure and other appropriate attributable costs incurred in bringing inventories to their present location and condition. Provision is made for obsolete, slow moving or damaged items where appropriate. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForMeasuringInventories",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-510": {
"value": "20 Trade and other receivables (a) Trade and other receivables Accounting policies Trade and other receivables are non-interest bearing and are on commercial terms. They are initially recognised at fair value and subsequently measured at amortised cost less allowances for expected credit losses, using the simplified approach under IFRS 9, with adjustments for factors specific to each receivable. 2023 \u00a3m 2022 \u00a3m Non-current Other receivables 28 41 Prepayments 28 24 56 65 Current Trade receivables 141 148 Other receivables 308 363 Accrued income 4 \u2013 Prepayments 174 172 627 683 Trade and other receivables include \u00a388 million (2022: \u00a376 million) relating to supplier arrangements where there is no right of offset. Refer to note 8. In addition, current other receivables of \u00a3308 million (2022: \u00a3363 million) include \u00a3142 million (2022: \u00a3171 million) of bank funds in the course of settlement. The carrying amounts of trade and other receivables are denominated in pound sterling. (b) Allowance for expected credit losses The Group\u2019s exposure to credit risk arising from its retail operations is minimal given that the customer base is large and unrelated and that the overwhelming majority of customer transactions are settled through cash or secure electronic means. New parties wishing to obtain credit terms with the Group are credit checked prior to invoices being raised and credit limits are determined on an individual basis. 2023 Not past due \u00a3m 0 to 6 months past due \u00a3m 6 to 12 months past due \u00a3m Over 1 year past due \u00a3m Total \u00a3m Trade receivables 112 25 7 12 156 Other receivables 336 6 1 8 351 Gross carrying amount \u2013 Trade and other receivables 448 31 8 20 507 Allowance for expected credit losses (7) (2) (5) (16) (30) Net carrying amount on balance sheet 441 29 3 4 477 2022 Not past due \u00a3m 0 to 6 months past due \u00a3m 6 to 12 months past due \u00a3m Over 1 year past due \u00a3m Total \u00a3m Trade receivables 136 15 6 5 162 Other receivables 403 5 2 10 420 Gross carrying amount \u2013 Trade and other receivables 539 20 8 15 582 Allowance for expected credit losses (6) (5) (7) (12) (30) Net carrying amount on balance sheet 533 15 1 3 552 (c) Major counterparties The Group has four (2022: five) major counterparties totalling \u00a3176 million (2022: \u00a3124 million). No major counterparty balances are considered overdue or impaired. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfTradeAndOtherReceivablesExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-545": {
"value": "Trade and other receivables are non-interest bearing and are on commercial terms. They are initially recognised at fair value and subsequently measured at amortised cost less allowances for expected credit losses, using the simplified approach under IFRS 9, with adjustments for factors specific to each receivable. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherReceivablesExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-511": {
"value": "21 Amounts due from Financial Services customers and other banks Accounting policies Loans and advances are initially recognised at fair value and subsequently held at amortised cost, using the effective interest method, less provision for impairment and recognised on the balance sheet when cash is advanced. Refer to note 29 for a detailed description of the accounting policies applicable to financial assets and note 28 for the accounting policies applicable to impairment of financial assets. 2023 \u00a3m 2022 \u00a3m Non-current Loans and advances to customers 1,959 2,069 Impairment of loans and advances to customers (51) (43) 1,908 2,026 Current Loans and advances to customers 3,573 3,202 Loans and advances to banks 100 121 Impairment of loans and advances to customers (189) (160) 3,484 3,163 Eligible personal and mortgage loans with applicable haircuts are used as collateral for the bilateral personal loans securitisation facility and the Bank of England\u2019s Term Funding Scheme with additional incentives for Small and Medium-sized enterprises (TFSME) and Indexed Long-term Repo (ILTR) facilities. As at 4 March 2023, \u00a3494 million (2022: \u00a3638 million) of Personal Loans assets, including \u00a380 million (\u00a380 million) of loans indirectly encumbered via the Bank\u2019s securitisation facilities, and \u00a3459 million (2022: \u00a3626 million) of Mortgage assets were pledged to the Bank of England facilitating funding of \u00a3660 million (2022: \u00a3661 million) from the TFSME and \u00a3nil (2022: \u00a3225 million) from the ILTR. A further \u00a3137 million (2022: \u00a369 million) of Personal Loans assets were pledged indirectly via the Bank\u2019s securitisation facilities generating \u00a3100 million (2022: \u00a350 million) of funding via sale and repurchase agreements and collateral swaps. Refer to note 28 for further details on Financial Services impairments of loans and advances. ",
"dimensions": {
"concept": "jsainsburyplc:DisclosureOfAmountsDueFromFinancialServicesCustomersAndOtherBanks",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-546": {
"value": "Loans and advances are initially recognised at fair value and subsequently held at amortised cost, using the effective interest method, less provision for impairment and recognised on the balance sheet when cash is advanced. Refer to note 29 for a detailed description of the accounting policies applicable to financial assets and note 28 for the accounting policies applicable to impairment of financial assets. ",
"dimensions": {
"concept": "jsainsburyplc:DescriptionOfAccountingPolicyForAmountsDueFromFinancialServicesCustomersAndOtherBanks",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-512": {
"value": "22 Assets held for sale Accounting policies Assets are classified as held for sale if their carrying amount is to be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable within one year from the date of classification and the assets are available for sale in their present condition. Assets held for sale are stated at the lower of the carrying amount and fair value less costs to dispose. 2023 \u00a3m 2022 \u00a3m Opening balance 8 24 Classified as held for sale in the year 5 \u2013 Sold in the year (5) (16) Closing balance 8 8 For the remaining assets, the sale is still considered probable in the next financial year and so they remain classified as held for sale. The fair value of assets held for sale is based on independent market valuations of the assets. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfNoncurrentAssetsOrDisposalGroupsClassifiedAsHeldForSaleExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-547": {
"value": "Assets are classified as held for sale if their carrying amount is to be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable within one year from the date of classification and the assets are available for sale in their present condition. Assets held for sale are stated at the lower of the carrying amount and fair value less costs to dispose. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForNoncurrentAssetsOrDisposalGroupsClassifiedAsHeldForSaleExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-513": {
"value": "23 Trade and other payables Accounting policies Trade payables are initially recognised at fair value and subsequently measured at amortised cost. Amounts are presented net of supplier arrangements due where there is a contractual right of offset. 2023 \u00a3m 2022 \u00a3m Current Trade payables 3,361 2,965 Other payables 596 675 Accruals 538 565 Deferred income 342 341 4,837 4,546 Non-current Other payables \u2013 11 Accruals \u2013 2 Deferred income \u2013 11 \u2013 24 Deferred income The following table presents a reconciliation of deferred income during the year: 2023 \u00a3m 2022 \u00a3m Opening balance 352 406 Revenue deferred in the year 340 282 Revenue recognised in the year which has previously been deferred (350) (336) Closing balance 342 352 The deferred revenue balance includes \u00a3315 million (2022: \u00a3327 million) in relation to deferred Nectar points. Foreign currency risk The Group has net euro denominated trade payables of \u00a335 million (2022: \u00a353 million) and US dollar denominated trade payables of \u00a386 million (2022: \u00a3119 million). Supplier financing arrangements The Group has supply chain finance programmes in place. The programmes act as an alternative source of financing for the suppliers who have the option to trade their invoices with funding providers in order to receive cash earlier than the invoice due dates. The payment terms offered to suppliers who are party to the supply chain finance programmes are within standard supplier payment terms and agreed directly between the Group and the supplier. Balances outstanding under the supplier financing arrangements are classified as trade payables, and cash flows are included in operating cash flows, since the financing arrangements are agreed between the supplier, the funding providers and the third-party platform providers. The Group does not provide additional credit enhancement nor obtain any working capital benefit from the arrangements. Included in trade payables at 4 March 2023 are amounts of \u00a3607 million (2022: \u00a3355 million) drawn by suppliers who are party to the supply chain finance programmes. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfTradeAndOtherPayablesExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-548": {
"value": "Trade payables are initially recognised at fair value and subsequently measured at amortised cost. Amounts are presented net of supplier arrangements due where there is a contractual right of offset. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherPayablesExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-549": {
"value": "Deferred income The following table presents a reconciliation of deferred income during the year: 2023 \u00a3m 2022 \u00a3m Opening balance 352 406 Revenue deferred in the year 340 282 Revenue recognised in the year which has previously been deferred (350) (336) Closing balance 342 352 The deferred revenue balance includes \u00a3315 million (2022: \u00a3327 million) in relation to deferred Nectar points. Foreign currency risk The Group has net euro denominated trade payables of \u00a335 million (2022: \u00a353 million) and US dollar denominated trade payables of \u00a386 million (2022: \u00a3119 million). Supplier financing arrangements The Group has supply chain finance programmes in place. The programmes act as an alternative source of financing for the suppliers who have the option to trade their invoices with funding providers in order to receive cash earlier than the invoice due dates. The payment terms offered to suppliers who are party to the supply chain finance programmes are within standard supplier payment terms and agreed directly between the Group and the supplier. Balances outstanding under the supplier financing arrangements are classified as trade payables, and cash flows are included in operating cash flows, since the financing arrangements are agreed between the supplier, the funding providers and the third-party platform providers. The Group does not provide additional credit enhancement nor obtain any working capital benefit from the arrangements. Included in trade payables at 4 March 2023 are amounts of \u00a3607 million (2022: \u00a3355 million) drawn by suppliers who are party to the supply chain finance programmes. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDeferredIncomeExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-514": {
"value": "24 Amounts due to Financial Services customers and banks Accounting policies With the exception of fixed rate bonds, amounts due to Financial Services customers are generally repayable on demand and accrue interest at retail deposit rates. 2023 \u00a3m 2022 \u00a3m Current Customer accounts 4,360 4,083 Other deposits 520 361 4,880 4,444 Non-current Customer accounts 374 152 Other deposits 692 663 1,066 815 Other deposits of \u00a31,212 million (2022: \u00a31,024 million) relate to deposits from wholesale counterparties, including the Bank of England. ",
"dimensions": {
"concept": "jsainsburyplc:DisclosureOfAmountsDueToFinancialServicesCustomersAndBanks",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-550": {
"value": "With the exception of fixed rate bonds, amounts due to Financial Services customers are generally repayable on demand and accrue interest at retail deposit rates. ",
"dimensions": {
"concept": "jsainsburyplc:DescriptionOfAccountingPolicyForAmountsDueToFinancialServicesCustomersAndBanks",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-515": {
"value": "25 Provisions Accounting policies and key information Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic recourses will be required to settle the obligation and where the amount can be reliably estimated. Provisions are measured at managements best estimate of the consideration required to settle the obligation at the reporting date and discounted using a pre-tax rate that reflects current market assessments where the time value of money is deemed material. An increase in the provision due to the passage of time is recognised as an interest expense. Provisions for onerous contracts are recognised when the Group believes that the unavoidable costs of meeting or novating the contract exceed the economic benefits expected to be received under it. Where assets are dedicated to the fulfilment of a contract that cannot be redirected to other parts of the Group, an impairment charge would be recognised to reduce the carrying value of the assets to nil before recognising a separate onerous contract. A restructuring provision is recognised when the Group has developed a detailed formal plan and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring. Property provisions Where the Group no longer operates from a leased property, onerous property contract provisions are recognised for the least net cost of exiting from the contract. The amounts provided are based on the Group\u2019s best estimates of the likely committed outflows and site closure dates. These provisions do not include rent in accordance with IFRS 16, however do include unavoidable costs related to the lease such as service charges and insurance. Property provisions also include provisions for dilapidations which are recognised where the Group has the obligation to make-good its leased properties, which is when a decision to exit a lease has been made. This is the point at which a reliable estimate of the expected cost for dilapidations can be made. These provisions are recognised based on historically settled dilapidations which form the basis of the estimated future cash outflows. Any difference between amounts expected to be settled and the actual cash outflow will be accounted for in the period when such determination is made. Where the Group is able to exit lease contracts before the expiry date or agree sublets, this results in the release of any associated property provisions. Such events are subject to the agreement of landlords, therefore the Group makes no assumptions on the ability to either exit or sublet a property until a position is agreed. Utilisation of the above amounts is expected to be incurred in conjunction with the profile of the leases to which they relate. Insurance provisions The provision relates to the Group\u2019s outstanding insurance claims liabilities in relation to public and employer\u2019s liability claims, and third party motor claims. Claims provisions are based on assumptions regarding past claims experience and on assessments by an independent actuary and are intended to provide a best estimate of the most likely or expected outcome. Restructuring provisions The current year charge relates to redundancies announced as part of Argos store closures, depot closures, and the exit of operations in Ireland. Utilisation of restructuring provisions is expected to be incurred in line with the closure date of the site to which the provision relates. Financial Services related provisions Financial Services loan commitment provisions reflect expected credit losses modelled in relation to loan commitments not yet recognised on the balance sheet, including on credit cards and Argos store cards. Other Financial Services related provisions are primarily in relation to Argos Financial Services customers in respect of potential redress payable arising from the historic sales of Payment Protection Insurance (PPI). The eventual cost is dependent on response rates, uphold rates, complaint rates, redress costs and claim handling costs. The provision represents management\u2019s best estimate of future costs. These assumptions are inherently uncertain and the ultimate financial impact may differ from the amount provided. Property provisions \u00a3m Insurance provisions \u00a3m Restructuring \u00a3m Financial Services related provisions \u00a3m Other provisions \u00a3m Total \u00a3m At 6 March 2022 140 62 29 26 14 271 Additional provisions 26 30 64 5 \u2013 125 Unused amounts reversed (33) (4) (3) (1) (1) (42) Utilisation of provision (19) (29) (32) (2) \u2013 (82) At 4 March 2023 114 59 58 28 13 272 Current 55 19 30 28 8 140 Non-current 59 40 28 \u2013 5 132 At 7 March 2021 164 67 54 26 38 349 Additional provisions 9 34 44 6 1 94 Unused amounts reversed (7) (5) (16) (3) (24) (55) Utilisation of provision (27) (34) (53) (3) (1) (118) Amortisation of discount 1 \u2013 \u2013 \u2013 \u2013 1 At 5 March 2022 140 62 29 26 14 271 Current 16 22 28 26 8 100 Non-current 124 40 1 \u2013 6 171 Climate change considerations The Group takes into account the potential impact of climate change on its legal and constructive obligations, such as potential changes in regulations related to carbon emissions, environmental liabilities and natural disasters. The Group also considers the potential impact of climate change on the costs of complying with environmental regulations and the costs of natural disasters. The Group has reviewed its provisions and concluded that no adjustments need to be made for climate change risks, nor that any new provisions need to be recognised for climate-related matters. Significant estimate \u2013 provisions The Group\u2019s provisions are estimates of the actual costs and timing of future cash flows, which are dependent on future events and market conditions. Thus there is inherently an element of estimation uncertainty within the provisions recognised by the Group. Any difference between expectations and the actual future liability will be accounted for in the period when such determination is made. The provisions are most sensitive to estimates of the future cash outflows. The following table summarises the impact that a reasonable possible change in expenditure required to settle the present obligation at the end of the reporting period would have had on the amounts recognised during the year. Increase/(decrease) in provisions recognised Property provisions \u00a3m Insurance provisions \u00a3m Restructuring \u00a3m Other provisions \u00a3m Total \u00a3m Increase in cash outflow of 5% 6 3 3 1 13 Decrease in cash outflows of 5% (6) (3) (3) (1) (13) Sensitivities on Financial Services ECL provisions are included in note 28, therefore not included in the above. 25 Provisions continued ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfProvisionsExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-551": {
"value": "Accounting policies and key information Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic recourses will be required to settle the obligation and where the amount can be reliably estimated. Provisions are measured at managements best estimate of the consideration required to settle the obligation at the reporting date and discounted using a pre-tax rate that reflects current market assessments where the time value of money is deemed material. An increase in the provision due to the passage of time is recognised as an interest expense. Provisions for onerous contracts are recognised when the Group believes that the unavoidable costs of meeting or novating the contract exceed the economic benefits expected to be received under it. Where assets are dedicated to the fulfilment of a contract that cannot be redirected to other parts of the Group, an impairment charge would be recognised to reduce the carrying value of the assets to nil before recognising a separate onerous contract. A restructuring provision is recognised when the Group has developed a detailed formal plan and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring. Property provisions Where the Group no longer operates from a leased property, onerous property contract provisions are recognised for the least net cost of exiting from the contract. The amounts provided are based on the Group\u2019s best estimates of the likely committed outflows and site closure dates. These provisions do not include rent in accordance with IFRS 16, however do include unavoidable costs related to the lease such as service charges and insurance. Property provisions also include provisions for dilapidations which are recognised where the Group has the obligation to make-good its leased properties, which is when a decision to exit a lease has been made. This is the point at which a reliable estimate of the expected cost for dilapidations can be made. These provisions are recognised based on historically settled dilapidations which form the basis of the estimated future cash outflows. Any difference between amounts expected to be settled and the actual cash outflow will be accounted for in the period when such determination is made. Where the Group is able to exit lease contracts before the expiry date or agree sublets, this results in the release of any associated property provisions. Such events are subject to the agreement of landlords, therefore the Group makes no assumptions on the ability to either exit or sublet a property until a position is agreed. Utilisation of the above amounts is expected to be incurred in conjunction with the profile of the leases to which they relate. Insurance provisions The provision relates to the Group\u2019s outstanding insurance claims liabilities in relation to public and employer\u2019s liability claims, and third party motor claims. Claims provisions are based on assumptions regarding past claims experience and on assessments by an independent actuary and are intended to provide a best estimate of the most likely or expected outcome. Restructuring provisions The current year charge relates to redundancies announced as part of Argos store closures, depot closures, and the exit of operations in Ireland. Utilisation of restructuring provisions is expected to be incurred in line with the closure date of the site to which the provision relates. Financial Services related provisions Financial Services loan commitment provisions reflect expected credit losses modelled in relation to loan commitments not yet recognised on the balance sheet, including on credit cards and Argos store cards. Other Financial Services related provisions are primarily in relation to Argos Financial Services customers in respect of potential redress payable arising from the historic sales of Payment Protection Insurance (PPI). The eventual cost is dependent on response rates, uphold rates, complaint rates, redress costs and claim handling costs. The provision represents management\u2019s best estimate of future costs. These assumptions are inherently uncertain and the ultimate financial impact may differ from the amount provided. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-552": {
"value": "26 Called up share capital, share premium and merger reserve Accounting policies Ordinary shares are classified as equity instruments. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds. 2023 million 2022 million 2023 \u00a3m 2022 \u00a3m Called up share capital Allotted and fully paid ordinary shares 28 4 /7p 2,352 2,336 672 668 Share premium account Share premium 1,418 1,406 The movements in the called up share capital, share premium and merger reserve are set out below: Number of ordinary shares million Ordinary shares \u00a3m Share premium account \u00a3m Merger reserve \u00a3m At 5 March 2022 2,336 668 1,406 568 Allotted in respect of share option schemes 16 4 12 \u2013 At 4 March 2023 2,352 672 1,418 568 At 6 March 2021 2,231 637 1,173 568 Allotted in respect of share option schemes 14 5 17 \u2013 Allotted in respect of Hybrid Convertible bond payment 91 26 216 \u2013 At 5 March 2022 2,336 668 1,406 568 For the year ended 4 March 2023, 15,987,425 Ordinary shares (2021/22: 14,541,968) with a nominal value of 28 4 /7p each were issued for consideration of \u00a316 million (2021/22: \u00a322 million) to satisfy awards under the Group\u2019s share options schemes. During the year ended 5 March 2022, the Group redeemed the \u00a3250 million perpetual convertible bonds, of which \u00a3242 million were converted to shares. As such, the Group issued 91,026,265 Ordinary shares to settle its liability, increasing share capital and share premium by \u00a326 million and \u00a3216 million respectively. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfIssuedCapitalExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-516": {
"value": "26 Called up share capital, share premium and merger reserve Accounting policies Ordinary shares are classified as equity instruments. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds. 2023 million 2022 million 2023 \u00a3m 2022 \u00a3m Called up share capital Allotted and fully paid ordinary shares 28 4 /7p 2,352 2,336 672 668 Share premium account Share premium 1,418 1,406 The movements in the called up share capital, share premium and merger reserve are set out below: Number of ordinary shares million Ordinary shares \u00a3m Share premium account \u00a3m Merger reserve \u00a3m At 5 March 2022 2,336 668 1,406 568 Allotted in respect of share option schemes 16 4 12 \u2013 At 4 March 2023 2,352 672 1,418 568 At 6 March 2021 2,231 637 1,173 568 Allotted in respect of share option schemes 14 5 17 \u2013 Allotted in respect of Hybrid Convertible bond payment 91 26 216 \u2013 At 5 March 2022 2,336 668 1,406 568 For the year ended 4 March 2023, 15,987,425 Ordinary shares (2021/22: 14,541,968) with a nominal value of 28 4 /7p each were issued for consideration of \u00a316 million (2021/22: \u00a322 million) to satisfy awards under the Group\u2019s share options schemes. During the year ended 5 March 2022, the Group redeemed the \u00a3250 million perpetual convertible bonds, of which \u00a3242 million were converted to shares. As such, the Group issued 91,026,265 Ordinary shares to settle its liability, increasing share capital and share premium by \u00a326 million and \u00a3216 million respectively. 27 Capital redemption and other reserves Movements in retained earnings during the reported periods are presented within the consolidated statement of changes in equity. Movements within individual reserves that are accumulated and presented as \u2018Other Reserves\u2019 within the consolidated statement of changes in equity are as follows: Currency translation reserve \u00a3m Own Share Reserve \u00a3m Financial assets at fair value through other comprehensive income \u00a3m Cash flow hedge \u00a3m Total other reserves \u00a3m Capital redemption reserve \u00a3m At 6 March 2022 (1) (68) 293 117 341 680 Currency translation differences 4 \u2013 \u2013 \u2013 4 \u2013 Financial assets at fair value through other comprehensive income movements \u2013 \u2013 2 \u2013 2 \u2013 Cash flow hedges gains and losses transferred to inventory \u2013 \u2013 \u2013 (139) (139) \u2013 Items reclassified from financial assets at fair value through other comprehensive income reserve \u2013 \u2013 (1) \u2013 (1) \u2013 Cash flow hedges effective portion of fair value movements \u2013 \u2013 \u2013 93 93 \u2013 Items reclassified from cash flow hedge reserve \u2013 \u2013 (1) (17) (18) \u2013 Purchase of own shares \u2013 (45) \u2013 \u2013 (45) \u2013 Allotted in respect of share schemes \u2013 23 \u2013 \u2013 23 \u2013 Deferred tax \u2013 \u2013 \u2013 14 14 \u2013 At 4 March 2023 3 (90) 293 68 274 680 At 7 March 2021 \u2013 (33) 251 (84) 134 680 Currency translation differences (1) \u2013 \u2013 \u2013 (1) \u2013 Financial assets at fair value through other comprehensive income movements \u2013 \u2013 71 \u2013 71 \u2013 Cash flow hedges gains and losses transferred to inventory \u2013 \u2013 \u2013 28 28 \u2013 Items reclassified from financial assets at fair value through other comprehensive income reserve \u2013 \u2013 4 \u2013 4 \u2013 Cash flow hedges effective portion of fair value movements \u2013 \u2013 \u2013 204 204 \u2013 Items reclassified from cash flow hedge reserve \u2013 \u2013 \u2013 7 7 \u2013 Purchase of own shares \u2013 (48) \u2013 \u2013 (48) \u2013 Allotted in respect of share schemes \u2013 14 \u2013 \u2013 14 \u2013 Other adjustments \u2013 (1) \u2013 16 15 \u2013 Deferred tax \u2013 \u2013 (33) (54) (87) \u2013 At 5 March 2022 (1) (68) 293 117 341 680 The Group has reclassified the Own Share Reserve of \u00a368 million as at 5 March 2022 and \u00a333 million as at 6 March 2021 from Retained earnings to Capital redemption and other reserves to provide greater clarity to users over the Group\u2019s accumulated profits and losses as well as to better align the nature of reserves presented cumulatively within the Statement of changes in equity. Retained earnings and Capital redemption and other reserves have subsequently been adjusted for the year ended 5 March 2022 from \u00a34,692 million and \u00a31,089 million to \u00a34,760 million and \u00a31,021 million respectively, and at 6 March 2021 from \u00a33,228 million and \u00a3847 million to \u00a33,261 million and \u00a3814 million respectively. Currency translation reserve The currency translation reserve accumulates foreign exchange differences arising on the translation of net assets in foreign operations which are recognised in Other Comprehensive Income. The cumulative amount is reclassified to retained earnings when the related investment is disposed. Own share reserve The own share reserve represents the cost of shares in the Company held by the ESOT. The number of shares held by the ESOT, outlined in the table below, are held for potential awards under outstanding employee share award plans. 4 March 2023 5 March 2022 Market Value \u00a3m Nominal Value \u00a3m Number of Ordinary shares million Market Value \u00a3m Nominal Value \u00a3m Number of Ordinary shares million Investment in own shares 99 10.7 37.3 66 7.6 26.6 Maximum number of shares held during the period 83 10.9 38.0 75 7.7 2 7. 0 Investment in own shares are recorded at cost, net of directly attributable costs for the purchase of issued, or issuance of new shares. Costs related to administering the ESOT are recognised within the Income Statement when incurred. The related cost is transferred to retained earnings when shares are issued by the ESOT to employees to satisfy employee share awards. During the period, the ESOT acquired 20.0 million of the Company\u2019s Ordinary shares via market purchase for cash consideration of \u00a345 million (2022: 16.3 million shares via market purchase for cash of \u00a348 million). The ESOT subsequently disposed of 9.3 million (2022: 6.9 million) Ordinary shares in the Company by way of distribution to settle outstanding employee share awards. The ESOT has waived its right to receive dividends and has agreed to abstain from exercising their right to vote. Financial assets at fair value through other comprehensive income The financial assets at fair value through other comprehensive income reserve represents the fair value gains and losses on the financial assets at fair value through other comprehensive income held by the Group. Cash flow hedge reserve The cash flow hedge reserve represents the effective portion of gains or losses on derivatives designated and that qualify as cash flow hedges. Amounts are transferred to the balance sheet and included within the initial cost of the asset in which is being hedged, or to the income statement, as appropriate. Capital redemption reserve The capital redemption reserve represents the aggregated nominal value of shares redeemed and subsequently cancelled by the Group. The balance relates to the redemption of class B shares following shareholder approval at the Company\u2019s Extraordinary General Meeting on 12 July 2004 to return \u00a3680 million of share capital. The final redemption date for B shares was 18 July 2007 and all transactions relating to the B shares have now been completed. 27 Capital redemption and other reserves continued ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-582": {
"value": "Accounting policies Ordinary shares are classified as equity instruments. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForIssuedCapitalExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-553": {
"value": "27 Capital redemption and other reserves Movements in retained earnings during the reported periods are presented within the consolidated statement of changes in equity. Movements within individual reserves that are accumulated and presented as \u2018Other Reserves\u2019 within the consolidated statement of changes in equity are as follows: Currency translation reserve \u00a3m Own Share Reserve \u00a3m Financial assets at fair value through other comprehensive income \u00a3m Cash flow hedge \u00a3m Total other reserves \u00a3m Capital redemption reserve \u00a3m At 6 March 2022 (1) (68) 293 117 341 680 Currency translation differences 4 \u2013 \u2013 \u2013 4 \u2013 Financial assets at fair value through other comprehensive income movements \u2013 \u2013 2 \u2013 2 \u2013 Cash flow hedges gains and losses transferred to inventory \u2013 \u2013 \u2013 (139) (139) \u2013 Items reclassified from financial assets at fair value through other comprehensive income reserve \u2013 \u2013 (1) \u2013 (1) \u2013 Cash flow hedges effective portion of fair value movements \u2013 \u2013 \u2013 93 93 \u2013 Items reclassified from cash flow hedge reserve \u2013 \u2013 (1) (17) (18) \u2013 Purchase of own shares \u2013 (45) \u2013 \u2013 (45) \u2013 Allotted in respect of share schemes \u2013 23 \u2013 \u2013 23 \u2013 Deferred tax \u2013 \u2013 \u2013 14 14 \u2013 At 4 March 2023 3 (90) 293 68 274 680 At 7 March 2021 \u2013 (33) 251 (84) 134 680 Currency translation differences (1) \u2013 \u2013 \u2013 (1) \u2013 Financial assets at fair value through other comprehensive income movements \u2013 \u2013 71 \u2013 71 \u2013 Cash flow hedges gains and losses transferred to inventory \u2013 \u2013 \u2013 28 28 \u2013 Items reclassified from financial assets at fair value through other comprehensive income reserve \u2013 \u2013 4 \u2013 4 \u2013 Cash flow hedges effective portion of fair value movements \u2013 \u2013 \u2013 204 204 \u2013 Items reclassified from cash flow hedge reserve \u2013 \u2013 \u2013 7 7 \u2013 Purchase of own shares \u2013 (48) \u2013 \u2013 (48) \u2013 Allotted in respect of share schemes \u2013 14 \u2013 \u2013 14 \u2013 Other adjustments \u2013 (1) \u2013 16 15 \u2013 Deferred tax \u2013 \u2013 (33) (54) (87) \u2013 At 5 March 2022 (1) (68) 293 117 341 680 The Group has reclassified the Own Share Reserve of \u00a368 million as at 5 March 2022 and \u00a333 million as at 6 March 2021 from Retained earnings to Capital redemption and other reserves to provide greater clarity to users over the Group\u2019s accumulated profits and losses as well as to better align the nature of reserves presented cumulatively within the Statement of changes in equity. Retained earnings and Capital redemption and other reserves have subsequently been adjusted for the year ended 5 March 2022 from \u00a34,692 million and \u00a31,089 million to \u00a34,760 million and \u00a31,021 million respectively, and at 6 March 2021 from \u00a33,228 million and \u00a3847 million to \u00a33,261 million and \u00a3814 million respectively. Currency translation reserve The currency translation reserve accumulates foreign exchange differences arising on the translation of net assets in foreign operations which are recognised in Other Comprehensive Income. The cumulative amount is reclassified to retained earnings when the related investment is disposed. Own share reserve The own share reserve represents the cost of shares in the Company held by the ESOT. The number of shares held by the ESOT, outlined in the table below, are held for potential awards under outstanding employee share award plans. 4 March 2023 5 March 2022 Market Value \u00a3m Nominal Value \u00a3m Number of Ordinary shares million Market Value \u00a3m Nominal Value \u00a3m Number of Ordinary shares million Investment in own shares 99 10.7 37.3 66 7.6 26.6 Maximum number of shares held during the period 83 10.9 38.0 75 7.7 2 7. 0 Investment in own shares are recorded at cost, net of directly attributable costs for the purchase of issued, or issuance of new shares. Costs related to administering the ESOT are recognised within the Income Statement when incurred. The related cost is transferred to retained earnings when shares are issued by the ESOT to employees to satisfy employee share awards. During the period, the ESOT acquired 20.0 million of the Company\u2019s Ordinary shares via market purchase for cash consideration of \u00a345 million (2022: 16.3 million shares via market purchase for cash of \u00a348 million). The ESOT subsequently disposed of 9.3 million (2022: 6.9 million) Ordinary shares in the Company by way of distribution to settle outstanding employee share awards. The ESOT has waived its right to receive dividends and has agreed to abstain from exercising their right to vote. Financial assets at fair value through other comprehensive income The financial assets at fair value through other comprehensive income reserve represents the fair value gains and losses on the financial assets at fair value through other comprehensive income held by the Group. Cash flow hedge reserve The cash flow hedge reserve represents the effective portion of gains or losses on derivatives designated and that qualify as cash flow hedges. Amounts are transferred to the balance sheet and included within the initial cost of the asset in which is being hedged, or to the income statement, as appropriate. Capital redemption reserve The capital redemption reserve represents the aggregated nominal value of shares redeemed and subsequently cancelled by the Group. The balance relates to the redemption of class B shares following shareholder approval at the Company\u2019s Extraordinary General Meeting on 12 July 2004 to return \u00a3680 million of share capital. The final redemption date for B shares was 18 July 2007 and all transactions relating to the B shares have now been completed. 27 Capital redemption and other reserves continued ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfReservesAndOtherEquityInterestExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-517": {
"value": "28 Financial risk management
The principal financial risks faced by the Group relate to liquidity risk, credit risk, market risk (foreign currency risk, interest rate risk and commodity risk)
and capital risk.
Financial risk management is managed by a central treasury department in accordance with policies and guidelines which are reviewed and approved by
the Board of Directors. The risk management policies are designed to minimise potential adverse effects on the Group\u2019s financial performance by identifying
financial exposures and setting appropriate risk limits and controls. The risk management policies also ensure sufficient liquidity is available to the Group to
meet foreseeable financial obligations and that cash assets are invested safely.
Financial risk management with respect to Financial Services is separately managed within the Financial Services\u2019 governance structure.
Liquidity risk
Liquidity risk is the risk that the Group may be unable to meet its financial obligations as they fall due.
The principal operational cash flow of the Group is largely stable and predictable reflecting the low business risk profile of the food retail sector and the
cyclical profile of the non-food retail sector. Cash flow forecasts are produced to assist management in identifying future liquidity requirements. The Group\u2019s
liquidity policy sets a minimum funding headroom of \u00a3500 million in excess of forecast funding requirements over a rolling 12-month time horizon. The Group
manages its liquidity risk by maintaining a core of long-dated borrowings, pre-funding future cash flow commitments and holding contingent committed
credit facilities.
The Group has a \u00a31,575 million unsecured committed facility which consists of a \u00a31,000 million Revolving Credit Facility and a \u00a3575 million Term Loan.
The Revolving Credit Facility is split into two Facilities, a \u00a3500 million Facility (A) and a \u00a3500 million Facility (B). Facility A has a maturity of December 2026
and Facility B has a maturity of December 2027. The Term Loan has a maturity of March 2026. The Revolving Credit Facility and Term Loan were undrawn at
4 March 2023.
As detailed in note 23, some suppliers have access to supply chain finance facilities, which allows these suppliers to benefit from the Group\u2019s credit profile.
The total size of the facility at 4 March 2023 was \u00a31,054 million (2022: \u00a31,101 million) across a number of banks and platforms. The amount utilised was \u00a3607
million with headroom of \u00a3447 million. The level of utilisation is dependent on the individual supplier requirements and varies significantly over time.
The table below analyses the Group\u2019s financial liabilities into relevant maturity groupings based on the remaining period to the contractual maturity date. The amounts disclosed in the tables are the contractual undiscounted cash flows or an estimate of cash flows in respect of floating interest rate liabilities. At 4 March 2023 Less than one year \u00a3m One to two years \u00a3m Two to five years \u00a3m More than five years \u00a3m Non-derivative financial liabilities Secured loans: Loan due 2031 1 (79) (82) (272) (289) Trade and other payables (4,495) \u2013 \u2013 \u2013 Amounts due to Financial Services customers and banks 2 (5,101) (359) (766) \u2013 Derivative contracts \u2013 net settled Commodity contracts (1) 1 \u2013 \u2013 Interest rate swaps in hedging relationships 1, 3 28 13 4 4 Other interest rate swaps \u2013 Sainsbury\u2019s Bank 4 \u2013 \u2013 \u2013 Derivative contracts \u2013 gross settled Foreign exchange forwards \u2013 outflow 4 (1,560) (222) \u2013 \u2013 Foreign exchange forwards \u2013 inflow 4 1,602 220 \u2013 \u2013 Commodity contracts \u2013 outflow (16) (28) (59) (164) Commodity contracts \u2013 inflow 44 58 116 200 At 5 March 2022 Less than one year \u00a3m One to two years \u00a3m Two to five years \u00a3m More than five years \u00a3m Non-derivative financial liabilities Secured loans: Loan due 2031 1 (76) (80) (265) (378) Unsecured loans Bank overdraft (7) \u2013 \u2013 \u2013 Trade and other payables (4,205) (13) \u2013 \u2013 Amounts due to Financial Services customers and banks 2 (4,444) (109) (708) \u2013 Derivative contracts \u2013 net settled Commodity contracts 22 2 \u2013 \u2013 Interest rate swaps in hedging relationships 1, 3 (4) 7 4 1 Derivative contracts \u2013 gross settled Foreign exchange forwards \u2013 outflow 4 (1,680) (233) \u2013 \u2013 Foreign exchange forwards \u2013 inflow 4 1,707 234 \u2013 \u2013 Commodity contracts \u2013 outflow (13) (25) (61) (56) Commodity contracts \u2013 inflow 82 55 102 109 Assumptions: 1. Cash flows relating to debt and swaps linked to inflation rates have been calculated using a RPI of 5 per cent for the year ended 4 March 2023, 5.0 per cent for the year ending 2 March 2024 and 5.0 per cent for future years (2022: RPI of 1.4 per cent for the year ending 5 March 2022 and 5 per cent for years 2023 and beyond). 2. Cash flows relating to amounts due to Sainsbury\u2019s Bank customers and banks are calculated using contractual terms and interest rates for fixed rate instruments. Where balances are contractually repayable on demand, behavioural assumptions are applied to estimate the interest payable on those balances. These are shown as due within one year. 3. The swap rate that matches the remaining term of the interest rate swap as at 4 March 2023 has been used to calculate the floating rate cash flows over the life of the interest rate swaps shown above (2022: 5 March 2022). 4. Cash flows in foreign currencies have been translated using spot rates as 4 March 2023 and 5 March 2022. Financial services Liquidity risk is the risk that Sainsbury\u2019s Bank and its subsidiaries (the Bank) cannot meet its payment obligations as they fall due, or can only do so at excessive cost. The Bank seeks to ensure that financial obligations can be met at all times, even under liquidity stress conditions. The annual Internal Liquidity Adequacy Assessment Process (ILAAP) enables the Bank to: (1) Identify and assess its most relevant liquidity risk drivers; (2) Quantify its liquidity needs under various stress scenarios; and (3) Put in place appropriate limits and controls to mitigate liquidity risks. In meeting its internal limits as well as PRA requirements, the Bank maintains a stock of high quality liquid assets that can be readily monetised by outright sale or repurchase agreement to meet the Bank\u2019s obligations to depositors and other creditors. The Bank\u2019s Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) are regularly monitored and forecast alongside cash flow and funding ratios. Long term and short term forecasts are prepared to assess liquidity requirements, taking into account factors such as ATM cash management, contractual maturities and customer deposit patterns (stable or less stable deposits) as well as outflows regarding undrawn commitments. These reports support daily liquidity management, with early warning indicators reviewed on a daily basis and appropriate triggers for escalation and action in line with risk appetite, Liquidity and Funding Policy and Liquidity Contingency Plan. Asset encumbrance ratios and risk indicators for wholesale funding are also regularly monitored and reported to the Asset-Liability Committee (ALCO). 28 Financial risk management continued Governan Asset encumbrance
2023 2022
Carrying
value of
encumbered
assets
\u00a3m
Matching
liabilities,
contingent
liabilities or
securities lent
\u00a3m
Carrying
value of
encumbered
assets
\u00a3m
Matching
liabilities,
contingent
liabilities or
securities lent
\u00a3m
Loans and advances to customers 1,116 760 1,365 885
Debt securities \u2013 \u2013 157 75
Other assets 64 \u2013 40 27
Cash and balances with central banks 15 \u2013 15 \u2013
The primary sources of encumbrance in the Bank relate to margin requirements for derivative transactions and collateral relating to secured funding
transactions. Cash collateral is advanced and received as variation margin on derivative transactions, whilst eligible treasury assets (primarily Gilts and
Treasury bills) are pledged as collateral for initial margin requirements on derivatives which are centrally cleared. Eligible personal loans and mortgages, with
applicable haircuts, are used as collateral for Bank of England funding facilities, the Term Funding Scheme with additional incentives for SMEs (TFSME) and
Indexed Long Term Repo (ILTR) facilities.
Credit risk
a. Retail credit risk management
Counterparty credit risk is the risk of a financial loss arising from counterparty default or non-performance in respect of the Group\u2019s holdings of cash and
cash equivalents, derivative financial assets, deposits with banks, investments in marketable securities, trade and other receivables and loans and advances
to customers.
Specifically within Financial Services, retail credit risk is the possibility of losses arising from a retail customer failing to meet their agreed repayment terms
as they fall due under mortgage, unsecured personal loan, credit card, store card or monthly payment plan arrangements. The Financial Services division
utilise automated scorecards to assess the credit worthiness and affordability criteria of new applicants and ongoing behavioural characteristics of existing
customers. The outcome from all scorecard models is monitored utilising a set of credit quality metrics to ensure actual performance is in line with agreed
expectations. Additional expert underwriting of credit applications is undertaken by a specialist operational team where further consideration is appropriate.
The Retail Credit Risk Committee of Sainsbury\u2019s Bank provide portfolio oversight control over credit strategy to maintain lending in line with the Board
approved risk appetite, with additional oversight and control provided by the Executive Risk Committee and Board Risk Committee. Internal Audit provide
additional assurance by undertaking regular reviews on the adequacy of credit risk policies and procedures.
b. Wholesale and derivative credit risk management
The Group (excluding Financial Services) sets counterparty limits for each of its banking and investment counterparties based on their credit ratings and
credit default swap pricing. The minimum long-term credit rating accepted by the Group is BBB- (Standard & Poor\u2019s and Fitch) or Baa3 (Moody\u2019s) or, in the
case of pound sterling liquidity funds, AAA or Aaa/MR1+ from Moody\u2019s. In the event of a split credit rating, the lower rating applies.
The table below analyses the Group\u2019s (including Financial Services) cash and cash equivalents by credit exposure excluding bank balances, store cash, cash in
transit and cash at ATMs.
Counterparty Long-term rating
Group
2023
\u00a3m
Group
2022
\u00a3m
Financial institutions \u2013 Money market funds AAA/Aaa 140 \u2013
Financial institutions \u2013 Money market deposits AAA/Aaa 50 \u2013
Financial institutions \u2013 Money market deposits AA+/Aa1 to A/A2 215 25
Deposits at central banks AA+/Aa1 345 234
The table below analyses the fair value of the Group\u2019s derivative financial assets by credit exposure, excluding any collateral held.
Counterparty Long-term rating
Group
2023
\u00a3m
Group
2022
\u00a3m
Interest rate swaps AA+/Aa1 to A/A2 99 35
Inflation rate swaps AA+/Aa1 to A/A2 2 5
FX forward contracts AA+/Aa1 to A/A2 49 46
Commodity forward contracts AA+/Aa1 to A/A2 7 25
The Bank\u2019s treasury portfolio is held primarily for liquidity management purposes and in the case of derivatives, for the purpose of managing market risk.
The liquidity portfolio is invested in eligible investment securities that qualify for the regulatory Liquidity Coverage Ratio (LCR) and internal Operational
Liquidity Pool (OLP). These investments include the Bank of England\u2019s (BoE) reserve account, UK government securities (gilts or Treasury bills), multilateral
development bank securities, government guaranteed agency securities, UK regulated covered bond programmes and asset backed securities.
Limits are established for all counterparty and asset class exposures based on their respective credit quality and market liquidity. Consideration is also given
to geographical region and the strength of relevant sovereign credit ratings. Derivatives are subject to the same credit risk control procedures as are applied to
other wholesale market instruments and the credit risk arising from mark to market derivative valuations is mitigated by daily margin calls, posting cash
collateral to cover exposures. Daily monitoring is undertaken by the Bank\u2019s Treasury and Financial Risk Teams, including early warning indicators with
appropriate triggers for escalation.
28 Financial risk management continued
28 Financial risk management continued
c. Maximum exposure to credit risk
The table below shows the maximum exposure to credit risk for the components of the balance sheet, including derivatives. The maximum exposure is
shown gross, before the effect of mitigation through the use of collateral agreements.
2023
\u00a3m
2022
\u00a3m
Credit risk exposures relating to on balance sheet items
Loans and advances to customers and other banks 5,392 5,189
Cash and balances with central banks 1,319 825
Derivative financial instruments (excludes level 3 instruments) 156 111
Investment securities 626 418
Other assets 477 552
Credit risk exposures relating to off balance sheet items
Loan commitments 11 26
Total credit risk exposures 7,981 7,1 2 1
The commitments to lend disclosed in the above table do not include undrawn limits on credit cards and store cards of \u00a38,674 million (2022: \u00a38,777 million).
These are not considered contractual commitments but, because in practice Financial Services does not expect to withdraw these credit limits from
customers, they are within the scope of impairment provisioning.
d. Impairment of financial assets
Accounting policies
Impairments on financial assets are accounted for using a 3-stage forward-looking expected credit loss (ECL) approach in line with IFRS 9. The Group is
required to record an allowance for ECL for all loans and other debt financial assets not held at FVTPL, together with loan commitments and financial
guarantee contracts.
ECLs are based on the difference between the cash flows due in accordance with the contract and all the cash flows that the Group expects to receive,
discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other
credit enhancements that are integral to the contractual terms.
For Financial Services portfolios of loans, such as credit card lending, storecard lending and personal loans, impairment provisions are calculated for groups
of assets, otherwise impairment is identified at a counterparty specific level. The allowance is calculated by reference to the estimated probability of default
(PD), exposure at default (EAD) and loss given default (LGD).
\u2014 The probability of default represents the likelihood of a borrower defaulting within 12 months from the balance sheet date or within the expected lifetime
of the borrower.
\u2014 Exposure at default represents the expected amount due from the borrower at the point of default by reference to exposure at the balance sheet date
adjusted for expected future changes including repayments and utilisation of undrawn facilities.
\u2014 Loss given default represents the expected percentage loss at the point of default relative to the EAD. The estimate takes into account utilisation of any
expected collections and recoveries strategies, debt sale arrangements and collateral.
ECL 3 stage model
\u2014 Stage 1 \u2013 Impairment allowance on financial assets that have not significantly increased in credit risk since origination, nor are credit impaired, is
calculated using the probability that a borrower will default within 12 months from the balance sheet date. Interest income is recognised on the gross
carrying value of the financial asset.
\u2014 Stage 2 \u2013 Where a financial asset exhibits a significant increase in credit risk (SICR) but is not yet considered to be credit impaired, the probability of
default considered in the impairment allowance is based upon the lifetime probability of the borrower defaulting. Interest income continues to be
recognised on the gross carrying value of the financial asset.
\u2014 Stage 3 \u2013 Assets considered to be credit impaired resulting from one or more events that have occurred that has resulted in a detrimental impact on the
estimated future cash flows of the asset. Stage 3 assets will continue to recognise lifetime expected impairment losses (with a 100% probability of default)
and interest income will be recognised on the net carrying amount (i.e. gross amount less impairment allowance).
Significant increases in credit risk
The Group determines whether there has been a significant increase in credit risk by reference to quantitative thresholds, qualitative indicators and the
backstop presumption that credit risk has significantly increased if contractual payments are more than 30 days past due.
Quantitative thresholds have been determined that when the lifetime PD of an instrument as at the reporting date has increased to greater than a specified
multiple of the origination lifetime PD, a significant increase in credit risk is deemed to have occurred.
Qualitative tests are based around the Group\u2019s credit origination policy rules for Financial Services customers. These rules are in place at account origination
in order to decline accounts that may demonstrate risk factors outside of risk appetite that are not yet reflected in PD measures. At the reporting date, if an
account satisfies any policy decline rules that it had not at the point of origination, it will be considered to have significantly increased in credit risk.
There is no probationary period applied in respect of accounts that cure from stage 2 to stage 1. Transfer criteria have been subject to extensive analysis to
ensure that they appropriately reflect the flow of accounts from origination to default so as to maximise the number of accounts that flow through the
stages and minimise accounts that jump from stage 1 to stage 3, or that fail to enter stage 3 from stage 2.
The Group has applied the low credit risk exemption in respect of its high quality treasury portfolio held for liquidity purposes. This exemption permits low
credit risk debt securities (i.e. those considered investment grade) to remain in Stage 1 without an assessment of significant increase in credit risk.
Definition of default
The Group\u2019s definition of default is used in determining those accounts classified as stage 3 (i.e. credit impaired). The Group has chosen not to rebut the
backstop presumption prescribed by IFRS 9 that where an account is 90 days or more past its due date then default has occurred.
The Group has also defined a number of unlikeliness-to-pay criteria that result in an account being deemed to have defaulted. These include:
\u2014 Where operational collections activities have been exhausted on accounts that are less than 90 days past due and the account is subject to
recoveries processes
\u2014 If any forbearance has been granted on the account (see forbearance definition below).
\u2014 Where the customer is subject to insolvency proceedings
\u2014 Where the customer is deceased
Where an account no longer meets any of the default criteria, such as by bringing payments back up to date, the Group will continue to consider the
account as being in default for the probation period (24 months for Loans and Cards, and 12 months for Storecards) from the date when it last met the
definition of default.
Write-off
Loans and advances to customers are written off (either partially or in full) when there is no realistic prospect of recovery. This is generally the case when
the Group determines that the borrower does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject
to write-off.
Subsequent recoveries of amounts previously written off result in impairment gains recorded in the statement of comprehensive income.
Expected lifetime
For the purposes of considering the lifetime probability of default, the expected lifetime of a financial asset is the contractual term where this is fixed within
the contract, or in the case of revolving products such as credit cards a behavioural life is determined by reference to historic trends.
Modified financial assets
When the contractual cash flows of a financial asset have been renegotiated or modified and the financial asset was not derecognised, its gross carrying
amount is recalculated as the present value of the modified contractual cash flows, discounted at the original effective interest rate with a gain or loss
recognised in the income statement.
28 Financial risk management continued
Loans and advances to customers per stage
The tables below summarise the breakdown of the gross carrying amount of loans and advances to customers per stage. Unsecured lending represents
Sainsbury\u2019s Bank credit cards and personal loan lending in addition to Argos storecards and monthly payment plan. Secured lending represents Sainsbury\u2019s
Bank mortgage lending.
At 4 March 2023
Unsecured lending
Stage 1
\u00a3m
Stage 2
\u00a3m
Stage 3
\u00a3m
Total
\u00a3m
Impaired
Less than 3 months, but impaired \u2013 \u2013 31 31
Over 3 months \u2013 \u2013 91 91
Recoveries \u2013 \u2013 81 81
Total gross impaired loans \u2013 \u2013 203 203
Past due 30 days to 3 months \u2013 23 \u2013 23
Past due less than 30 days 10 26 \u2013 36
Not past due 4,302 430 \u2013 4,732
Total gross amount due 4,312 479 203 4,994
Impairment
Impairment on gross balance (45) (51) (144) (240)
Undrawn commitments impairment (12) (7) - (19)
Total impairment (57) (58) (144) (259)
Coverage 1.3% 12.1% 70.9% 5.2%
At 4 March 2023
Secured lending
Stage 1
\u00a3m
Stage 2
\u00a3m
Stage 3
\u00a3m
Total
\u00a3m
Impaired
Less than 3 months, but impaired \u2013 \u2013 5 5
Over 3 months \u2013 \u2013 1 1
Recoveries \u2013 \u2013 \u2013 \u2013
Total gross impaired loans \u2013 \u2013 6 6
Past due 30 days to 3 months \u2013 \u2013 \u2013 \u2013
Past due less than 30 days \u2013 1 \u2013 1
Not past due 533 41 \u2013 574
Total gross amount due 533 42 6 581
Impairment
Impairment on gross balance - - - -
Undrawn commitments impairment - - - -
Total impairment - - - -
Coverage 0.0% 0.1% 10.4% 0.1%
28 Financial risk management continued
At 5 March 2022 Secured lending Stage 1 \u00a3m Stage 2 \u00a3m Stage 3 \u00a3m Total \u00a3m Impaired Less than 3 months, but impaired \u2013 \u2013 31 31 Over 3 months \u2013 \u2013 75 75 Recoveries \u2013 \u2013 59 59 Total gross impaired loans \u2013 \u2013 165 165 Past due 30 days to 3 months \u2013 20 \u2013 20 Past due less than 30 days 11 29 \u2013 40 Not past due 3,815 465 \u2013 4,280 Total gross amount due 3,826 514 165 4,505 Impairment Impairment on gross balance (34) (47) (120) (201) Undrawn commitments impairment (10) (8) (1) (19) Total impairment (44) (55) (121) (220) Coverage 1.2% 10.7% 73.3% 4.9% At 5 March 2022 Secured lending Stage 1 \u00a3m Stage 2 \u00a3m Stage 3 \u00a3m Total \u00a3m Impaired Less than 3 months, but impaired \u2013 \u2013 8 8 Over 3 months \u2013 \u2013 1 1 Recoveries \u2013 \u2013 \u2013 \u2013 Total gross impaired loans \u2013 \u2013 9 9 Past due 30 days to 3 months \u2013 \u2013 \u2013 \u2013 Past due less than 30 days \u2013 1 \u2013 1 Not past due 713 59 \u2013 772 Total gross amount due 713 60 9 782 Impairment Impairment on gross balance \u2013 \u2013 (2) (2) Undrawn commitments impairment \u2013 \u2013 \u2013 \u2013 Total impairment \u2013 \u2013 (2) (2) Coverage 0.1% 0.7% 23.6% 0.4% 28 Financial risk management continued The tables below present the reconciliations of ECL allowances on loans and advances to customers, and to overall amounts held on the balance sheet: At 4 March 2023 Stage 1 \u00a3m Stage 2 \u00a3m Stage 3 \u00a3m Total \u00a3m Gross exposure Impaired \u2013 \u2013 209 209 Past due but not impaired 10 50 \u2013 60 Neither past due nor impaired 4,835 471 \u2013 5,306 4,845 521 209 5,575 Allowance for expected credit loss Opening loss allowance (34) (47) (122) (203) Transfers between stages (11) 22 (11) \u2013 Additional provisions less amounts recovered (8) (2) 8 (2) Write-offs \u2013 4 35 39 Changes in credit risk during the year 8 (28) (54) (74) Closing loss allowance (45) (51) (144) (240) Net exposure 4,800 470 65 5,335 Hedging fair value adjustment (43) Loans and advances to other banks 100 Net book value within amounts due from financial services customers on balance sheet 5,392 At 5 March 2022 Stage 1 \u00a3m Stage 2 \u00a3m Stage 3 \u00a3m Total \u00a3m Gross exposure Impaired \u2013 \u2013 174 174 Past due but not impaired 11 50 \u2013 61 Neither past due nor impaired 4,528 524 \u2013 5,052 4,539 574 174 5,287 Allowance for expected credit loss Opening loss allowance (40) (63) (160) (263) Transfers between stages 8 (3) (5) \u2013 Additional provisions less amounts recovered (6) 2 13 9 Write-offs \u2013 1 78 79 Changes in credit risk during the year 4 16 (48) (28) Closing loss allowance (34) (47) (122) (203) Net exposure 4,505 527 52 5,084 Hedging fair value adjustment (16) Loans and advances to other banks 121 Net book value on balance sheet 5,189 Financial commitments Sainsbury\u2019s Bank has off-balance sheet commitments to extend credit to customers of \u00a311 million (2022: \u00a326 million). These commitments do not include undrawn limits on credit cards and store cards of \u00a38,674 million (2022: \u00a38,777 million). These are not considered contractual commitments but, because in practice Financial Services does not expect to withdraw these credit limits from customers, they are within the scope of impairment provisioning. At the year-end, \u00a320 million of expected credit loss provisions are recognised in respect of off-balance sheet loan commitments and undrawn limits in line with IFRS 9 (2022: \u00a319 million). 28 Financial risk management continued Governan Credit quality per class of loans and advances
The Group defines the following classifications for all loans and advances to customers: High, Satisfactory, Low and Credit impaired. These are segmented
by 12 month probability of default (PD) under IFRS 9.
IFRS 9 12 month PD
High quality: <=3.02%
Satisfactory quality >=3.03% \u2013 11.10%
Low quality >=11.11%
Credit impaired 100%
Unsecured lending
At 4 March 2023
Stage 1
\u00a3m
Stage 2
\u00a3m
Stage 3
\u00a3m
Total
\u00a3m
High quality 3,593 125 \u2013 3,718
Satisfactory quality 641 215 \u2013 856
Low quality 78 139 \u2013 217
Credit impaired \u2013 \u2013 203 203
Total 4,312 479 203 4,994
At 5 March 2022
Stage 1
\u00a3m
Stage 2
\u00a3m
Stage 3
\u00a3m
Total
\u00a3m
High quality 3,401 233 \u2013 3,634
Satisfactory quality 381 181 \u2013 562
Low quality 44 100 \u2013 144
Credit impaired \u2013 \u2013 165 165
Total 3,826 514 165 4,505
Secured lending
At 4 March 2023
Stage 1
\u00a3m
Stage 2
\u00a3m
Stage 3
\u00a3m
Total
\u00a3m
High quality 533 30 \u2013 563
Satisfactory quality \u2013 10 \u2013 10
Low quality \u2013 2 \u2013 2
Credit impaired \u2013 \u2013 6 6
Total 533 42 6 581
At 5 March 2022
Stage 1
\u00a3m
Stage 2
\u00a3m
Stage 3
\u00a3m
Total
\u00a3m
High quality 713 59 \u2013 772
Satisfactory quality \u2013 1 \u2013 1
Low quality \u2013 \u2013 \u2013 \u2013
Credit impaired \u2013 \u2013 9 9
Total 713 60 9 782
e. Significant estimate \u2013 macro-economic scenarios
IFRS 9 requires that the measurement of ECL should reflect an unbiased and probability weighted amount that is determined by evaluating a range of
forward-looking economic assumptions. The Group has engaged an external supplier to provide economic forecasts which are subject to review, challenge
and approval through the Bank\u2019s governance processes.
The ECL models utilise 4 scenarios (2022: 4 scenarios) including a \u2018base case\u2019 scenario considered to be the most likely outcome together with an upside,
downside scenario and severe downside. The base case has been assigned a probability weighting of 40% with the upside, downside and severe downside
scenarios weighted 30%, 25%, 5% respectively (2022: base scenario 45%; upside, downside and severe downside scenarios weighted 35%, 15%, 5% respectively).
28 Financial risk management continued
The key macro-economic assumptions included in the ECL calculation (shown as five-year averages from the reporting date) were:
As at 4 March 2023
Base
%
Upside
%
Downside
%
Severe
downside
%
Unemployment rate 5.3 4.5 6.2 7.6
Consumer price growth 3.4 2.9 3.8 4.3
GDP 0.8 1.4 0.3 (0.3)
Mortgage debt as a percentage of household income 99.9 97.6 102.0 104.5
Real household disposable income 0.8 1.2 0.2 (0.3)
Probability weighting (%) 40% 30% 25% 5%
Sensitivity analysis impact on impairment of 100 per cent weighting \u00a3(2.5)m \u00a3(12.5)m \u00a312.9m \u00a344.5m
f. Management overlays and post model adjustments (PMAs)
Overlays and PMAs are short-term increases or decreases to the ECL at either a customer or portfolio level to account for items that have not been fully
reflected in the existing models. Consistent with the most recent recommendations of the Taskforce on Disclosures about Expected Credit Losses (DECL), the
Group has defined overlays as adjustments made outside of the granular account level ECL calculation and PMAs as being calculated at granular account
level, most often in respect of known data or model limitations.
Internal governance is in place to regularly monitor management overlays and to reduce the reliance on management overlays through model recalibration
or redevelopment, as appropriate.
Management overlays and PMAs applied in estimating the reported ECL at 4 March 2023 are set out in the following table. The table includes adjustments in
relation to data and model limitations resulting from economic uncertainty related to the cost of living crisis. It shows the adjustments applicable to the
scenario weighted ECL numbers.
At 4 March
2023
\u00a3m
At 5 March
2022
\u00a3m
Economic adjustment (4) 10
Operational overlays 1 5
Total (3) 15
The proportion of net overlays and post model adjustments is (1)% of the total ECL provision as at 4 March 2023 (2022: 9%).
Economic overlays are included where management judge the underlying models do not respond adequately to the economic scenarios. During the year, the
historic economic post model adjustment relating to COVID-19 was released, however, a new economic post model adjustment was introduced given the cost
of living crisis and uncertainty around the potential impact the large inflation increase may have on customer behaviour or change in economic outlook.
The majority of the Operational overlays relate to model or data limitations that are manually corrected, whilst a permanent fix is being developed.
g. Collateral relating to loans and advances to customers
Mortgages held over residential properties represent the only collateral held by the Group for retail exposures. The market value of collateral held for impaired
loans and loans past due but not impaired was \u00a317 million (2022: \u00a323 million).
An analysis by loan-to-value (LTV) ratio of the Group\u2019s residential mortgage lending is presented below. The value of collateral used in determining the LTV
ratios has been estimated based upon the last actual valuation, adjusted to take into account subsequent movements in house prices.
At 4 March 2023
Stage 1
\u00a3m
Stage 2
\u00a3m
Stage 3
\u00a3m
Total
\u00a3m
Less than 70% 519 41 5 565
70% to 80% 14 1 1 16
80% to 90 % \u2013 \u2013 \u2013 \u2013
90% to 100% \u2013 \u2013 \u2013 \u2013
Greater than 100% \u2013 \u2013 \u2013 \u2013
Total mortgages 533 42 6 581
At 5 March 2022
Stage 1
\u00a3m
Stage 2
\u00a3m
Stage 3
\u00a3m
Total
\u00a3m
Less than 70% 607 57 8 672
70% to 80% 102 2 1 105
80% to 90% 4 1 \u2013 5
90% to 100% \u2013 \u2013 \u2013 \u2013
Greater than 100% \u2013 \u2013 \u2013 \u2013
Total mortgages 713 60 9 782
28 Financial risk management continued
h. Forbearance
The Group provides support to customers who are experiencing financial difficulties. Forbearance is defined as relief granted by a lender to assist customers
in financial difficulty, through arrangements which temporarily allow the customer to pay an amount other than the contractual amounts due. These
temporary arrangements may be initiated by the customer or the Group where financial difficulty would prevent repayment within the original terms and
conditions of the contract.
The main aim of forbearance is to support customers in returning to a position where they are able to meet their contractual obligations.
The Group has well defined forbearance policies and processes. A number of forbearance options are made available to customers. These include
arrangements to repay arrears over a period of time by making payments above the contractual amount, that ensure the loan is repaid within the original
repayment term and short-term concessions, where the borrower is allowed to make reduced repayments (or in exceptional circumstances, no repayments)
on a temporary basis to assist with short-term financial hardship.
The table below details the values of secured and unsecured advances that are subject to the Group\u2019s forbearance programmes:
2023 2022
Gross loans
and advances
subject to
forbearance
\u00a3m
Forbearance
as a total of
loans and
advances
%
Forbearance
covered by
impairment
provision
%
Gross loans and
advances
subject to
forbearance
\u00a3m
Forbearance
as a total of
loans and
advances
%
Forbearance
covered by
impairment
provision
%
Unsecured 61 1.2 69.1 52 1.2 72.0
Secured 1 0.2 4.5 2 0.3 25.7
Total 62 1.1 68.1 54 1 70.1
Market risk
The Group uses forward contracts to hedge foreign exchange and commodity exposures, and interest rate swap contracts to hedge interest rate exposures.
The use of financial derivatives is governed by Board approved policies which prohibits the use of derivative financial instruments for speculative purposes.
a. Foreign currency risk
Currency risk is the risk of increased costs arising from unexpected movements in exchange rates impacting the Group\u2019s foreign currency denominated
supply contracts.
The Group\u2019s currency risk policy seeks to limit the impact of fluctuating exchange rates on the Group\u2019s income statement by requiring highly probable foreign
currency cash flows to be hedged. Highly probable foreign currency cash flows, which may be either contracted or uncontracted, are hedged on a layered
basis using foreign currency forward contracts.
The Group has exposure to currency risk on balances held in foreign currency denominated bank accounts, which may arise due to short-term timing
differences on maturing hedges and underlying supplier payments.
The Group considers that a ten per cent movement in exchange rates against pound sterling is a reasonable measure of volatility. The impact of a ten per cent
movement in the exchange rate of US dollar and euro versus pound sterling as at the balance sheet date, with all other variables held constant, is summarised
in the table below:
Group
2023
Change in
exchange rate
impact on
post-tax
profit
+/-10%
\u00a3m
2023
Change in
exchange rate
impact on cash
flow hedge
reserve
+/-10%
\u00a3m
2022
Change in
exchange rate
impact on
post-tax
profit
+/-10%
\u00a3m
2022
Change in
exchange rate
impact on cash
flow hedge
reserve
+/-10%
\u00a3m
USD/GBP 5/(6) (110)/135 3/(3) (115)/141
EUR/GBP 2/(3) (32)/40 3/(3) (29)/36
Financial Services
The Bank is exposed to foreign exchange (FX) risk through its holding of cash denominated in foreign currencies, primarily Euro and US Dollar, within its travel
money bureaux in Sainsbury\u2019s stores and its currency dispensing ATM machines. The FX positions are hedged on a regular basis.
b. Interest rate risk
Interest rate risk is the risk of increased costs or lower income arising from unexpected movements in interest rates and inflation rates impacting the Group\u2019s
borrowing and investment portfolios. The Group\u2019s interest rate policy seeks to limit the impact of fluctuating interest and inflation rates by maintaining a
diversified mix of fixed rate, floating rate and variable capped rate liabilities.
Interest on financial instruments is classified as fixed rate if interest resets on the borrowings are less frequent than once every 12 months. Interest on
financial instruments is classified as floating rate if interest resets on the borrowings occur every 12 months or more frequently. Floating rate instruments are
considered variable capped rate if the nominal interest rate is subject to a cap.
28 Financial risk management continued
The mix of the Group\u2019s financial assets and liabilities at the balance sheet date was as follows: Fixed \u00a3m Floating \u00a3m Variable capped \u00a3m Total \u00a3m Interest bearing financial assets at fair value through other comprehensive income 25 664 \u2013 689 Amounts due from Financial Services customers and other banks 2,690 2,702 \u2013 5,392 Cash and cash equivalents 456 863 \u2013 1,319 Borrowings (122) \u2013 (539) (661) Amounts due to Financial Services customers and banks (1,477) (4,469) \u2013 (5,946) Derivative effect: Interest rate swaps (1,143) 1,143 \u2013 \u2013 Inflation linked swaps (490) \u2013 490 \u2013 At 4 March 2023 (61) 903 (49) 793 Fixed \u00a3m Floating \u00a3m Variable capped \u00a3m Total \u00a3m Interest bearing financial assets at fair value through other comprehensive income 121 297 \u2013 418 Amounts due from Financial Services customers and other banks 2,799 2,390 \u2013 5,189 Cash and cash equivalents 547 278 \u2013 825 Bank Overdrafts \u2013 (7) \u2013 (7) Borrowings (179) \u2013 (575) (754) Amounts due to Financial Services customers and banks (603) (4,656) \u2013 (5,259) Derivative effect: Interest rate swaps (1,952) 1,952 \u2013 \u2013 Inflation linked swaps (490) \u2013 490 \u2013 At 5 March 2022 243 254 (85) 412 (i) Cash flow sensitivity for floating rate instruments The Group considers that a 100 basis point movement in interest rates is a reasonable measure of volatility. The sensitivity of floating rate balances to a change of 100 basis points in the interest rate (or such lesser amount as would result in a zero rate of interest) at the balance sheet date is shown below: 2023 Impact on post-tax profit \u00a3m 2023 Impact on cash flow hedge reserve \u00a3m 2022 Impact on post-tax profit \u00a3m 2022 Impact on cash flow hedge reserve \u00a3m Change in floating rate +/-100bps 1/2 (0)/0 (5)/9 (0)/0 (ii) Cash flow sensitivity for variable capped rate liabilities The Group holds \u00a3539 million of capped inflation-linked borrowings (2022: \u00a3575 million) of which \u00a3490 million (2022: \u00a3490 million) have been swapped into fixed rate borrowings using inflation rate swaps maturing on 19 April 2023. The Group considers that a 100 basis point movement in the RPI rate is a reasonable measure of volatility. The sensitivity of variable capped balances to a change of 100 basis points in the RPI rate at the balance sheet date is shown below: 2023 Impact on post-tax profit \u00a3m 2023 Impact on cash flow hedge reserve \u00a3m 2022 Impact on post-tax profit \u00a3m 2022 Impact on cash flow hedge reserve \u00a3m Change in floating rate +/-100bps 0/(0) 1/(1) (0)/0 5/(6) 28 Financial risk management continued Governan Financial Services
Interest Rate Risk in the Banking Book (IRRBB) arises from interest rate movements which impact the present value and timing of future cash flows resulting
in changes in the underlying value of a bank\u2019s assets and liabilities and hence its economic value. Interest rates movements also affect a bank\u2019s earnings by
altering interest-sensitive income and expenses, affecting its net interest income.
The main types of interest rate risk faced by the Bank are:
\u2014 Repricing gap risk: the risk arising from timing differences in the interest rate changes of bank assets and liabilities (e.g. fixed rate personal loans and
instant access savings accounts).
\u2014 Yield curve risk: the risk arising from changes in the slope and shape of the yield curve.
\u2014 Basis risk: risk arising from imperfect correlation between different interest rate indices (e.g. administered rate on savings products and treasury assets
linked to SONIA).
\u2014 Prepayment risk: the risk arising from the timing of customer prepayments which differ from planning and hedging assumptions.
\u2014 Pipeline risk: the risk of a customer drawing down, or not, a product at a rate which is unfavourable for the Bank.
\u2014 Credit Spread Risk: the risk of adverse effects resulting from a change in credit spreads, arising via the Bank\u2019s Treasury portfolio.
Interest risk exposure is actively managed within limits that are aligned with the Bank\u2019s risk appetite by using financial instruments such as interest rate
swaps and by taking into account natural hedges between assets and liabilities with similar repricing characteristics. Hedging strategies are implemented
and reviewed to ensure the Bank remains within its limits.
The Bank\u2019s market risk appetite statements defines limits for the following market risk measures:
\u2014 Capital at Risk: an aggregate measure based on assessing each of the IRRBB risks and allocating a capital charge against each risk driver using a series of
plausible but severe interest rate stresses. This includes parallel and non-parallel movements of the yield curve. Where applicable a customer behavioural
repayment profile is applied.
\u2014 Annual Earnings at Risk: measures the sensitivity of the Bank\u2019s earnings over the next 12 months, in response to adverse movements in interest rates.
c. Commodity Risk
Commodity risk is the risk of increased costs arising from unexpected movements in commodity prices impacting the Group\u2019s own use consumption of
electricity, gas and diesel. The Group hedges own use consumption of electricity and gas with forward purchases under flexible purchasing arrangements
with its suppliers as well as power purchase agreements for electricity. The Group uses a combination of purchasing agreements and financial derivatives
to hedge fuel exposures on a layered basis using contracts for difference. See note 30 for derivative disclosures.
Capital risk management
The Group defines capital as total equity plus net debt.
The Board\u2019s capital objective is to maintain a strong and efficient capital base to support the Group\u2019s strategic objectives, provide optimal returns for
shareholders and safeguard the Group\u2019s status as a going concern. There has been no change to capital risk management policies during the year.
The Board monitors a broad range of financial metrics including return on capital employed, balance sheet gearing and fixed charge cover.
The Board can manage the Group\u2019s capital structure by diversifying the debt portfolio, adjusting the size and timing of dividends paid to shareholders,
recycling capital through sale and leaseback transactions, issuing new shares or repurchasing shares in the open market and flexing capital expenditure.
From time-to-time, the ESOT may purchase shares in the Company from the open market for the purpose of satisfying awards under the Group\u2019s employee
share plans however the Group does not currently operate a defined share buy-back plan.
The Revolving Credit Facility and Term Loan have a single repeating financial covenant. Part of the Group\u2019s capital risk management is to ensure compliance
with both the financial and general covenants included within the Group\u2019s borrowing facilities. Examples of general covenants include restrictions on the
permitted value of asset disposals and incremental indebtedness. In addition to there being no breaches of financial and general covenants in the financial
year ended 4 March 2023, there is healthy headroom within all covenants as at 4 March 2023.
Financial Services capital resources (unaudited)
The following table analyses the regulatory capital resources under CRD IV. From a prudential perspective, Sainsbury\u2019s Bank is monitored and supervised on
a consolidated basis with its subsidiary, Home Retail Group Card Services Limited, from the point of acquisition of Argos Financial Services in September 2016.
The Bank has obtained an individual consolidation waiver from the PRA, which allows the Bank to monitor its capital position on a consolidated basis only.
Therefore, the capital position shown below is on a regulatory consolidated basis.
The Bank implemented IFRS 9, effective 1 March 2018. The following table analyses the regulatory capital resources under CRD IV and aligns to the phase-in
approach of IFRS 9 impacts on capital, over a five-year period.
Transitional
2023
IFRS 9
\u00a3m
Full impact
2023
IFRS 9
\u00a3m
Transitional
2022
IFRS 9
\u00a3m
Full impact
2022
IFRS 9
\u00a3m
Common Equity Tier 1 (CET 1) capital:
Ordinary share capital 701 701 701 701
Allowable reserves 165 165 126 126
Regulatory adjustments (144) (167) (142) (180)
Tier 1 capital 722 699 685 647
Tier 2 capital (loan notes \u2013 listed) 113 113 109 109
Total capital 835 812 794 756
28 Financial risk management continued
Regulatory capital is calculated under the Capital Requirements Regulations and Capital Requirements Directive (collectively known as CRD IV) and aligns to
the phase-in approach of IFRS 9 impacts on capital, over a 5-year period from 1 March 2018, as enacted in the UK. Common Equity Tier 1 (CET 1) capital includes
ordinary share capital, other reserves, losses and regulatory deductions.
The movement of CET 1 capital during the financial year is analysed as follows:
Transitional
2023
IFRS 9
\u00a3m
Full impact
2023
IFRS 9
\u00a3m
Transitional
2022
IFRS 9
\u00a3m
Full impact
2022
IFRS 9
\u00a3m
At 1 March 2022 and 1 March 2021 685 647 791 726
Verified profits attributable to shareholders 38 38 22 22
Foreseeable dividend \u2013 \u2013 (50) (50)
Transitional adjustments (15) \u2013 (27) \u2013
Other reserve movements 1 1 (2) (2)
Movement in additional value adjustments (1) (1) 1 1
Movement in intangible assets 15 15 (50) (50)
Movement in Non Performing Exposures insufficient coverage (1) (1) \u2013 \u2013
At 28 February 2023 and 28 February 2022 722 699 685 647
Leverage ratio (unaudited)
The leverage ratio is defined as the ratio of Tier 1 capital to adjusted assets, which is measured below on a regulatory consolidated basis. The denominator
represents the total non-risk weighted assets of the regulatory group (Bank and Home Retail Group Card Services Limited) adjusted for certain off balance
sheet exposures assets and regulatory deductions and provides a non-risk-weighted \u2018backstop\u2019 capital measure. The leverage ratio is calculated below as
at 28 February 2023 on the UK basis which allows central bank assets to be excluded from the leverage exposures. The Bank\u2019s leverage ratio of 9.6% exceeds
the minimum Basel leverage ratio of 3%.
Transitional
2023
IFRS 9
\u00a3m
Full impact
2023
IFRS 9
\u00a3m
Transitional
2022
IFRS 9
\u00a3m
Full impact
2022
IFRS 9
\u00a3m
Components of the leverage ratio
Total assets as per published financial statements (Sainsbury\u2019s Bank plc consolidated group)
1
7,209 7,209 6,516 6,516
Movement on consolidation of subsidiary undertakings
1
(6) (6) \u2013 \u2013
Exposure value for derivatives and securities financing transactions 32 32 37 37
Off balance sheet exposures: unconditionally cancellable (10%) 867 867 878 878
Off balance sheet: other (100%) 2 2 5 5
Other adjustments (242) (265) (169) (207)
Central Bank Claims (331) (331) (219) (219)
7,531 7,508 7,048 7,010
Tier 1 capital 722 699 685 647
Leverage ratio 9.6% 9.3% 9.7% 9.2%
1. As a result of Sainsbury\u2019s Bank moving to prepare consolidated accounts, the prior year comparatives have been restated to use the total assets of the Consolidated Financial Services sector. A deconsolidation
adjustment is then applied to get the total assets of the prudential regulated group.
Capital management
The Bank manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of its activities.
Capital adequacy is monitored on an ongoing basis by senior management, the ALCO, the Executive Risk Committee and the Board Risk Committee.
Our submissions to the PRA in the year have shown that the Bank has complied with all externally imposed capital requirements.
The Bank will disclose Pillar 3 information as required by the Capital Requirements Regulations and PRA prudential sourcebook on the J Sainsbury plc
external website.
28 Financial risk management continued
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinancialRiskManagementExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-554": {
"value": "Liquidity risk Liquidity risk is the risk that the Group may be unable to meet its financial obligations as they fall due. The principal operational cash flow of the Group is largely stable and predictable reflecting the low business risk profile of the food retail sector and the cyclical profile of the non-food retail sector. Cash flow forecasts are produced to assist management in identifying future liquidity requirements. The Group\u2019s liquidity policy sets a minimum funding headroom of \u00a3500 million in excess of forecast funding requirements over a rolling 12-month time horizon. The Group manages its liquidity risk by maintaining a core of long-dated borrowings, pre-funding future cash flow commitments and holding contingent committed credit facilities. The Group has a \u00a31,575 million unsecured committed facility which consists of a \u00a31,000 million Revolving Credit Facility and a \u00a3575 million Term Loan. The Revolving Credit Facility is split into two Facilities, a \u00a3500 million Facility (A) and a \u00a3500 million Facility (B). Facility A has a maturity of December 2026 and Facility B has a maturity of December 2027. The Term Loan has a maturity of March 2026. The Revolving Credit Facility and Term Loan were undrawn at 4 March 2023. As detailed in note 23, some suppliers have access to supply chain finance facilities, which allows these suppliers to benefit from the Group\u2019s credit profile. The total size of the facility at 4 March 2023 was \u00a31,054 million (2022: \u00a31,101 million) across a number of banks and platforms. The amount utilised was \u00a3607 million with headroom of \u00a3447 million. The level of utilisation is dependent on the individual supplier requirements and varies significantly over time. The table below analyses the Group\u2019s financial liabilities into relevant maturity groupings based on the remaining period to the contractual maturity date. The amounts disclosed in the tables are the contractual undiscounted cash flows or an estimate of cash flows in respect of floating interest rate liabilities. At 4 March 2023 Less than one year \u00a3m One to two years \u00a3m Two to five years \u00a3m More than five years \u00a3m Non-derivative financial liabilities Secured loans: Loan due 2031 1 (79) (82) (272) (289) Trade and other payables (4,495) \u2013 \u2013 \u2013 Amounts due to Financial Services customers and banks 2 (5,101) (359) (766) \u2013 Derivative contracts \u2013 net settled Commodity contracts (1) 1 \u2013 \u2013 Interest rate swaps in hedging relationships 1, 3 28 13 4 4 Other interest rate swaps \u2013 Sainsbury\u2019s Bank 4 \u2013 \u2013 \u2013 Derivative contracts \u2013 gross settled Foreign exchange forwards \u2013 outflow 4 (1,560) (222) \u2013 \u2013 Foreign exchange forwards \u2013 inflow 4 1,602 220 \u2013 \u2013 Commodity contracts \u2013 outflow (16) (28) (59) (164) Commodity contracts \u2013 inflow 44 58 116 200 At 5 March 2022 Less than one year \u00a3m One to two years \u00a3m Two to five years \u00a3m More than five years \u00a3m Non-derivative financial liabilities Secured loans: Loan due 2031 1 (76) (80) (265) (378) Unsecured loans Bank overdraft (7) \u2013 \u2013 \u2013 Trade and other payables (4,205) (13) \u2013 \u2013 Amounts due to Financial Services customers and banks 2 (4,444) (109) (708) \u2013 Derivative contracts \u2013 net settled Commodity contracts 22 2 \u2013 \u2013 Interest rate swaps in hedging relationships 1, 3 (4) 7 4 1 Derivative contracts \u2013 gross settled Foreign exchange forwards \u2013 outflow 4 (1,680) (233) \u2013 \u2013 Foreign exchange forwards \u2013 inflow 4 1,707 234 \u2013 \u2013 Commodity contracts \u2013 outflow (13) (25) (61) (56) Commodity contracts \u2013 inflow 82 55 102 109 Assumptions: 1. Cash flows relating to debt and swaps linked to inflation rates have been calculated using a RPI of 5 per cent for the year ended 4 March 2023, 5.0 per cent for the year ending 2 March 2024 and 5.0 per cent for future years (2022: RPI of 1.4 per cent for the year ending 5 March 2022 and 5 per cent for years 2023 and beyond). 2. Cash flows relating to amounts due to Sainsbury\u2019s Bank customers and banks are calculated using contractual terms and interest rates for fixed rate instruments. Where balances are contractually repayable on demand, behavioural assumptions are applied to estimate the interest payable on those balances. These are shown as due within one year. 3. The swap rate that matches the remaining term of the interest rate swap as at 4 March 2023 has been used to calculate the floating rate cash flows over the life of the interest rate swaps shown above (2022: 5 March 2022). 4. Cash flows in foreign currencies have been translated using spot rates as 4 March 2023 and 5 March 2022. Financial services Liquidity risk is the risk that Sainsbury\u2019s Bank and its subsidiaries (the Bank) cannot meet its payment obligations as they fall due, or can only do so at excessive cost. The Bank seeks to ensure that financial obligations can be met at all times, even under liquidity stress conditions. The annual Internal Liquidity Adequacy Assessment Process (ILAAP) enables the Bank to: (1) Identify and assess its most relevant liquidity risk drivers; (2) Quantify its liquidity needs under various stress scenarios; and (3) Put in place appropriate limits and controls to mitigate liquidity risks. In meeting its internal limits as well as PRA requirements, the Bank maintains a stock of high quality liquid assets that can be readily monetised by outright sale or repurchase agreement to meet the Bank\u2019s obligations to depositors and other creditors. The Bank\u2019s Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) are regularly monitored and forecast alongside cash flow and funding ratios. Long term and short term forecasts are prepared to assess liquidity requirements, taking into account factors such as ATM cash management, contractual maturities and customer deposit patterns (stable or less stable deposits) as well as outflows regarding undrawn commitments. These reports support daily liquidity management, with early warning indicators reviewed on a daily basis and appropriate triggers for escalation and action in line with risk appetite, Liquidity and Funding Policy and Liquidity Contingency Plan. Asset encumbrance ratios and risk indicators for wholesale funding are also regularly monitored and reported to the Asset-Liability Committee (ALCO). Governan Asset encumbrance 2023 2022 Carrying value of encumbered assets \u00a3m Matching liabilities, contingent liabilities or securities lent \u00a3m Carrying value of encumbered assets \u00a3m Matching liabilities, contingent liabilities or securities lent \u00a3m Loans and advances to customers 1,116 760 1,365 885 Debt securities \u2013 \u2013 157 75 Other assets 64 \u2013 40 27 Cash and balances with central banks 15 \u2013 15 \u2013 The primary sources of encumbrance in the Bank relate to margin requirements for derivative transactions and collateral relating to secured funding transactions. Cash collateral is advanced and received as variation margin on derivative transactions, whilst eligible treasury assets (primarily Gilts and Treasury bills) are pledged as collateral for initial margin requirements on derivatives which are centrally cleared. Eligible personal loans and mortgages, with applicable haircuts, are used as collateral for Bank of England funding facilities, the Term Funding Scheme with additional incentives for SMEs (TFSME) and Indexed Long Term Repo (ILTR) facilities. ",
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"fact-555": {
"value": "Credit risk a. Retail credit risk management Counterparty credit risk is the risk of a financial loss arising from counterparty default or non-performance in respect of the Group\u2019s holdings of cash and cash equivalents, derivative financial assets, deposits with banks, investments in marketable securities, trade and other receivables and loans and advances to customers. Specifically within Financial Services, retail credit risk is the possibility of losses arising from a retail customer failing to meet their agreed repayment terms as they fall due under mortgage, unsecured personal loan, credit card, store card or monthly payment plan arrangements. The Financial Services division utilise automated scorecards to assess the credit worthiness and affordability criteria of new applicants and ongoing behavioural characteristics of existing customers. The outcome from all scorecard models is monitored utilising a set of credit quality metrics to ensure actual performance is in line with agreed expectations. Additional expert underwriting of credit applications is undertaken by a specialist operational team where further consideration is appropriate. The Retail Credit Risk Committee of Sainsbury\u2019s Bank provide portfolio oversight control over credit strategy to maintain lending in line with the Board approved risk appetite, with additional oversight and control provided by the Executive Risk Committee and Board Risk Committee. Internal Audit provide additional assurance by undertaking regular reviews on the adequacy of credit risk policies and procedures. b. Wholesale and derivative credit risk management The Group (excluding Financial Services) sets counterparty limits for each of its banking and investment counterparties based on their credit ratings and credit default swap pricing. The minimum long-term credit rating accepted by the Group is BBB- (Standard & Poor\u2019s and Fitch) or Baa3 (Moody\u2019s) or, in the case of pound sterling liquidity funds, AAA or Aaa/MR1+ from Moody\u2019s. In the event of a split credit rating, the lower rating applies. The table below analyses the Group\u2019s (including Financial Services) cash and cash equivalents by credit exposure excluding bank balances, store cash, cash in transit and cash at ATMs. Counterparty Long-term rating Group 2023 \u00a3m Group 2022 \u00a3m Financial institutions \u2013 Money market funds AAA/Aaa 140 \u2013 Financial institutions \u2013 Money market deposits AAA/Aaa 50 \u2013 Financial institutions \u2013 Money market deposits AA+/Aa1 to A/A2 215 25 Deposits at central banks AA+/Aa1 345 234 The table below analyses the fair value of the Group\u2019s derivative financial assets by credit exposure, excluding any collateral held. Counterparty Long-term rating Group 2023 \u00a3m Group 2022 \u00a3m Interest rate swaps AA+/Aa1 to A/A2 99 35 Inflation rate swaps AA+/Aa1 to A/A2 2 5 FX forward contracts AA+/Aa1 to A/A2 49 46 Commodity forward contracts AA+/Aa1 to A/A2 7 25 The Bank\u2019s treasury portfolio is held primarily for liquidity management purposes and in the case of derivatives, for the purpose of managing market risk. The liquidity portfolio is invested in eligible investment securities that qualify for the regulatory Liquidity Coverage Ratio (LCR) and internal Operational Liquidity Pool (OLP). These investments include the Bank of England\u2019s (BoE) reserve account, UK government securities (gilts or Treasury bills), multilateral development bank securities, government guaranteed agency securities, UK regulated covered bond programmes and asset backed securities. Limits are established for all counterparty and asset class exposures based on their respective credit quality and market liquidity. Consideration is also given to geographical region and the strength of relevant sovereign credit ratings. Derivatives are subject to the same credit risk control procedures as are applied to other wholesale market instruments and the credit risk arising from mark to market derivative valuations is mitigated by daily margin calls, posting cash collateral to cover exposures. Daily monitoring is undertaken by the Bank\u2019s Treasury and Financial Risk Teams, including early warning indicators with appropriate triggers for escalation. c. Maximum exposure to credit risk The table below shows the maximum exposure to credit risk for the components of the balance sheet, including derivatives. The maximum exposure is shown gross, before the effect of mitigation through the use of collateral agreements. 2023 \u00a3m 2022 \u00a3m Credit risk exposures relating to on balance sheet items Loans and advances to customers and other banks 5,392 5,189 Cash and balances with central banks 1,319 825 Derivative financial instruments (excludes level 3 instruments) 156 111 Investment securities 626 418 Other assets 477 552 Credit risk exposures relating to off balance sheet items Loan commitments 11 26 Total credit risk exposures 7,981 7,1 2 1 The commitments to lend disclosed in the above table do not include undrawn limits on credit cards and store cards of \u00a38,674 million (2022: \u00a38,777 million). These are not considered contractual commitments but, because in practice Financial Services does not expect to withdraw these credit limits from customers, they are within the scope of impairment provisioning. d. Impairment of financial assets Accounting policies Impairments on financial assets are accounted for using a 3-stage forward-looking expected credit loss (ECL) approach in line with IFRS 9. The Group is required to record an allowance for ECL for all loans and other debt financial assets not held at FVTPL, together with loan commitments and financial guarantee contracts. ECLs are based on the difference between the cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. For Financial Services portfolios of loans, such as credit card lending, storecard lending and personal loans, impairment provisions are calculated for groups of assets, otherwise impairment is identified at a counterparty specific level. The allowance is calculated by reference to the estimated probability of default (PD), exposure at default (EAD) and loss given default (LGD). \u2014 The probability of default represents the likelihood of a borrower defaulting within 12 months from the balance sheet date or within the expected lifetime of the borrower. \u2014 Exposure at default represents the expected amount due from the borrower at the point of default by reference to exposure at the balance sheet date adjusted for expected future changes including repayments and utilisation of undrawn facilities. \u2014 Loss given default represents the expected percentage loss at the point of default relative to the EAD. The estimate takes into account utilisation of any expected collections and recoveries strategies, debt sale arrangements and collateral. ECL 3 stage model \u2014 Stage 1 \u2013 Impairment allowance on financial assets that have not significantly increased in credit risk since origination, nor are credit impaired, is calculated using the probability that a borrower will default within 12 months from the balance sheet date. Interest income is recognised on the gross carrying value of the financial asset. \u2014 Stage 2 \u2013 Where a financial asset exhibits a significant increase in credit risk (SICR) but is not yet considered to be credit impaired, the probability of default considered in the impairment allowance is based upon the lifetime probability of the borrower defaulting. Interest income continues to be recognised on the gross carrying value of the financial asset. \u2014 Stage 3 \u2013 Assets considered to be credit impaired resulting from one or more events that have occurred that has resulted in a detrimental impact on the estimated future cash flows of the asset. Stage 3 assets will continue to recognise lifetime expected impairment losses (with a 100% probability of default) and interest income will be recognised on the net carrying amount (i.e. gross amount less impairment allowance). Significant increases in credit risk The Group determines whether there has been a significant increase in credit risk by reference to quantitative thresholds, qualitative indicators and the backstop presumption that credit risk has significantly increased if contractual payments are more than 30 days past due. Quantitative thresholds have been determined that when the lifetime PD of an instrument as at the reporting date has increased to greater than a specified multiple of the origination lifetime PD, a significant increase in credit risk is deemed to have occurred. Qualitative tests are based around the Group\u2019s credit origination policy rules for Financial Services customers. These rules are in place at account origination in order to decline accounts that may demonstrate risk factors outside of risk appetite that are not yet reflected in PD measures. At the reporting date, if an account satisfies any policy decline rules that it had not at the point of origination, it will be considered to have significantly increased in credit risk. There is no probationary period applied in respect of accounts that cure from stage 2 to stage 1. Transfer criteria have been subject to extensive analysis to ensure that they appropriately reflect the flow of accounts from origination to default so as to maximise the number of accounts that flow through the stages and minimise accounts that jump from stage 1 to stage 3, or that fail to enter stage 3 from stage 2. The Group has applied the low credit risk exemption in respect of its high quality treasury portfolio held for liquidity purposes. This exemption permits low credit risk debt securities (i.e. those considered investment grade) to remain in Stage 1 without an assessment of significant increase in credit risk. Definition of default The Group\u2019s definition of default is used in determining those accounts classified as stage 3 (i.e. credit impaired). The Group has chosen not to rebut the backstop presumption prescribed by IFRS 9 that where an account is 90 days or more past its due date then default has occurred. The Group has also defined a number of unlikeliness-to-pay criteria that result in an account being deemed to have defaulted. These include: \u2014 Where operational collections activities have been exhausted on accounts that are less than 90 days past due and the account is subject to recoveries processes \u2014 If any forbearance has been granted on the account (see forbearance definition below). \u2014 Where the customer is subject to insolvency proceedings \u2014 Where the customer is deceased Where an account no longer meets any of the default criteria, such as by bringing payments back up to date, the Group will continue to consider the account as being in default for the probation period (24 months for Loans and Cards, and 12 months for Storecards) from the date when it last met the definition of default. Write-off Loans and advances to customers are written off (either partially or in full) when there is no realistic prospect of recovery. This is generally the case when the Group determines that the borrower does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to write-off. Subsequent recoveries of amounts previously written off result in impairment gains recorded in the statement of comprehensive income. Expected lifetime For the purposes of considering the lifetime probability of default, the expected lifetime of a financial asset is the contractual term where this is fixed within the contract, or in the case of revolving products such as credit cards a behavioural life is determined by reference to historic trends. Modified financial assets When the contractual cash flows of a financial asset have been renegotiated or modified and the financial asset was not derecognised, its gross carrying amount is recalculated as the present value of the modified contractual cash flows, discounted at the original effective interest rate with a gain or loss recognised in the income statement. Loans and advances to customers per stage The tables below summarise the breakdown of the gross carrying amount of loans and advances to customers per stage. Unsecured lending represents Sainsbury\u2019s Bank credit cards and personal loan lending in addition to Argos storecards and monthly payment plan. Secured lending represents Sainsbury\u2019s Bank mortgage lending. At 4 March 2023 Unsecured lending Stage 1 \u00a3m Stage 2 \u00a3m Stage 3 \u00a3m Total \u00a3m Impaired Less than 3 months, but impaired \u2013 \u2013 31 31 Over 3 months \u2013 \u2013 91 91 Recoveries \u2013 \u2013 81 81 Total gross impaired loans \u2013 \u2013 203 203 Past due 30 days to 3 months \u2013 23 \u2013 23 Past due less than 30 days 10 26 \u2013 36 Not past due 4,302 430 \u2013 4,732 Total gross amount due 4,312 479 203 4,994 Impairment Impairment on gross balance (45) (51) (144) (240) Undrawn commitments impairment (12) (7) - (19) Total impairment (57) (58) (144) (259) Coverage 1.3% 12.1% 70.9% 5.2% At 4 March 2023 Secured lending Stage 1 \u00a3m Stage 2 \u00a3m Stage 3 \u00a3m Total \u00a3m Impaired Less than 3 months, but impaired \u2013 \u2013 5 5 Over 3 months \u2013 \u2013 1 1 Recoveries \u2013 \u2013 \u2013 \u2013 Total gross impaired loans \u2013 \u2013 6 6 Past due 30 days to 3 months \u2013 \u2013 \u2013 \u2013 Past due less than 30 days \u2013 1 \u2013 1 Not past due 533 41 \u2013 574 Total gross amount due 533 42 6 581 Impairment Impairment on gross balance - - - - Undrawn commitments impairment - - - - Total impairment - - - - Coverage 0.0% 0.1% 10.4% 0.1% At 5 March 2022 Secured lending Stage 1 \u00a3m Stage 2 \u00a3m Stage 3 \u00a3m Total \u00a3m Impaired Less than 3 months, but impaired \u2013 \u2013 31 31 Over 3 months \u2013 \u2013 75 75 Recoveries \u2013 \u2013 59 59 Total gross impaired loans \u2013 \u2013 165 165 Past due 30 days to 3 months \u2013 20 \u2013 20 Past due less than 30 days 11 29 \u2013 40 Not past due 3,815 465 \u2013 4,280 Total gross amount due 3,826 514 165 4,505 Impairment Impairment on gross balance (34) (47) (120) (201) Undrawn commitments impairment (10) (8) (1) (19) Total impairment (44) (55) (121) (220) Coverage 1.2% 10.7% 73.3% 4.9% At 5 March 2022 Secured lending Stage 1 \u00a3m Stage 2 \u00a3m Stage 3 \u00a3m Total \u00a3m Impaired Less than 3 months, but impaired \u2013 \u2013 8 8 Over 3 months \u2013 \u2013 1 1 Recoveries \u2013 \u2013 \u2013 \u2013 Total gross impaired loans \u2013 \u2013 9 9 Past due 30 days to 3 months \u2013 \u2013 \u2013 \u2013 Past due less than 30 days \u2013 1 \u2013 1 Not past due 713 59 \u2013 772 Total gross amount due 713 60 9 782 Impairment Impairment on gross balance \u2013 \u2013 (2) (2) Undrawn commitments impairment \u2013 \u2013 \u2013 \u2013 Total impairment \u2013 \u2013 (2) (2) Coverage 0.1% 0.7% 23.6% 0.4% The tables below present the reconciliations of ECL allowances on loans and advances to customers, and to overall amounts held on the balance sheet:
At 4 March 2023
Stage 1
\u00a3m
Stage 2
\u00a3m
Stage 3
\u00a3m
Total
\u00a3m
Gross exposure
Impaired \u2013 \u2013 209 209
Past due but not impaired 10 50 \u2013 60
Neither past due nor impaired 4,835 471 \u2013 5,306
4,845 521 209 5,575
Allowance for expected credit loss
Opening loss allowance (34) (47) (122) (203)
Transfers between stages (11) 22 (11) \u2013
Additional provisions less amounts recovered (8) (2) 8 (2)
Write-offs \u2013 4 35 39
Changes in credit risk during the year 8 (28) (54) (74)
Closing loss allowance (45) (51) (144) (240)
Net exposure 4,800 470 65 5,335
Hedging fair value adjustment (43)
Loans and advances to other banks 100
Net book value within amounts due from financial services customers on balance sheet 5,392
At 5 March 2022
Stage 1
\u00a3m
Stage 2
\u00a3m
Stage 3
\u00a3m
Total
\u00a3m
Gross exposure
Impaired \u2013 \u2013 174 174
Past due but not impaired 11 50 \u2013 61
Neither past due nor impaired 4,528 524 \u2013 5,052
4,539 574 174 5,287
Allowance for expected credit loss
Opening loss allowance (40) (63) (160) (263)
Transfers between stages 8 (3) (5) \u2013
Additional provisions less amounts recovered (6) 2 13 9
Write-offs \u2013 1 78 79
Changes in credit risk during the year 4 16 (48) (28)
Closing loss allowance (34) (47) (122) (203)
Net exposure 4,505 527 52 5,084
Hedging fair value adjustment (16)
Loans and advances to other banks 121
Net book value on balance sheet 5,189
Financial commitments
Sainsbury\u2019s Bank has off-balance sheet commitments to extend credit to customers of \u00a311 million (2022: \u00a326 million). These commitments do not include
undrawn limits on credit cards and store cards of \u00a38,674 million (2022: \u00a38,777 million). These are not considered contractual commitments but, because
in practice Financial Services does not expect to withdraw these credit limits from customers, they are within the scope of impairment provisioning.
At the year-end, \u00a320 million of expected credit loss provisions are recognised in respect of off-balance sheet loan commitments and undrawn limits in line
with IFRS 9 (2022: \u00a319 million).
Credit quality per class of loans and advances The Group defines the following classifications for all loans and advances to customers: High, Satisfactory, Low and Credit impaired. These are segmented by 12 month probability of default (PD) under IFRS 9. IFRS 9 12 month PD High quality: <=3.02% Satisfactory quality >=3.03% \u2013 11.10% Low quality >=11.11% Credit impaired 100% Unsecured lending At 4 March 2023 Stage 1 \u00a3m Stage 2 \u00a3m Stage 3 \u00a3m Total \u00a3m High quality 3,593 125 \u2013 3,718 Satisfactory quality 641 215 \u2013 856 Low quality 78 139 \u2013 217 Credit impaired \u2013 \u2013 203 203 Total 4,312 479 203 4,994 At 5 March 2022 Stage 1 \u00a3m Stage 2 \u00a3m Stage 3 \u00a3m Total \u00a3m High quality 3,401 233 \u2013 3,634 Satisfactory quality 381 181 \u2013 562 Low quality 44 100 \u2013 144 Credit impaired \u2013 \u2013 165 165 Total 3,826 514 165 4,505 Secured lending At 4 March 2023 Stage 1 \u00a3m Stage 2 \u00a3m Stage 3 \u00a3m Total \u00a3m High quality 533 30 \u2013 563 Satisfactory quality \u2013 10 \u2013 10 Low quality \u2013 2 \u2013 2 Credit impaired \u2013 \u2013 6 6 Total 533 42 6 581 At 5 March 2022 Stage 1 \u00a3m Stage 2 \u00a3m Stage 3 \u00a3m Total \u00a3m High quality 713 59 \u2013 772 Satisfactory quality \u2013 1 \u2013 1 Low quality \u2013 \u2013 \u2013 \u2013 Credit impaired \u2013 \u2013 9 9 Total 713 60 9 782 e. Significant estimate \u2013 macro-economic scenarios IFRS 9 requires that the measurement of ECL should reflect an unbiased and probability weighted amount that is determined by evaluating a range of forward-looking economic assumptions. The Group has engaged an external supplier to provide economic forecasts which are subject to review, challenge and approval through the Bank\u2019s governance processes. The ECL models utilise 4 scenarios (2022: 4 scenarios) including a \u2018base case\u2019 scenario considered to be the most likely outcome together with an upside, downside scenario and severe downside. The base case has been assigned a probability weighting of 40% with the upside, downside and severe downside scenarios weighted 30%, 25%, 5% respectively (2022: base scenario 45%; upside, downside and severe downside scenarios weighted 35%, 15%, 5% respectively). The key macro-economic assumptions included in the ECL calculation (shown as five-year averages from the reporting date) were: As at 4 March 2023 Base % Upside % Downside % Severe downside % Unemployment rate 5.3 4.5 6.2 7.6 Consumer price growth 3.4 2.9 3.8 4.3 GDP 0.8 1.4 0.3 (0.3) Mortgage debt as a percentage of household income 99.9 97.6 102.0 104.5 Real household disposable income 0.8 1.2 0.2 (0.3) Probability weighting (%) 40% 30% 25% 5% Sensitivity analysis impact on impairment of 100 per cent weighting \u00a3(2.5)m \u00a3(12.5)m \u00a312.9m \u00a344.5m f. Management overlays and post model adjustments (PMAs) Overlays and PMAs are short-term increases or decreases to the ECL at either a customer or portfolio level to account for items that have not been fully reflected in the existing models. Consistent with the most recent recommendations of the Taskforce on Disclosures about Expected Credit Losses (DECL), the Group has defined overlays as adjustments made outside of the granular account level ECL calculation and PMAs as being calculated at granular account level, most often in respect of known data or model limitations. Internal governance is in place to regularly monitor management overlays and to reduce the reliance on management overlays through model recalibration or redevelopment, as appropriate. Management overlays and PMAs applied in estimating the reported ECL at 4 March 2023 are set out in the following table. The table includes adjustments in relation to data and model limitations resulting from economic uncertainty related to the cost of living crisis. It shows the adjustments applicable to the scenario weighted ECL numbers. At 4 March 2023 \u00a3m At 5 March 2022 \u00a3m Economic adjustment (4) 10 Operational overlays 1 5 Total (3) 15 The proportion of net overlays and post model adjustments is (1)% of the total ECL provision as at 4 March 2023 (2022: 9%). Economic overlays are included where management judge the underlying models do not respond adequately to the economic scenarios. During the year, the historic economic post model adjustment relating to COVID-19 was released, however, a new economic post model adjustment was introduced given the cost of living crisis and uncertainty around the potential impact the large inflation increase may have on customer behaviour or change in economic outlook. The majority of the Operational overlays relate to model or data limitations that are manually corrected, whilst a permanent fix is being developed. g. Collateral relating to loans and advances to customers Mortgages held over residential properties represent the only collateral held by the Group for retail exposures. The market value of collateral held for impaired loans and loans past due but not impaired was \u00a317 million (2022: \u00a323 million). An analysis by loan-to-value (LTV) ratio of the Group\u2019s residential mortgage lending is presented below. The value of collateral used in determining the LTV ratios has been estimated based upon the last actual valuation, adjusted to take into account subsequent movements in house prices. At 4 March 2023 Stage 1 \u00a3m Stage 2 \u00a3m Stage 3 \u00a3m Total \u00a3m Less than 70% 519 41 5 565 70% to 80% 14 1 1 16 80% to 90 % \u2013 \u2013 \u2013 \u2013 90% to 100% \u2013 \u2013 \u2013 \u2013 Greater than 100% \u2013 \u2013 \u2013 \u2013 Total mortgages 533 42 6 581 At 5 March 2022 Stage 1 \u00a3m Stage 2 \u00a3m Stage 3 \u00a3m Total \u00a3m Less than 70% 607 57 8 672 70% to 80% 102 2 1 105 80% to 90% 4 1 \u2013 5 90% to 100% \u2013 \u2013 \u2013 \u2013 Greater than 100% \u2013 \u2013 \u2013 \u2013 Total mortgages 713 60 9 782 h. Forbearance The Group provides support to customers who are experiencing financial difficulties. Forbearance is defined as relief granted by a lender to assist customers in financial difficulty, through arrangements which temporarily allow the customer to pay an amount other than the contractual amounts due. These temporary arrangements may be initiated by the customer or the Group where financial difficulty would prevent repayment within the original terms and conditions of the contract. The main aim of forbearance is to support customers in returning to a position where they are able to meet their contractual obligations. The Group has well defined forbearance policies and processes. A number of forbearance options are made available to customers. These include arrangements to repay arrears over a period of time by making payments above the contractual amount, that ensure the loan is repaid within the original repayment term and short-term concessions, where the borrower is allowed to make reduced repayments (or in exceptional circumstances, no repayments) on a temporary basis to assist with short-term financial hardship. The table below details the values of secured and unsecured advances that are subject to the Group\u2019s forbearance programmes: 2023 2022 Gross loans and advances subject to forbearance \u00a3m Forbearance as a total of loans and advances % Forbearance covered by impairment provision % Gross loans and advances subject to forbearance \u00a3m Forbearance as a total of loans and advances % Forbearance covered by impairment provision % Unsecured 61 1.2 69.1 52 1.2 72.0 Secured 1 0.2 4.5 2 0.3 25.7 Total 62 1.1 68.1 54 1 70.1 ",
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"fact-583": {
"value": "Impairments on financial assets are accounted for using a 3-stage forward-looking expected credit loss (ECL) approach in line with IFRS 9. The Group is required to record an allowance for ECL for all loans and other debt financial assets not held at FVTPL, together with loan commitments and financial guarantee contracts. ECLs are based on the difference between the cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. For Financial Services portfolios of loans, such as credit card lending, storecard lending and personal loans, impairment provisions are calculated for groups of assets, otherwise impairment is identified at a counterparty specific level. The allowance is calculated by reference to the estimated probability of default (PD), exposure at default (EAD) and loss given default (LGD). \u2014 The probability of default represents the likelihood of a borrower defaulting within 12 months from the balance sheet date or within the expected lifetime of the borrower. \u2014 Exposure at default represents the expected amount due from the borrower at the point of default by reference to exposure at the balance sheet date adjusted for expected future changes including repayments and utilisation of undrawn facilities. \u2014 Loss given default represents the expected percentage loss at the point of default relative to the EAD. The estimate takes into account utilisation of any expected collections and recoveries strategies, debt sale arrangements and collateral. ECL 3 stage model \u2014 Stage 1 \u2013 Impairment allowance on financial assets that have not significantly increased in credit risk since origination, nor are credit impaired, is calculated using the probability that a borrower will default within 12 months from the balance sheet date. Interest income is recognised on the gross carrying value of the financial asset. \u2014 Stage 2 \u2013 Where a financial asset exhibits a significant increase in credit risk (SICR) but is not yet considered to be credit impaired, the probability of default considered in the impairment allowance is based upon the lifetime probability of the borrower defaulting. Interest income continues to be recognised on the gross carrying value of the financial asset. \u2014 Stage 3 \u2013 Assets considered to be credit impaired resulting from one or more events that have occurred that has resulted in a detrimental impact on the estimated future cash flows of the asset. Stage 3 assets will continue to recognise lifetime expected impairment losses (with a 100% probability of default) and interest income will be recognised on the net carrying amount (i.e. gross amount less impairment allowance). Significant increases in credit risk The Group determines whether there has been a significant increase in credit risk by reference to quantitative thresholds, qualitative indicators and the backstop presumption that credit risk has significantly increased if contractual payments are more than 30 days past due. Quantitative thresholds have been determined that when the lifetime PD of an instrument as at the reporting date has increased to greater than a specified multiple of the origination lifetime PD, a significant increase in credit risk is deemed to have occurred. Qualitative tests are based around the Group\u2019s credit origination policy rules for Financial Services customers. These rules are in place at account origination in order to decline accounts that may demonstrate risk factors outside of risk appetite that are not yet reflected in PD measures. At the reporting date, if an account satisfies any policy decline rules that it had not at the point of origination, it will be considered to have significantly increased in credit risk. There is no probationary period applied in respect of accounts that cure from stage 2 to stage 1. Transfer criteria have been subject to extensive analysis to ensure that they appropriately reflect the flow of accounts from origination to default so as to maximise the number of accounts that flow through the stages and minimise accounts that jump from stage 1 to stage 3, or that fail to enter stage 3 from stage 2. The Group has applied the low credit risk exemption in respect of its high quality treasury portfolio held for liquidity purposes. This exemption permits low credit risk debt securities (i.e. those considered investment grade) to remain in Stage 1 without an assessment of significant increase in credit risk. Definition of default The Group\u2019s definition of default is used in determining those accounts classified as stage 3 (i.e. credit impaired). The Group has chosen not to rebut the backstop presumption prescribed by IFRS 9 that where an account is 90 days or more past its due date then default has occurred. The Group has also defined a number of unlikeliness-to-pay criteria that result in an account being deemed to have defaulted. These include: \u2014 Where operational collections activities have been exhausted on accounts that are less than 90 days past due and the account is subject to recoveries processes \u2014 If any forbearance has been granted on the account (see forbearance definition below). \u2014 Where the customer is subject to insolvency proceedings \u2014 Where the customer is deceased Where an account no longer meets any of the default criteria, such as by bringing payments back up to date, the Group will continue to consider the account as being in default for the probation period (24 months for Loans and Cards, and 12 months for Storecards) from the date when it last met the definition of default. Write-off Loans and advances to customers are written off (either partially or in full) when there is no realistic prospect of recovery. This is generally the case when the Group determines that the borrower does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to write-off. Subsequent recoveries of amounts previously written off result in impairment gains recorded in the statement of comprehensive income. Expected lifetime For the purposes of considering the lifetime probability of default, the expected lifetime of a financial asset is the contractual term where this is fixed within the contract, or in the case of revolving products such as credit cards a behavioural life is determined by reference to historic trends. Modified financial assets When the contractual cash flows of a financial asset have been renegotiated or modified and the financial asset was not derecognised, its gross carrying amount is recalculated as the present value of the modified contractual cash flows, discounted at the original effective interest rate with a gain or loss recognised in the income statement. ",
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"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-556": {
"value": "Market risk The Group uses forward contracts to hedge foreign exchange and commodity exposures, and interest rate swap contracts to hedge interest rate exposures. The use of financial derivatives is governed by Board approved policies which prohibits the use of derivative financial instruments for speculative purposes. a. Foreign currency risk Currency risk is the risk of increased costs arising from unexpected movements in exchange rates impacting the Group\u2019s foreign currency denominated supply contracts. The Group\u2019s currency risk policy seeks to limit the impact of fluctuating exchange rates on the Group\u2019s income statement by requiring highly probable foreign currency cash flows to be hedged. Highly probable foreign currency cash flows, which may be either contracted or uncontracted, are hedged on a layered basis using foreign currency forward contracts. The Group has exposure to currency risk on balances held in foreign currency denominated bank accounts, which may arise due to short-term timing differences on maturing hedges and underlying supplier payments. The Group considers that a ten per cent movement in exchange rates against pound sterling is a reasonable measure of volatility. The impact of a ten per cent movement in the exchange rate of US dollar and euro versus pound sterling as at the balance sheet date, with all other variables held constant, is summarised in the table below: Group 2023 Change in exchange rate impact on post-tax profit +/-10% \u00a3m 2023 Change in exchange rate impact on cash flow hedge reserve +/-10% \u00a3m 2022 Change in exchange rate impact on post-tax profit +/-10% \u00a3m 2022 Change in exchange rate impact on cash flow hedge reserve +/-10% \u00a3m USD/GBP 5/(6) (110)/135 3/(3) (115)/141 EUR/GBP 2/(3) (32)/40 3/(3) (29)/36 Financial Services The Bank is exposed to foreign exchange (FX) risk through its holding of cash denominated in foreign currencies, primarily Euro and US Dollar, within its travel money bureaux in Sainsbury\u2019s stores and its currency dispensing ATM machines. The FX positions are hedged on a regular basis. b. Interest rate risk Interest rate risk is the risk of increased costs or lower income arising from unexpected movements in interest rates and inflation rates impacting the Group\u2019s borrowing and investment portfolios. The Group\u2019s interest rate policy seeks to limit the impact of fluctuating interest and inflation rates by maintaining a diversified mix of fixed rate, floating rate and variable capped rate liabilities. Interest on financial instruments is classified as fixed rate if interest resets on the borrowings are less frequent than once every 12 months. Interest on financial instruments is classified as floating rate if interest resets on the borrowings occur every 12 months or more frequently. Floating rate instruments are considered variable capped rate if the nominal interest rate is subject to a cap. The mix of the Group\u2019s financial assets and liabilities at the balance sheet date was as follows: Fixed \u00a3m Floating \u00a3m Variable capped \u00a3m Total \u00a3m Interest bearing financial assets at fair value through other comprehensive income 25 664 \u2013 689 Amounts due from Financial Services customers and other banks 2,690 2,702 \u2013 5,392 Cash and cash equivalents 456 863 \u2013 1,319 Borrowings (122) \u2013 (539) (661) Amounts due to Financial Services customers and banks (1,477) (4,469) \u2013 (5,946) Derivative effect: Interest rate swaps (1,143) 1,143 \u2013 \u2013 Inflation linked swaps (490) \u2013 490 \u2013 At 4 March 2023 (61) 903 (49) 793 Fixed \u00a3m Floating \u00a3m Variable capped \u00a3m Total \u00a3m Interest bearing financial assets at fair value through other comprehensive income 121 297 \u2013 418 Amounts due from Financial Services customers and other banks 2,799 2,390 \u2013 5,189 Cash and cash equivalents 547 278 \u2013 825 Bank Overdrafts \u2013 (7) \u2013 (7) Borrowings (179) \u2013 (575) (754) Amounts due to Financial Services customers and banks (603) (4,656) \u2013 (5,259) Derivative effect: Interest rate swaps (1,952) 1,952 \u2013 \u2013 Inflation linked swaps (490) \u2013 490 \u2013 At 5 March 2022 243 254 (85) 412 (i) Cash flow sensitivity for floating rate instruments The Group considers that a 100 basis point movement in interest rates is a reasonable measure of volatility. The sensitivity of floating rate balances to a change of 100 basis points in the interest rate (or such lesser amount as would result in a zero rate of interest) at the balance sheet date is shown below: 2023 Impact on post-tax profit \u00a3m 2023 Impact on cash flow hedge reserve \u00a3m 2022 Impact on post-tax profit \u00a3m 2022 Impact on cash flow hedge reserve \u00a3m Change in floating rate +/-100bps 1/2 (0)/0 (5)/9 (0)/0 (ii) Cash flow sensitivity for variable capped rate liabilities The Group holds \u00a3539 million of capped inflation-linked borrowings (2022: \u00a3575 million) of which \u00a3490 million (2022: \u00a3490 million) have been swapped into fixed rate borrowings using inflation rate swaps maturing on 19 April 2023. The Group considers that a 100 basis point movement in the RPI rate is a reasonable measure of volatility. The sensitivity of variable capped balances to a change of 100 basis points in the RPI rate at the balance sheet date is shown below: 2023 Impact on post-tax profit \u00a3m 2023 Impact on cash flow hedge reserve \u00a3m 2022 Impact on post-tax profit \u00a3m 2022 Impact on cash flow hedge reserve \u00a3m Change in floating rate +/-100bps 0/(0) 1/(1) (0)/0 5/(6) Financial Services Interest Rate Risk in the Banking Book (IRRBB) arises from interest rate movements which impact the present value and timing of future cash flows resulting in changes in the underlying value of a bank\u2019s assets and liabilities and hence its economic value. Interest rates movements also affect a bank\u2019s earnings by altering interest-sensitive income and expenses, affecting its net interest income. The main types of interest rate risk faced by the Bank are: \u2014 Repricing gap risk: the risk arising from timing differences in the interest rate changes of bank assets and liabilities (e.g. fixed rate personal loans and instant access savings accounts). \u2014 Yield curve risk: the risk arising from changes in the slope and shape of the yield curve. \u2014 Basis risk: risk arising from imperfect correlation between different interest rate indices (e.g. administered rate on savings products and treasury assets linked to SONIA). \u2014 Prepayment risk: the risk arising from the timing of customer prepayments which differ from planning and hedging assumptions. \u2014 Pipeline risk: the risk of a customer drawing down, or not, a product at a rate which is unfavourable for the Bank. \u2014 Credit Spread Risk: the risk of adverse effects resulting from a change in credit spreads, arising via the Bank\u2019s Treasury portfolio. Interest risk exposure is actively managed within limits that are aligned with the Bank\u2019s risk appetite by using financial instruments such as interest rate swaps and by taking into account natural hedges between assets and liabilities with similar repricing characteristics. Hedging strategies are implemented and reviewed to ensure the Bank remains within its limits. The Bank\u2019s market risk appetite statements defines limits for the following market risk measures: \u2014 Capital at Risk: an aggregate measure based on assessing each of the IRRBB risks and allocating a capital charge against each risk driver using a series of plausible but severe interest rate stresses. This includes parallel and non-parallel movements of the yield curve. Where applicable a customer behavioural repayment profile is applied. \u2014 Annual Earnings at Risk: measures the sensitivity of the Bank\u2019s earnings over the next 12 months, in response to adverse movements in interest rates. c. Commodity Risk Commodity risk is the risk of increased costs arising from unexpected movements in commodity prices impacting the Group\u2019s own use consumption of electricity, gas and diesel. The Group hedges own use consumption of electricity and gas with forward purchases under flexible purchasing arrangements with its suppliers as well as power purchase agreements for electricity. The Group uses a combination of purchasing agreements and financial derivatives to hedge fuel exposures on a layered basis using contracts for difference. See note 30 for derivative disclosures. ",
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"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
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"fact-557": {
"value": "Capital risk management The Group defines capital as total equity plus net debt. The Board\u2019s capital objective is to maintain a strong and efficient capital base to support the Group\u2019s strategic objectives, provide optimal returns for shareholders and safeguard the Group\u2019s status as a going concern. There has been no change to capital risk management policies during the year. The Board monitors a broad range of financial metrics including return on capital employed, balance sheet gearing and fixed charge cover. The Board can manage the Group\u2019s capital structure by diversifying the debt portfolio, adjusting the size and timing of dividends paid to shareholders, recycling capital through sale and leaseback transactions, issuing new shares or repurchasing shares in the open market and flexing capital expenditure. From time-to-time, the ESOT may purchase shares in the Company from the open market for the purpose of satisfying awards under the Group\u2019s employee share plans however the Group does not currently operate a defined share buy-back plan. The Revolving Credit Facility and Term Loan have a single repeating financial covenant. Part of the Group\u2019s capital risk management is to ensure compliance with both the financial and general covenants included within the Group\u2019s borrowing facilities. Examples of general covenants include restrictions on the permitted value of asset disposals and incremental indebtedness. In addition to there being no breaches of financial and general covenants in the financial year ended 4 March 2023, there is healthy headroom within all covenants as at 4 March 2023. Financial Services capital resources (unaudited) The following table analyses the regulatory capital resources under CRD IV. From a prudential perspective, Sainsbury\u2019s Bank is monitored and supervised on a consolidated basis with its subsidiary, Home Retail Group Card Services Limited, from the point of acquisition of Argos Financial Services in September 2016. The Bank has obtained an individual consolidation waiver from the PRA, which allows the Bank to monitor its capital position on a consolidated basis only. Therefore, the capital position shown below is on a regulatory consolidated basis. The Bank implemented IFRS 9, effective 1 March 2018. The following table analyses the regulatory capital resources under CRD IV and aligns to the phase-in approach of IFRS 9 impacts on capital, over a five-year period. Transitional 2023 IFRS 9 \u00a3m Full impact 2023 IFRS 9 \u00a3m Transitional 2022 IFRS 9 \u00a3m Full impact 2022 IFRS 9 \u00a3m Common Equity Tier 1 (CET 1) capital: Ordinary share capital 701 701 701 701 Allowable reserves 165 165 126 126 Regulatory adjustments (144) (167) (142) (180) Tier 1 capital 722 699 685 647 Tier 2 capital (loan notes \u2013 listed) 113 113 109 109 Total capital 835 812 794 756 Regulatory capital is calculated under the Capital Requirements Regulations and Capital Requirements Directive (collectively known as CRD IV) and aligns to the phase-in approach of IFRS 9 impacts on capital, over a 5-year period from 1 March 2018, as enacted in the UK. Common Equity Tier 1 (CET 1) capital includes ordinary share capital, other reserves, losses and regulatory deductions. The movement of CET 1 capital during the financial year is analysed as follows: Transitional 2023 IFRS 9 \u00a3m Full impact 2023 IFRS 9 \u00a3m Transitional 2022 IFRS 9 \u00a3m Full impact 2022 IFRS 9 \u00a3m At 1 March 2022 and 1 March 2021 685 647 791 726 Verified profits attributable to shareholders 38 38 22 22 Foreseeable dividend \u2013 \u2013 (50) (50) Transitional adjustments (15) \u2013 (27) \u2013 Other reserve movements 1 1 (2) (2) Movement in additional value adjustments (1) (1) 1 1 Movement in intangible assets 15 15 (50) (50) Movement in Non Performing Exposures insufficient coverage (1) (1) \u2013 \u2013 At 28 February 2023 and 28 February 2022 722 699 685 647 Leverage ratio (unaudited) The leverage ratio is defined as the ratio of Tier 1 capital to adjusted assets, which is measured below on a regulatory consolidated basis. The denominator represents the total non-risk weighted assets of the regulatory group (Bank and Home Retail Group Card Services Limited) adjusted for certain off balance sheet exposures assets and regulatory deductions and provides a non-risk-weighted \u2018backstop\u2019 capital measure. The leverage ratio is calculated below as at 28 February 2023 on the UK basis which allows central bank assets to be excluded from the leverage exposures. The Bank\u2019s leverage ratio of 9.6% exceeds the minimum Basel leverage ratio of 3%. Transitional 2023 IFRS 9 \u00a3m Full impact 2023 IFRS 9 \u00a3m Transitional 2022 IFRS 9 \u00a3m Full impact 2022 IFRS 9 \u00a3m Components of the leverage ratio Total assets as per published financial statements (Sainsbury\u2019s Bank plc consolidated group) 1 7,209 7,209 6,516 6,516 Movement on consolidation of subsidiary undertakings 1 (6) (6) \u2013 \u2013 Exposure value for derivatives and securities financing transactions 32 32 37 37 Off balance sheet exposures: unconditionally cancellable (10%) 867 867 878 878 Off balance sheet: other (100%) 2 2 5 5 Other adjustments (242) (265) (169) (207) Central Bank Claims (331) (331) (219) (219) 7,531 7,508 7,048 7,010 Tier 1 capital 722 699 685 647 Leverage ratio 9.6% 9.3% 9.7% 9.2% 1. As a result of Sainsbury\u2019s Bank moving to prepare consolidated accounts, the prior year comparatives have been restated to use the total assets of the Consolidated Financial Services sector. A deconsolidation adjustment is then applied to get the total assets of the prudential regulated group. Capital management The Bank manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of its activities. Capital adequacy is monitored on an ongoing basis by senior management, the ALCO, the Executive Risk Committee and the Board Risk Committee. Our submissions to the PRA in the year have shown that the Bank has complied with all externally imposed capital requirements. The Bank will disclose Pillar 3 information as required by the Capital Requirements Regulations and PRA prudential sourcebook on the J Sainsbury plc external website. ",
"dimensions": {
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"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
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"fact-518": {
"value": "29 Financial instruments Accounting policies a) Financial assets The Group classifies all of its financial assets as either amortised cost, fair value through other comprehensive income (FVOCI) or fair value through profit or loss (FVTPL). The Group\u2019s non-derivative financial assets comprise: \u2014 Cash and cash equivalents (note 31) \u2014 Trade and other receivables, excluding prepayments and accrued income (note 20) \u2014 Amounts due from Financial Services customers and other banks (note 21) \u2014 Financial assets at FVOCI (note 18) To determine their classification and measurement category, IFRS 9 requires all financial assets, except equity instruments and derivatives, to be assessed based on a combination of the entity\u2019s business model for managing the assets and the instruments\u2019 contractual cash flow characteristics. In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are \u2018solely payments of principal and interest (SPPI)\u2019 on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. The business model assessment reflects how the Group manages the risks relating to the underlying financial assets, including whether the Group\u2019s principal objective is to collect the contractual cash flows arising from the instruments (amortised cost), to sell the financial instruments (FVTPL) or a combination thereof (FVOCI). Financial instruments at amortised cost Financial assets that are principally held for the collection of contractual cash flows and which pass the SPPI test are classified as amortised cost. For the Group this includes cash, receivables and amounts due from Financial Services customers and other banks. The Group has no intention of trading these assets. With the exception of trade receivables that do not contain a significant financing component, the Group initially measures these financial assets at fair value plus transaction costs. Subsequently these assets are carried at amortised cost less impairment using the effective interest rate method. Income from these financial assets is calculated on an effective interest rate basis and is recognised in the income statement. Financial assets at fair value through other comprehensive income Accounting policies are detailed in note 18. Financial assets at fair value through profit and loss The Group\u2019s derivatives are classified as fair value through profit or loss. They are carried in the statement of financial position at fair value with net changes in fair value recognised in the income statement. Financial assets are derecognised when the contractual cash flows from the asset have expired or have been transferred, usually by sale, and with them either substantially all the risks and rewards of the asset or significant risks and rewards, along with the unconditional ability to sell or pledge the asset. b) Financial liabilities The Group recognises all of its financial liabilities at amortised cost and all derivative financial liabilities are classified as FVTPL. Financial liabilities costs, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accrual basis in the income statement using the effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. The Group\u2019s non-derivative financial liabilities comprise: \u2014 Borrowings (note 33) \u2014 Trade and other payables, excluding deferred income, other taxes and social security costs payable, and other accruals (note 23) \u2014 Amounts due to Financial Services customers and banks (note 24) \u2014 Lease liabilities (note 15) Interest-bearing bank loans, overdrafts, other deposits and amounts due to Sainsbury\u2019s Bank customers are recorded initially at fair value, which is generally the proceeds received, net of direct issue costs. Subsequently, these liabilities are held at amortised cost using the effective interest rate method. Financial liabilities are derecognised when the obligation under the liability is discharged, cancelled, or expires. Financial assets and liabilities by category The carrying amount of the Group\u2019s financial assets, financial liabilities and derivative financial instruments as at the balance sheet date are as follows: Amortised cost \u00a3m Fair value through OCI \u00a3m Fair value through profit or loss \u00a3m Total \u00a3m Cash and cash equivalents 1,319 \u2013 \u2013 1,319 Trade and other receivables 477 \u2013 \u2013 477 Amounts due from Financial Services customers and other banks 5,392 \u2013 \u2013 5,392 Financial assets at FVOCI \u2013 1,009 \u2013 1,009 Trade and other payables (4,495) \u2013 \u2013 (4,495) Borrowings (656) \u2013 \u2013 (656) Amounts due to Financial Services customers and banks (5,946) \u2013 \u2013 (5,946) Derivative financial instruments \u2013 \u2013 213 213 Lease liabilities (6,489) \u2013 \u2013 (6,489) At 4 March 2023 (10,398) 1,009 213 (9,176) Amortised cost \u00a3m Fair value through OCI \u00a3m Fair value through profit or loss \u00a3m Total \u00a3m Cash and cash equivalents 825 \u2013 \u2013 825 Trade and other receivables 552 \u2013 \u2013 552 Amounts due from Financial Services customers and other banks 5,189 \u2013 \u2013 5,189 Financial assets at FVOCI \u2013 800 \u2013 800 Trade and other payables (4,218) \u2013 \u2013 (4,218) Borrowings (761) \u2013 \u2013 (761) Amounts due to Financial Services customers and banks (5,259) \u2013 \u2013 (5,259) Derivative financial instruments \u2013 \u2013 259 259 Lease liabilities (6,621) \u2013 \u2013 (6,621) At 5 March 2022 (10,293) 800 259 (9,234) c) Fair value estimation Set out below is a comparison of the carrying amount and the fair value of financial instruments that are carried in the financial statements at a value other than fair value. The fair values of financial assets and liabilities are based on prices available from the market on which the instruments are traded. Where market values are not available, the fair values of financial assets and liabilities have been calculated by discounting expected future cash flows at prevailing interest rates. The fair values of short-term deposits, trade receivables, other receivables, overdrafts and payables and lease liabilities are assumed to approximate to their book values. At 4 March 2023 Carrying amount \u00a3m Group fair value \u00a3m Financial assets Amounts due from Financial Services customers 1 5,392 5,340 Financial liabilities Loans due 2031 (539) (639) Tier 2 capital due 2028 (122) (131) Amounts due to Financial Services customers and other banks (5,946) (5,954) At 5 March 2022 Carrying amount \u00a3m Group fair value \u00a3m Financial assets Amounts due from Financial Services customers 1 5,189 5,216 Financial liabilities Loans due 2031 (575) (717) Tier 2 capital due 2023 (179) (180) Amounts due to Financial Services customers and other banks (5,259) (5,260) 1. Included within a portfolio fair value hedging relationship with \u00a33,033 million (2022: \u00a33,235 million) of interest rate swaps. The fair value of financial liabilities have been calculated by discounting cash flows at prevailing interest rates and are within Level 2 of the fair value hierarchy, with the exception of the Tier 2 Capital, where the fair value is calculated using prevailing market prices and is therefore Level 1. 29 Financial instruments continued Fair value measurements recognised in the balance sheet The following table provides an analysis of financial instruments that are recognised at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable: \u2014 Level 1 fair value measurements are derived from quoted market prices (unadjusted) in active markets for identical assets or liabilities at the balance sheet date. This level includes listed equity securities and debt instrument on public exchanges; \u2014 Level 2 fair value measurements are derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). The fair value of financial instruments is determined by discounting expected cash flows at prevailing interest rates; and \u2014 Level 3 fair value measurements are derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). Level 1 \u00a3m Level 2 \u00a3m Level 3 \u00a3m Total \u00a3m At 4 March 2023 Financial instruments at fair value through other comprehensive income Other financial assets \u2013 383 \u2013 383 Investment securities 626 \u2013 \u2013 626 Derivative financial assets \u2013 156 131 287 Derivative financial liabilities \u2013 (74) \u2013 (74) At 5 March 2022 Financial instruments at fair value through other comprehensive income Other financial assets \u2013 15 367 382 Investment securities 418 \u2013 \u2013 418 Derivative financial assets \u2013 111 180 291 Derivative financial liabilities \u2013 (32) \u2013 (32) Reconciliation of Level 3 fair value measurements of financial assets and liabilities: Commodity derivatives \u00a3m Total \u00a3m At 6 March 2022 180 180 In cost of sales in the Group income statement (30) (30) In other comprehensive income (19) (19) At 4 March 2023 131 131 Financial instruments at FVTOCI \u00a3m Commodity derivatives \u00a3m Total \u00a3m At 7 March 2021 291 6 297 In cost of sales in the Group income statement \u2013 76 76 In other comprehensive income 76 98 174 At 5 March 2022 367 180 547 29 Financial instruments continued Level 3 other financial assets Other financial assets categorised as Level 3 in the prior year of \u00a3367 million relate to the Group\u2019s beneficial interest in a property investment pool. Given the Group has reached an agreement on an acquisition price for the properties within this investment pool during the period (see note 15 for further details), these financial assets have been reclassified to Level 2. Level 3 derivative financial assets \u2013 power purchase agreement The Group has entered into several long-term fixed price Power Purchase agreements with independent producers. Included within derivative financial assets is \u00a3131 million (2022: \u00a3180 million) relating to these agreements. The Group has entered into a new Power Purchase Agreement during the year, and this has been designated as a cash flow hedge. The Group values its Power Purchase agreements as the net present value of the estimated future usage at the contracted fixed price less the market implied forward energy price discounted at the prevailing swap rate. The Group also makes an assumption regarding expected energy output based on the historical performance and the producer\u2019s estimate of expected electricity output. The sensitivity of this balance to changes of 20 per cent in the assumed rate of energy output and 20 per cent in the implied forward energy prices holding other assumptions constant is shown below: Not in a hedge relationship 2023 Change in volume +/-20.0% \u00a3m 2023 Change in electricity forward pricing +/-20.0% \u00a3m 2022 Change in volume +/-20.0% \u00a3m 2022 Change in electricity forward pricing +/-20.0% \u00a3m Derivative financial instruments 20/(20) 11/(11) 23/(23) 16/(16) Designated in a cash flow hedge relationship 2023 Change in volume +/-20.0% \u00a3m 2023 Change in electricity forward pricing +/-20.0% \u00a3m 2022 Change in volume +/-20.0% \u00a3m 2022 Change in electricity forward pricing +/-20.0% \u00a3m Derivative financial instruments 43/(44) 15/(16) 32/(32) 20/(20) 29 Financial instruments continued d) Offsetting financial instruments Financial assets and liabilities are offset, and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty. The following table sets out the Group\u2019s financial assets and financial liabilities that are subject to counterparty offsetting or a master netting agreement. The master netting agreements regulate settlement amounts in the event a party defaults on their obligations. Gross amounts of recognised financial assets and liabilities \u00a3m Amounts offset in the balance sheet \u00a3m Net amounts recognised in the balance sheet \u00a3m Amounts not offset in balance sheet Cash collateral pledged \u00a3m Net amounts \u00a3m Assets Derivative financial assets 287 \u2013 287 (49) 238 Trade and other receivables 624 (147) 477 \u2013 477 Cash and cash equivalents 1,319 \u2013 1,319 \u2013 1,319 Total assets at 4 March 2023 2,230 (147) 2,083 (49) 2,034 Liabilities Derivative financial liabilities (74) \u2013 (74) 52 (22) Trade and other payables (4,642) 147 (4,495) \u2013 (4,495) Total liabilities at 4 March 2023 (4,716) 147 (4,569) 52 (4,517) Assets Derivative financial assets 291 \u2013 291 (20) 271 Trade and other receivables 643 (91) 552 \u2013 552 Cash and cash equivalents 825 \u2013 825 \u2013 825 Total assets at 5 March 2022 1,759 (91) 1,668 (20) 1,648 Liabilities Derivative financial liabilities (32) \u2013 (32) 20 (12) Trade and other payables (4,309) 91 (4,218) \u2013 (4,218) Total liabilities at 5 March 2022 (4,341) 91 (4,250) 20 (4,230) The Group holds certain financial derivatives which are subject to credit support agreements. Under these agreements cash collateral is posted by one party to the other party should the fair value of the financial derivative exceed a pre-agreed level. As at 4 March 2023, the Group held no collateral against these financial derivative assets (2022: \u00a3nil). Financial Services has derivatives that are governed by the International Swaps and Derivatives Association and their associated credit support annex bilateral agreements where if the fair value exceeds a pre-agreed level, cash collateral is posted. As at 4 March 2023, Financial Services and its subsidiary had pledged / posted collateral of \u00a349 million (2022: provided collateral of \u00a320 million) against the derivatives and received collateral of \u00a352 million (2022: \u00a320 million). The Group also operates a cash pooling arrangement and collective net overdraft facility with its main clearing bank. As at 4 March 2023 the Group had a net overdraft of \u00a3nil (2022: \u00a37 million) under this facility. 29 Financial instruments continued ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-558": {
"value": "Accounting policies a) Financial assets The Group classifies all of its financial assets as either amortised cost, fair value through other comprehensive income (FVOCI) or fair value through profit or loss (FVTPL). The Group\u2019s non-derivative financial assets comprise: \u2014 Cash and cash equivalents (note 31) \u2014 Trade and other receivables, excluding prepayments and accrued income (note 20) \u2014 Amounts due from Financial Services customers and other banks (note 21) \u2014 Financial assets at FVOCI (note 18) To determine their classification and measurement category, IFRS 9 requires all financial assets, except equity instruments and derivatives, to be assessed based on a combination of the entity\u2019s business model for managing the assets and the instruments\u2019 contractual cash flow characteristics. In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are \u2018solely payments of principal and interest (SPPI)\u2019 on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. The business model assessment reflects how the Group manages the risks relating to the underlying financial assets, including whether the Group\u2019s principal objective is to collect the contractual cash flows arising from the instruments (amortised cost), to sell the financial instruments (FVTPL) or a combination thereof (FVOCI). Financial instruments at amortised cost Financial assets that are principally held for the collection of contractual cash flows and which pass the SPPI test are classified as amortised cost. For the Group this includes cash, receivables and amounts due from Financial Services customers and other banks. The Group has no intention of trading these assets. With the exception of trade receivables that do not contain a significant financing component, the Group initially measures these financial assets at fair value plus transaction costs. Subsequently these assets are carried at amortised cost less impairment using the effective interest rate method. Income from these financial assets is calculated on an effective interest rate basis and is recognised in the income statement. Financial assets at fair value through other comprehensive income Accounting policies are detailed in note 18. Financial assets at fair value through profit and loss The Group\u2019s derivatives are classified as fair value through profit or loss. They are carried in the statement of financial position at fair value with net changes in fair value recognised in the income statement. Financial assets are derecognised when the contractual cash flows from the asset have expired or have been transferred, usually by sale, and with them either substantially all the risks and rewards of the asset or significant risks and rewards, along with the unconditional ability to sell or pledge the asset. b) Financial liabilities The Group recognises all of its financial liabilities at amortised cost and all derivative financial liabilities are classified as FVTPL. Financial liabilities costs, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accrual basis in the income statement using the effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. The Group\u2019s non-derivative financial liabilities comprise: \u2014 Borrowings (note 33) \u2014 Trade and other payables, excluding deferred income, other taxes and social security costs payable, and other accruals (note 23) \u2014 Amounts due to Financial Services customers and banks (note 24) \u2014 Lease liabilities (note 15) Interest-bearing bank loans, overdrafts, other deposits and amounts due to Sainsbury\u2019s Bank customers are recorded initially at fair value, which is generally the proceeds received, net of direct issue costs. Subsequently, these liabilities are held at amortised cost using the effective interest rate method. Financial liabilities are derecognised when the obligation under the liability is discharged, cancelled, or expires. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-584": {
"value": "a) Financial assets The Group classifies all of its financial assets as either amortised cost, fair value through other comprehensive income (FVOCI) or fair value through profit or loss (FVTPL). The Group\u2019s non-derivative financial assets comprise: \u2014 Cash and cash equivalents (note 31) \u2014 Trade and other receivables, excluding prepayments and accrued income (note 20) \u2014 Amounts due from Financial Services customers and other banks (note 21) \u2014 Financial assets at FVOCI (note 18) To determine their classification and measurement category, IFRS 9 requires all financial assets, except equity instruments and derivatives, to be assessed based on a combination of the entity\u2019s business model for managing the assets and the instruments\u2019 contractual cash flow characteristics. In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are \u2018solely payments of principal and interest (SPPI)\u2019 on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. The business model assessment reflects how the Group manages the risks relating to the underlying financial assets, including whether the Group\u2019s principal objective is to collect the contractual cash flows arising from the instruments (amortised cost), to sell the financial instruments (FVTPL) or a combination thereof (FVOCI). Financial instruments at amortised cost Financial assets that are principally held for the collection of contractual cash flows and which pass the SPPI test are classified as amortised cost. For the Group this includes cash, receivables and amounts due from Financial Services customers and other banks. The Group has no intention of trading these assets. With the exception of trade receivables that do not contain a significant financing component, the Group initially measures these financial assets at fair value plus transaction costs. Subsequently these assets are carried at amortised cost less impairment using the effective interest rate method. Income from these financial assets is calculated on an effective interest rate basis and is recognised in the income statement. Financial assets at fair value through other comprehensive income Accounting policies are detailed in note 18. Financial assets at fair value through profit and loss The Group\u2019s derivatives are classified as fair value through profit or loss. They are carried in the statement of financial position at fair value with net changes in fair value recognised in the income statement. Financial assets are derecognised when the contractual cash flows from the asset have expired or have been transferred, usually by sale, and with them either substantially all the risks and rewards of the asset or significant risks and rewards, along with the unconditional ability to sell or pledge the asset. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialAssetsExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-585": {
"value": "b) Financial liabilities The Group recognises all of its financial liabilities at amortised cost and all derivative financial liabilities are classified as FVTPL. Financial liabilities costs, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accrual basis in the income statement using the effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. The Group\u2019s non-derivative financial liabilities comprise: \u2014 Borrowings (note 33) \u2014 Trade and other payables, excluding deferred income, other taxes and social security costs payable, and other accruals (note 23) \u2014 Amounts due to Financial Services customers and banks (note 24) \u2014 Lease liabilities (note 15) Interest-bearing bank loans, overdrafts, other deposits and amounts due to Sainsbury\u2019s Bank customers are recorded initially at fair value, which is generally the proceeds received, net of direct issue costs. Subsequently, these liabilities are held at amortised cost using the effective interest rate method. Financial liabilities are derecognised when the obligation under the liability is discharged, cancelled, or expires. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-559": {
"value": "c) Fair value estimation Set out below is a comparison of the carrying amount and the fair value of financial instruments that are carried in the financial statements at a value other than fair value. The fair values of financial assets and liabilities are based on prices available from the market on which the instruments are traded. Where market values are not available, the fair values of financial assets and liabilities have been calculated by discounting expected future cash flows at prevailing interest rates. The fair values of short-term deposits, trade receivables, other receivables, overdrafts and payables and lease liabilities are assumed to approximate to their book values. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsAtFairValueThroughProfitOrLossExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-560": {
"value": "d) Offsetting financial instruments Financial assets and liabilities are offset, and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty. The following table sets out the Group\u2019s financial assets and financial liabilities that are subject to counterparty offsetting or a master netting agreement. The master netting agreements regulate settlement amounts in the event a party defaults on their obligations. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForOffsettingOfFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-519": {
"value": "30 Derivative financial instruments and hedge accounting Accounting policies The Group uses derivative financial instruments to hedge its exposure to foreign exchange, interest rate and commodity risks. All derivative financial instruments are initially measured at fair value on the contract date and are also measured at fair value at subsequent reporting dates. Where derivatives do not qualify for hedge accounting, any changes in the fair value of the derivative financial instrument are recognised in the income statement as they arise. To qualify for hedge accounting, the Group documents, at the inception of the hedge, the hedging risk management strategy, the relationship between the hedging instrument and the hedged item or transaction, the nature of the risks being hedged and an assessment of the effectiveness of the hedging relationship to ensure it is highly effective on an ongoing basis. Where a derivative does qualify for hedge accounting, any changes in fair value are recognised depending on the nature of the hedge relationship and the item being hedged as follows: i) Cash flow hedges Hedge relationships are classified as cash flow hedges where the derivative financial instruments hedge the Group\u2019s exposure to variability in cash flows resulting from a highly probable forecasted transaction. These include the exchange rate risk of inventory purchases denominated in foreign currency, interest rate risk and commodity risk on purchases of power and fuel. Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognised directly in other comprehensive income and the ineffective portion is recognised immediately in the income statement. If a cash flow hedge is hedging a firm commitment or forecast transaction that results in the recognition of a non-financial asset or liability, then, at the time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in other comprehensive income are included in the initial measurement of the asset or liability. This applies to the Group\u2019s foreign currency hedges in relation to inventory purchases. ii) Fair value hedges The Group designates certain derivatives as fair value hedges where the derivative financial instrument hedges the change in fair value of the particular risks inherent in recognised assets or liabilities (fair value hedges). The Group has adopted IFRS 9 hedge accounting requirements for its fair value hedges of investment securities and its one-for-one hedge on Tier 2 Debt issuance within Sainsbury\u2019s Bank. The Group continues to adopt IAS 39 for its macro portfolio fair value hedges of fixed rate personal loans and residential mortgages, as it is permitted to do so under IFRS 9 and until the point that the new macro hedge accounting standard is finalised and adopted. Fair value hedging matches the change in fair value of designated hedged items against the corresponding change in value of the hedging derivative. The designated hedged item can be a recognised asset or liability, a firm commitment, or an identified portion of an asset. The effective part of any gain or loss on the hedged item adjusts the balance of the hedged item and is recognised in the income statement, offsetting the gain or loss on the hedging derivative. Should circumstances arise where the hedge relationship subsequently proves ineffective, is early settled, or is terminated the adjustment to the balance of the hedged item is amortised over the remaining life of the hedged item and to the income statement. Micro fair value hedging \u2013 IFRS 9 The Group has purchased a number of fixed rate debt investment securities and has issued fixed rate subordinated debt within Sainsbury\u2019s Bank. These instruments are hedged via plain vanilla interest rate swaps, with the critical economic terms of both the hedging instrument and hedged item matching. The notional amount, fixed interest legs and maturity dates are economically matched. Portfolio fair value hedging \u2013 IAS 39 The Group uses portfolio fair value hedging as a risk management tool for hedging interest rate risk on the Personal Loans and Mortgage portfolios. Portfolio fair value hedging allows the designation of the whole or part of a portfolio of assets or liabilities with similar risk exposures. The hedged item can be designated based on expected maturities to match the hedging derivative maturity. Hedge effectiveness is considered to have been met where the change in fair value of the hedged item offsets the change in fair value of hedging instruments, within the 80 to 125 per cent ratio corridor. The effects of hedge accounting on the Group\u2019s financial position and performance The fair value of derivative financial instruments has been disclosed in the balance sheet as follows: 2023 Asset \u00a3m 2023 Liability \u00a3m 2022 Asset \u00a3m 2022 Liability \u00a3m Non-current 217 (58) 213 (3) Current 70 (16) 78 (29) Total 287 (74) 291 (32) The table below provides a breakdown of the type of derivatives in fair value and cash flow hedges as well as derivatives not in a formal hedge accounting relationship. 2023 2022 Asset Liability Asset Liability Fair value \u00a3m Notional \u00a3m Fair value \u00a3m Notional \u00a3m Fair value \u00a3m Notional \u00a3m Fair value \u00a3m Notional \u00a3m Fair value hedges Interest rate swaps 99 2,149 (52) 675 35 2,249 (19) 986 Cash flow hedges Inflation rate swaps \u2013 490 \u2013 \u2013 5 490 \u2013 \u2013 Foreign exchange forward contracts 49 1,049 (17) 482 46 1,153 (13) 323 Commodity contracts 7 21 (5) 45 25 33 \u2013 \u2013 Power Purchase contracts 79 15 \u2013 \u2013 98 6 \u2013 \u2013 Derivatives not in a formal hedging relationship Interest rate swaps 1 209 \u2013 \u2013 \u2013 9 \u2013 \u2013 Cross currency swaps \u2013 \u2013 \u2013 \u2013 \u2013 44 \u2013 69 Foreign exchange forward contracts \u2013 14 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Power Purchase contracts 52 11 \u2013 \u2013 82 11 \u2013 \u2013 Total 287 3,958 (74) 1,202 291 3,995 (32) 1,378 30 Derivative financial instruments and hedge accounting continued Cash flow hedges
There is an economic relationship between the hedged items and the hedging instruments as the terms of the interest rate swaps, foreign exchange and
commodity forward contracts match the terms of the expected highly probable forecast transactions (i.e., notional amount and expected payment date).
The Group has established a hedge ratio of 1:1 for the hedging relationships as the underlying risk of the foreign exchange and commodity forward contracts
are identical to the hedged risk components. To test the hedge effectiveness, the Group uses the hypothetical derivative method and compares the changes
in the fair value of the hedging instruments against the changes in fair value of the hedged items attributable to the hedged risks.
Hedge ineffectiveness can arise from:
\u2014 Differences in the timing of the cash flows of the hedged items and the hedging instruments
\u2014 Different indexes (and accordingly different curves) linked to the hedged risk of the hedged items and hedging instruments
\u2014 The counterparties\u2019 credit risk differently impacting the fair value movements of the hedging instrument compared to the hedged items
\u2014 Changes to the forecasted cash flows of hedged items
At 4 March 2023 the maturity profile and average price/rate of the hedging instruments used in the Group\u2019s non-dynamic hedging strategies were as follows:
Maturity
At 4 March 2023
Less than
1 month 1 to 3 months
3 months to
1 year
One to five
years
More than five
years
Cash flow hedges
Interest rate risk
Notional amount \u2013 490 \u2013 \u2013 \u2013
Average interest receive \u2013 5.00% \u2013 \u2013 \u2013
Maturity
At 5 March 2022
Less than
1 month 1 to 3 months
3 months to
1 year
One to five
years
More than five
years
Cash flow hedges
Interest rate risk
Notional amount \u2013 \u2013 \u2013 490 \u2013
Average interest receive \u2013 \u2013 \u2013 1.37% \u2013
The impact of the hedged items on the Group\u2019s financial statements is as follows:
At 4 March 2023
Change in value of
hedged item for
calculating hedge
ineffectiveness
\u00a3m
Change in value
of hedging instrument
for calculating hedge
ineffectiveness
\u00a3m
Cumulative impact
on cash flow
hedge reserve
\u00a3m
Cash flow hedges
Foreign exchange forward contracts (123) 123 9
Commodity contracts 11 (11) 2
Power Purchase Agreements 19 (19) 79
At 5 March 2022
Change in value of
hedged item for
calculating hedge
ineffectiveness
\u00a3m
Change in value
of hedging instrument
for calculating hedge
ineffectiveness
\u00a3m
Cumulative
impact
on cash flow
hedge reserve
\u00a3m
Cash flow hedges
Inflation rate swaps (8) 8 5
Foreign exchange forward contracts
1
(73) 73 25
Commodity contracts (25) 25 25
Power Purchase Agreements (98) 98 98
1. Includes \u00a316 million reclassified to retained earnings during the year.
There are no amounts remaining in the hedging reserves for which hedge accounting is no longer applied.
30 Derivative financial instruments and hedge accounting continued
The following table presents a reconciliation by risk category of the cash flow hedge reserve and analysis of other comprehensive income in relation to
hedge accounting:
At 4 March 2023
Opening
\u00a3m
Fair value movements
recognised in other
comprehensive income
\u00a3m
Amounts
reclassified
\u00a3m
Closing
\u00a3m Reclassification recognised in
Inflation rate swaps 5 \u2013 (5) \u2013 Finance costs
Foreign exchange forward contracts 25 123 (139) 9 Inventory
Commodity contracts 25 (11) (12) 2 Cost of sales
Power purchase agreements 98 (19) \u2013 79 Cost of sales
Tax (36) 14 \u2013 (22)
117 107 (156) 68
At 5 March 2022
Opening
\u00a3m
Fair value movements
recognised in other
comprehensive income
\u00a3m
Amounts
reclassified
\u00a3m
Closing
\u00a3m Reclassification recognised in
Interest rate swaps (1) \u2013 1 \u2013 Finance costs
Inflation rate swaps (13) 8 10 5 Finance costs
Foreign exchange forward contracts
1
(92) 73 44 25 Inventory/retained earnings
Commodity contracts 4 25 (4) 25 Cost of sales
Power purchase agreements \u2013 98 \u2013 98 Cost of sales
Tax 18 (54) \u2013 (36)
(84) 150 51 117
1. Includes \u00a316 million reclassified to retained earnings during the year.
Fair value hedges
Within the Financial Services business, interest rate swaps are executed to hedge interest rate risk arising from fixed rate exposures in its retail personal loan
and retail mortgage books, and certain fixed rate treasury investment securities, which are predominantly funded by variable rate linked liabilities.
The cash flows under the hedging instruments (interest rate swap derivatives) substantially match the cash flow profile of the hedged items (personal loans,
mortgages, treasury investment securities and borrowings). The changes in fair value of the derivatives offset changes in the fair value of the hedged items
through the income statement, with any ineffective portion also being recognised in the income statement.
The main source of ineffectiveness within the micro hedge relationships relates to the floating leg valuation changes inherent within the hedging instrument
that do not exist within the hedged item. Ineffectiveness on portfolio hedges can also arise as a result of mismatch in cash flow maturities between the
hedged item and hedging instrument and basis risk between cash flows discounted using different benchmark rates.
30 Derivative financial instruments and hedge accounting continued
At 4 March 2023 the maturity profile and average price/rate of the hedging instruments used in the Group\u2019s non-dynamic hedging strategies were as follows:
Maturity
Less than
1 month 1 to 3 months
3 months to
1 year
One to five
years
More than five
years
At 4 March 2023
Fair value hedges
Interest rate risk
Interest rate swaps
Notional amount \u2013 125 589 748 1,362
Average net interest receive \u2013 0.73% 0.71% 1.17% 3.50%
At 5 March 2022
Fair value hedges
Interest rate risk
Interest rate swaps
Notional amount \u2013 138 584 1,246 1,267
Average net interest receive \u2013 (0.08)% (0.20)% (0.28)% 0.06%
The impact of the hedged items on Group\u2019s financial statements is as follows:
Carrying amount
of the hedged item
Change in fair value
used for measuring
ineffectiveness
for the period
Accumulated amount of fair
value hedge adjustments
included in the carrying
amount of the hedged item
Line item in financial statementsAt 4 March 2023
Assets
\u00a3m
Liabilities
\u00a3m \u00a3m
Assets
\u00a3m
Liabilities
\u00a3m
Fair value hedges
Interest rate swaps 2,615 \u2013 (27) (43) \u2013 Amounts due from Financial Services customers
Interest rate swaps \u2013 \u2013 3 \u2013 \u2013 Financial assets at FVOCI
Interest rate swaps \u2013 (122) 5 \u2013 3 Borrowings
2,615 (122) (19) (43) 3
At 5 March 2022
Carrying amount
of the hedged item
Change in fair value
used for measuring
ineffectiveness
for the period
Accumulated amount of fair
value hedge adjustments
included in the carrying
amount of the hedged item
Line item in financial statements
Assets
\u00a3m
Liabilities
\u00a3m \u00a3m
Assets
\u00a3m
Liabilities
\u00a3m
Fair value hedges
Interest rate swaps 2,725 \u2013 (38) (16) \u2013 Amounts due from Financial Services customers
Interest rate swaps 197 \u2013 (4) (3) \u2013 Financial assets at FVOCI
Interest rate swaps \u2013 (179) 1 \u2013 (2) Borrowings
2,922 (179) (41) (19) (2)
30 Derivative financial instruments and hedge accounting continued
The impact of the hedging instruments on the financial statements is as follows:
At 4 March 2023
Notional
amount
\u00a3m
Carrying amount
Change in fair value for measuring
ineffectiveness for the period
\u00a3m Line item in financial statements
Asset
\u00a3m
Liability
\u00a3m
Fair value hedges
Interest rate swaps (loans and mortgages) 2,704 99 (52) 35 Derivative financial assets/
liabilities
Interest rate swaps (Tier 2 capital) 120 \u2013 \u2013 1 Derivative financial liabilities
Interest rate swaps (investment securities) \u2013 \u2013 \u2013 (5) Derivative financial assets
2,824 99 (52) 31
At 5 March 2022
Notional
amount
\u00a3m
Carrying amount
Change in fair value for measuring
ineffectiveness for the period
\u00a3m Line item in financial statements
Asset
\u00a3m
Liability
\u00a3m
Fair value hedges
Interest rate swaps (loans and mortgages) 3,164 30 (18) 40 Derivative financial liabilities
Interest rate swaps (Tier 2 capital) \u2013 \u2013 (1) (1) Derivative financial assets
Interest rate swaps (investment securities) 71 5 \u2013 5 Derivative financial liabilities
3,235 35 (19) 44
Fair value hedge relationships impacted profit or loss as follows:
Hedge ineffectiveness recognised in cost of sales
2023
\u00a3m
2022
\u00a3m
Change in value of hedged items for calculating hedge ineffectiveness (19) (41)
Change in value of hedging instruments for calculating hedge ineffectiveness 31 44
Hedge ineffectiveness recognised in cost of sales 12 3
Derivatives not in a hedge relationship
Some of the Group\u2019s derivative contracts do not qualify for hedge accounting and are therefore not designated in a hedging relationship. In addition, where
gains or losses on a derivative contract economically offset the losses or gains on an underlying transaction, the derivative is not designated as being in a
hedging relationship.
The Group has several long-term fixed price Power Purchase agreements with independent producers as detailed in note 29. Included within derivative
financial assets is \u00a3131 million (2022: \u00a3180 million) relating to these agreements, of which \u00a353 million (2022: \u00a382 million) is not within a hedging relationship.
Fair value losses of \u00a329 million (2022: gain of \u00a376 million) have been recognised in the income statement during the year for these arrangements.
Sainsbury\u2019s Bank and its subsidiaries has a \u00a39 million portfolio of interest rate swaps hedging mortgage pipeline offers that cannot be entered into a hedge
accounting relationship (2022: \u00a39 million) with fair value fluctuations fully accounted for in the P&L, with no effective offset. Additionally, Sainsbury\u2019s Bank
had a \u00a3200 million interest rate swap (2022: \u00a3nil) intended to economically hedge certain Treasury positions.
The fair value fluctuations crediting the income statement for interest rate derivatives not in a hedge accounting relationship was \u00a31 million (2022: \u00a3nil).
30 Derivative financial instruments and hedge accounting continued
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDerivativeFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-561": {
"value": "The Group uses derivative financial instruments to hedge its exposure to foreign exchange, interest rate and commodity risks. All derivative financial instruments are initially measured at fair value on the contract date and are also measured at fair value at subsequent reporting dates. Where derivatives do not qualify for hedge accounting, any changes in the fair value of the derivative financial instrument are recognised in the income statement as they arise. To qualify for hedge accounting, the Group documents, at the inception of the hedge, the hedging risk management strategy, the relationship between the hedging instrument and the hedged item or transaction, the nature of the risks being hedged and an assessment of the effectiveness of the hedging relationship to ensure it is highly effective on an ongoing basis. Where a derivative does qualify for hedge accounting, any changes in fair value are recognised depending on the nature of the hedge relationship and the item being hedged as follows: i) Cash flow hedges Hedge relationships are classified as cash flow hedges where the derivative financial instruments hedge the Group\u2019s exposure to variability in cash flows resulting from a highly probable forecasted transaction. These include the exchange rate risk of inventory purchases denominated in foreign currency, interest rate risk and commodity risk on purchases of power and fuel. Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognised directly in other comprehensive income and the ineffective portion is recognised immediately in the income statement. If a cash flow hedge is hedging a firm commitment or forecast transaction that results in the recognition of a non-financial asset or liability, then, at the time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in other comprehensive income are included in the initial measurement of the asset or liability. This applies to the Group\u2019s foreign currency hedges in relation to inventory purchases. ii) Fair value hedges The Group designates certain derivatives as fair value hedges where the derivative financial instrument hedges the change in fair value of the particular risks inherent in recognised assets or liabilities (fair value hedges). The Group has adopted IFRS 9 hedge accounting requirements for its fair value hedges of investment securities and its one-for-one hedge on Tier 2 Debt issuance within Sainsbury\u2019s Bank. The Group continues to adopt IAS 39 for its macro portfolio fair value hedges of fixed rate personal loans and residential mortgages, as it is permitted to do so under IFRS 9 and until the point that the new macro hedge accounting standard is finalised and adopted. Fair value hedging matches the change in fair value of designated hedged items against the corresponding change in value of the hedging derivative. The designated hedged item can be a recognised asset or liability, a firm commitment, or an identified portion of an asset. The effective part of any gain or loss on the hedged item adjusts the balance of the hedged item and is recognised in the income statement, offsetting the gain or loss on the hedging derivative. Should circumstances arise where the hedge relationship subsequently proves ineffective, is early settled, or is terminated the adjustment to the balance of the hedged item is amortised over the remaining life of the hedged item and to the income statement. Micro fair value hedging \u2013 IFRS 9 The Group has purchased a number of fixed rate debt investment securities and has issued fixed rate subordinated debt within Sainsbury\u2019s Bank. These instruments are hedged via plain vanilla interest rate swaps, with the critical economic terms of both the hedging instrument and hedged item matching. The notional amount, fixed interest legs and maturity dates are economically matched. Portfolio fair value hedging \u2013 IAS 39 The Group uses portfolio fair value hedging as a risk management tool for hedging interest rate risk on the Personal Loans and Mortgage portfolios. Portfolio fair value hedging allows the designation of the whole or part of a portfolio of assets or liabilities with similar risk exposures. The hedged item can be designated based on expected maturities to match the hedging derivative maturity. Hedge effectiveness is considered to have been met where the change in fair value of the hedged item offsets the change in fair value of hedging instruments, within the 80 to 125 per cent ratio corridor. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsAndHedgingExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-520": {
"value": "31 Cash and cash equivalents Accounting policies Cash and cash equivalents Cash and bank balances comprise cash in hand and at bank, deposits at central banks, investments in money market funds and deposits and other short-term highly liquid investments. To be classified as cash and cash equivalents, an asset must: \u2014 Be readily convertible into cash; \u2014 Have an insignificant risk of changes in value; and \u2014 Have a maturity period of typically three months or less at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Group\u2019s cash management are included as a component of cash and cash equivalents for the purposes of the cash flow statement. Cash flow statement The Group presents its cash flow statement using the indirect method, whereby profit is reconciled to net cash from operating activities by adjusting profit and loss for non-cash items. Interest, dividends and taxes The Group has chosen to present interest received on bank deposits and other financial assets as well as dividends received as cash flows from investing activities because they are returns on the Group\u2019s investments. Dividends paid are presented as financing cash flows as they are considered a cost of obtaining financial resources. Interest paid on borrowings is presented within cash flows from operating activities as they are held for cash management purposes. Lease payments and receipts Lease payments are presented as follows in the Group cash flow statement: \u2014 Cash payments for the principal element of the lease liabilities are presented as cash flows from financing activities \u2014 Cash payments for the interest element of lease liabilities are presented as interest paid within cash flows from operating activities consistent with presentation of interest payments \u2014 Short-term lease payments, payments for leases of low-value assets and variable lease payments that are not included in the measurement of the lease liabilities as cash flows from operating activities \u2014 Cash receipts in relation to sub-leases (both operating and finance leases) are included within operating cash flows For the purposes of the cash flow statement, cash and cash equivalents comprise the following: 2023 \u00a3m 2022 \u00a3m Cash in hand and bank balances 569 566 Money market funds 255 25 Money market deposits 150 \u2013 Deposits at central banks 345 234 Cash and bank balances as reported in the Group balance sheet 1,319 825 Bank overdrafts \u2013 (7) Net cash and cash equivalents as reported in the Group cash flow statement 1,319 818 Of the above balance, \u00a328 million was restricted at the balance sheet date (2022: \u00a318 million). The balance includes \u00a315 million (2022: \u00a315 million) held as a reserve deposit with the Bank of England in accordance with statutory requirements is not available for use in day-to-day operations, \u00a310 million (2022: \u00a3nil) held within the ESOT, and \u00a33 million (2022: \u00a33 million) is restricted for insurance purposes. Reconciliation of cash flow items Working capital Inventories \u00a3m Financial assets at fair value through OCI \u00a3m Trade and other receivables \u00a3m Amounts due from Financial Services customers \u00a3m Trade and other payables \u00a3m Amounts due to Financial Services customers and other deposits \u00a3m Provisions \u00a3m At 4 March 2023 1,899 1,009 683 5,392 (4,837) (5,946) (272) At 5 March 2022 1,797 800 748 5,189 (4,570) (5,259) (271) Balance sheet movement (102) (209) 65 (203) 267 687 1 Fair value movements \u2013 2 \u2013 (27) \u2013 \u2013 \u2013 Hedge adjustments (3) \u2013 \u2013 \u2013 (2) \u2013 \u2013 Interest in working capital \u2013 \u2013 \u2013 \u2013 9 \u2013 \u2013 Reclassification to other lines in the cash flow statement \u2013 \u2013 3 \u2013 11 \u2013 \u2013 Financial Services ECL impairments \u2013 \u2013 \u2013 (76) \u2013 \u2013 \u2013 Movement in capital accruals \u2013 \u2013 \u2013 \u2013 (8) \u2013 \u2013 Other \u2013 \u2013 \u2013 (1) 3 \u2013 (1) Movement shown in cash flow statement (105) (207) 68 (307) 280 687 \u2013 Inventories \u00a3m Financial assets at fair value through OCI \u00a3m Trade and other receivables \u00a3m Amounts due from Financial Services customers \u00a3m Trade and other payables \u00a3m Amounts due to Financial Services customers and other deposits \u00a3m Provisions \u00a3m At 5 March 2022 1,797 800 748 5,189 (4,570) (5,259) (271) At 6 March 2021 1,625 844 775 5,407 (4,508) (6,289) (349) Balance sheet movement (172) 44 27 218 62 (1,030) (78) Fair value movements \u2013 71 \u2013 (38) \u2013 \u2013 \u2013 Hedge adjustments (7) \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Interest in working capital \u2013 \u2013 \u2013 \u2013 (6) \u2013 \u2013 Transfer of SaaS spend to prepayments \u2013 \u2013 9 \u2013 \u2013 \u2013 \u2013 Reclassification to other lines in the cash flow statement \u2013 \u2013 \u2013 \u2013 (28) \u2013 \u2013 Financial Services ECL impairments \u2013 \u2013 \u2013 (19) \u2013 \u2013 \u2013 Movement in capital accruals \u2013 \u2013 \u2013 \u2013 1 \u2013 \u2013 Amortisation of discount \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 (1) Other \u2013 \u2013 (3) \u2013 (1) \u2013 (1) Movement shown in cash flow statement (179) 115 33 161 28 (1,030) (80) 31 Cash and cash equivalents continued Other 2023 Note Gross additions \u00a3m Capitalised interest \u00a3m Movement in capital accruals \u00a3m Movement shown in cash flow statement \u00a3m Purchase of property, plant and equipment 14 (534) 1 8 (525) Purchase of intangible assets 16 (213) \u2013 \u2013 (213) 2022 Note Gross additions \u00a3m Capitalised interest \u00a3m Movement in capital accruals \u00a3m Movement shown in cash flow statement \u00a3m Purchase of property, plant and equipment 14 (417) 2 (1) (416) Purchase of intangible assets 16 (278) \u2013 \u2013 (278) Profit on the sale of properties and early termination of leases in the cash flow statement is reconciled as follows: 52 weeks to 4 March 2023 \u00a3m 52 weeks to 5 March 2022 \u00a3m Loss/(Profit) on disposal of properties (note 5) 3 (7) Non-underlying gain on early termination of leases (note 5) (2) (9) Profit on disposal of properties within restructuring programmes (note 5) (11) (12) Non-underlying SaaS adjustment (note 5) \u2013 21 Underlying gain on early termination of leases (4) (3) (Profit)/loss on disposal of intangible assets (1) 4 Profit on sale of non-current assets and early termination of leases (15) (6) 31 Cash and cash equivalents continued ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfCashAndCashEquivalentsExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-562": {
"value": "Cash and cash equivalents Cash and bank balances comprise cash in hand and at bank, deposits at central banks, investments in money market funds and deposits and other short-term highly liquid investments. To be classified as cash and cash equivalents, an asset must: \u2014 Be readily convertible into cash; \u2014 Have an insignificant risk of changes in value; and \u2014 Have a maturity period of typically three months or less at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Group\u2019s cash management are included as a component of cash and cash equivalents for the purposes of the cash flow statement. Cash flow statement The Group presents its cash flow statement using the indirect method, whereby profit is reconciled to net cash from operating activities by adjusting profit and loss for non-cash items. Interest, dividends and taxes The Group has chosen to present interest received on bank deposits and other financial assets as well as dividends received as cash flows from investing activities because they are returns on the Group\u2019s investments. Dividends paid are presented as financing cash flows as they are considered a cost of obtaining financial resources. Interest paid on borrowings is presented within cash flows from operating activities as they are held for cash management purposes. Lease payments and receipts Lease payments are presented as follows in the Group cash flow statement: \u2014 Cash payments for the principal element of the lease liabilities are presented as cash flows from financing activities \u2014 Cash payments for the interest element of lease liabilities are presented as interest paid within cash flows from operating activities consistent with presentation of interest payments \u2014 Short-term lease payments, payments for leases of low-value assets and variable lease payments that are not included in the measurement of the lease liabilities as cash flows from operating activities \u2014 Cash receipts in relation to sub-leases (both operating and finance leases) are included within operating cash flows ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyToDetermineComponentsOfCashAndCashEquivalents",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-586": {
"value": "Cash flow statement The Group presents its cash flow statement using the indirect method, whereby profit is reconciled to net cash from operating activities by adjusting profit and loss for non-cash items. Interest, dividends and taxes The Group has chosen to present interest received on bank deposits and other financial assets as well as dividends received as cash flows from investing activities because they are returns on the Group\u2019s investments. Dividends paid are presented as financing cash flows as they are considered a cost of obtaining financial resources. Interest paid on borrowings is presented within cash flows from operating activities as they are held for cash management purposes. Lease payments and receipts Lease payments are presented as follows in the Group cash flow statement: \u2014 Cash payments for the principal element of the lease liabilities are presented as cash flows from financing activities \u2014 Cash payments for the interest element of lease liabilities are presented as interest paid within cash flows from operating activities consistent with presentation of interest payments \u2014 Short-term lease payments, payments for leases of low-value assets and variable lease payments that are not included in the measurement of the lease liabilities as cash flows from operating activities \u2014 Cash receipts in relation to sub-leases (both operating and finance leases) are included within operating cash flows ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForCashFlowsExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-521": {
"value": "32 Analysis of net debt The Group\u2019s definition of net debt includes the following: \u2014 Cash \u2014 Borrowings and overdrafts \u2014 Lease liabilities \u2014 Perpetual securities \u2014 Debt-related financial assets at fair value through other comprehensive income \u2014 Derivatives used in hedging borrowings Net debt includes the capital injections to Sainsbury\u2019s Bank, but excludes the net debt of Sainsbury\u2019s Bank and its subsidiaries (Financial Services). Financial Services\u2019 net debt balances are excluded because they are required as part of the business as usual operations of a bank, as opposed to specific forms of financing for the Group. Derivatives exclude those not used to hedge borrowings, and borrowings exclude bank overdrafts as they are disclosed separately. A reconciliation of opening to closing net debt is included below. Balances and movements for the total Group and Financial Services are shown in addition to Retail to enable reconciliation between the Group balance sheet and Group cash flow statement. Cash movements Non-cash movements 6 March 2022 \u00a3m Cash flows excluding interest \u00a3m Net interest (received)/ paid \u00a3m Accrued interest \u00a3m Other non-cash movements \u00a3m Changes in fair value \u00a3m 4 March 2023 \u00a3m Retail Net derivative financial instruments 5 \u2013 (5) 5 (5) \u2013 \u2013 Borrowings (excluding overdrafts) (575) 40 45 (40) (9) \u2013 (539) Lease liabilities (6,618) 512 267 (267) (382) \u2013 (6,488) Arising from financing activities (7,1 88) 552 307 (302) (396) \u2013 (7,027 ) Financial assets at fair value through other comprehensive income \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 \u2013 Cash and cash equivalents 436 247 \u2013 \u2013 \u2013 \u2013 683 Bank overdrafts (7) 7 \u2013 \u2013 \u2013 \u2013 \u2013 Retail net debt (6,759) 806 307 (302) (396) \u2013 (6,344) Financial Services Net derivative financial instruments 4 \u2013 \u2013 \u2013 \u2013 (4) \u2013 Borrowings (excluding overdrafts) (179) 55 9 (12) \u2013 5 (122) Lease liabilities (3) 2 \u2013 \u2013 \u2013 \u2013 (1) Arising from financing activities (178) 57 9 (12) \u2013 1 (123) Financial assets at fair value through other comprehensive income 418 207 \u2013 \u2013 \u2013 1 626 Cash and cash equivalents 389 247 \u2013 \u2013 \u2013 \u2013 636 Financial Services net debt 629 511 9 (12) \u2013 2 1,139 Group Net derivative financial instruments 9 \u2013 (5) 5 (5) (4) \u2013 Borrowings (excluding overdrafts) (754) 95 54 (52) (9) 5 (661) Lease liabilities (6,621) 514 267 (267) (382) \u2013 (6,489) Arising from financing activities (7,366) 609 316 (314) (396) 1 (7,150) Financial assets at fair value through other comprehensive income 418 207 \u2013 \u2013 \u2013 1 626 Cash and cash equivalents 825 494 \u2013 \u2013 \u2013 \u2013 1,319 Bank overdrafts (7) 7 \u2013 \u2013 \u2013 \u2013 \u2013 Group net debt (6,130) 1,317 316 (314) (396) 2 (5,205) Retail net debt (6,759) 806 307 (302) (396) \u2013 (6,344) Of which: Leases (6,618) (6,488) Net debt excluding lease liabilities (141) 144 Other non-cash movements relate to interest accruals, new leases and foreign exchange. 32 Analysis of net debt continued Cash movements Non-cash movements 7 March 2021 \u00a3m Cash flows excluding interest \u00a3m Net interest (received)/paid \u00a3m Accrued interest \u00a3m Other non-cash movements \u00a3m Changes in fair value \u00a3m 5 March 2022 \u00a3m Retail Net derivative financial instruments (14) \u2013 10 (10) 11 8 5 Borrowings (excluding overdrafts) (826) 248 28 (25) \u2013 \u2013 (575) Lease liabilities (5,829) 491 281 (281) (1,280) \u2013 (6,618) Arising from financing activities (6,669) 739 319 (316) (1,269) 8 ( 7,18 8) Financial assets at fair value through other comprehensive income 1 \u2013 \u2013 \u2013 \u2013 (1) \u2013 Cash and cash equivalents 546 (110) \u2013 \u2013 \u2013 \u2013 436 Bank overdrafts (99) 92 \u2013 \u2013 \u2013 \u2013 (7) Retail net debt (excluding perpetual securities) (6,221) 721 319 (316) (1,269) 7 (6,759) Financial Services Net derivative financial instruments \u2013 \u2013 \u2013 \u2013 \u2013 4 4 Borrowings (excluding overdrafts) (179) \u2013 10 (11) \u2013 1 (179) Lease liabilities (5) 2 \u2013 \u2013 \u2013 \u2013 (3) Arising from financing activities (184) 2 10 (11) \u2013 5 (178) Financial assets at fair value through other comprehensive income 537 (115) \u2013 \u2013 \u2013 (4) 418 Cash and cash equivalents 1,029 (640) \u2013 \u2013 \u2013 \u2013 389 Financial Services net debt 1,382 (753) 10 (11) \u2013 1 629 Group Net derivative financial instruments (14) \u2013 10 (10) 11 12 9 Borrowings (excluding overdrafts) (1,005) 248 38 (36) \u2013 1 (754) Lease liabilities (5,834) 493 281 (281) (1,280) \u2013 (6,621) Arising from financing activities (6,853) 741 329 (327) (1,269) 13 ( 7,3 6 6 ) Financial assets at fair value through other comprehensive income 538 (115) \u2013 \u2013 \u2013 (5) 418 Cash and cash equivalents 1,575 (750) \u2013 \u2013 \u2013 \u2013 825 Bank overdrafts (99) 92 \u2013 \u2013 \u2013 \u2013 (7) Group net debt (excluding perpetual securities) (4,839) (32) 329 (327) (1,269) 8 (6,130) Retail net debt (excluding perpetual securities) (6,221) 721 319 (316) (1,269) 7 (6,759) Perpetual convertible bonds (248) 8 \u2013 \u2013 240 \u2013 \u2013 Retail net debt (including perpetual securities) (6,469) 729 319 (316) (1,029) 7 (6,759) Of which: Leases (5,829) (6,618) Net debt excluding lease liabilities (640) (141) 32 Analysis of net debt continued Reconciliation of net cash flow to movement in net debt 52 weeks to 4 March 2023 \u00a3m 52 weeks to 5 March 2022 \u00a3m Opening net debt (6,759) (6,469) Cash flow movements Net increase/(decrease) in cash and cash equivalents (including overdrafts) 501 (658) Elimination of Financial Services movement in cash and cash equivalents (247) 640 Repayment of perpetual capital securities \u2013 8 Decrease in Retail borrowings 40 248 Decrease in Retail lease obligations 512 491 Net interest paid on components of Retail net debt 307 319 Changes in net debt resulting from cash flow 1,113 1,048 Non-cash movements Accrued interest (302) (316) Retail fair value and other non-cash movements (396) (1,022) Changes in net debt resulting from non-cash movements (698) (1,338) Movement in net debt 415 (290) Closing net debt (6,344) (6,759) 32 Analysis of net debt continued ",
"dimensions": {
"concept": "jsainsburyplc:DisclosureOfAnalysisOfNetDebt",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-522": {
"value": "33 Borrowings 2023 2022 Current \u00a3m Non-current \u00a3m Total \u00a3m Current \u00a3m Non-current \u00a3m Total \u00a3m Loan due 2031 48 491 539 44 531 575 Bank overdrafts \u2013 \u2013 \u2013 7 \u2013 7 Transaction costs (1) (4) (5) \u2013 \u2013 \u2013 Sainsbury\u2019s Bank Tier 2 Capital 6 116 122 3 176 179 53 603 656 54 707 761 a) Loan due 2031 The loan is secured against 48 (2022: 48) supermarket properties (note 14). This is an inflation linked amortising loan from the finance company Longstone Finance plc with an outstanding principal value of \u00a3527 million (2022: \u00a3566 million) fixed at a real rate of 2.36 per cent where principal and interest rate are uplifted annually by RPI subject to a cap at five per cent and a floor at nil per cent. The carrying value of the loan is \u00a3539 million (2022: \u00a3575 million) with a final repayment date of April 2031. The Group has entered into inflation swaps to convert \u00a3490 million (2022: \u00a3490 million) of the \u00a3527 million (2022: \u00a3566 million) loan from RPI linked interest to fixed rate interest until April 2023. These transactions have been designated as cash flow hedges (note 30). The principal activity of Longstone Finance plc is the issuance of commercial mortgage-backed securities and applying the proceeds towards the secured loans due 2031 with the Group as summarised above. Intertrust Corporate Services Limited holds all the issued share capital of Longstone Finance Holdings Limited on trust for charitable purposes. Longstone Finance Holdings Limited beneficially owns all the issued share capital of Longstone Finance plc. As the Group has no interest, power or bears any risk over these entities they are not included in the Group consolidation. b) Bank overdrafts Bank overdrafts are repayable on demand and bear interest at a spread above Bank of England base rate. c) Sainsbury\u2019s Bank Tier 2 Capital due 2033 The Bank issued \u00a3120 million of fixed rate reset callable subordinated Tier 2 notes in September 2022. These notes pay interest on the principal amount at a rate of 10.5 per cent per annum, payable in equal instalments semi-annually in arrears, until March 2028 at which time the interest rate will reset. This was issued in conjunction with a tender to repurchase and extinguish \u00a3120 million of the existing \u00a3175 million subordinated Tier 2 notes that were issued in November 2017. The Bank subsequently redeemed the remaining \u00a355 million of the existing \u00a3175 million issued in November 2022. d) Short term borrowings The Group refinanced its Revolving Credit Facility in December 2022. The new Revolving Credit Facility is unsecured and is split into two Facilities, a \u00a3500 million Facility (A) and a \u00a3500 million Facility (B). Facility A has a maturity of December 2026 and Facility B has a maturity of December 2027. At 4 March 2023, the Revolving Credit Facility was undrawn (2022: undrawn). The Revolving Credit Facility incurs commitment fees at market rates and drawdowns bear interest at a margin above SONIA. The Group maintains uncommitted facilities to provide additional capacity to fund short-term working capital requirements. Drawdowns on these uncommitted facilities bear interest at a margin. The uncommitted facilities were undrawn at 4 March 2023 (2022: undrawn). e) Term loan The Group issued a \u00a3575 million unsecured term loan in December 2022, with maturity of March 2026. This new term loan refinanced the \u00a3575 million Bridge Loan Facility arranged in October 2022 with maturity of November 2024. At 4 March 2023, the term loan was undrawn. f) Transaction costs Transaction costs are amortised on a straight-line basis over the life of the facility they relate to. 33 Borrowings continued ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfBorrowingsExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-523": {
"value": "34 Employee costs 2023 \u00a3m 2022 \u00a3m Employee costs for the Group during the year amounted to: Wages and salaries, including bonus and termination benefits 3,088 3,119 Social security costs 240 240 Pension costs \u2013 defined contribution schemes 191 183 Share-based payments expense 59 58 3,578 3,600 2023 \u2019000 2022 \u2019000 The average number of employees, including directors, during the year was: Full-time 63 65 Part-time 99 116 162 181 Full-time equivalent 107 117 Details of key management compensation can be found in note 39 and within the Directors\u2019 Remuneration Report on pages 96 to 113. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfInformationAboutEmployeesExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-563": {
"value": "34 Employee costs 2023 \u00a3m 2022 \u00a3m Employee costs for the Group during the year amounted to: Wages and salaries, including bonus and termination benefits 3,088 3,119 Social security costs 240 240 Pension costs \u2013 defined contribution schemes 191 183 Share-based payments expense 59 58 3,578 3,600 2023 \u2019000 2022 \u2019000 The average number of employees, including directors, during the year was: Full-time 63 65 Part-time 99 116 162 181 Full-time equivalent 107 117 Details of key management compensation can be found in note 39 and within the Directors\u2019 Remuneration Report on pages 96 to 113. a) Income statement The amounts recognised in the income statement are as follows: 2023 \u00a3m 2022 \u00a3m Excluded from underlying profit before tax: Interest cost on pension liabilities 1 (221) (197) Interest income on plan assets 277 212 Total included in finance income 56 15 Defined benefit pension scheme expenses (6) (7) Past service credit/(cost) \u2013 3 Settlement gains 2 8 \u2013 Total excluded from underlying profit before tax 58 11 Total income statement income 58 11 1. Includes interest of \u00a31 million for the unfunded pension scheme (2022: \u00a31 million). 2. A settlement credit of \u00a38 million has been recognised relating to a gain on payments made to members exiting the scheme relative to the liabilities. ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfExpensesExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
},
"fact-524": {
"value": "35 Retirement benefit obligations Accounting policies \u2013 defined contribution pension schemes The Group contributions to defined contribution pension schemes are charged to the income statement as incurred. Any contributions unpaid at the balance sheet date are included as an accrual as at that date. The Group has no further payment obligations once the contributions have been paid. Accounting policies \u2013 defined benefit pension scheme (Sainsbury\u2019s Pension Scheme) The surplus or deficit recognised in the balance sheet for defined benefit schemes represents the difference between the fair value of the plan assets and the present value of the defined benefit obligation at the balance sheet date. The defined benefit obligation is actuarially calculated on an annual basis using the projected unit credit method. Actuarial gains and losses are reported in the statement of other comprehensive income as incurred, and comprise both the effects of changes in actuarial assumptions and experience adjustments arising because of differences between the previous actuarial assumptions and what has actually occurred. The income statement charge consists of a financing charge, which is the net of interest cost on pension scheme liabilities and interest income on plan assets and defined benefit pension scheme expenses. The financing charge is determined by applying the discount rate used to measure the defined benefit obligation to the pension scheme liabilities and plan assets at the beginning of the financial year. Background The retirement benefit obligations relate to the Sainsbury\u2019s Pension Scheme plus three unfunded pension liabilities for former senior employees of Sainsbury\u2019s and Home Retail Group. The Sainsbury\u2019s Pension Scheme has two sections, the Sainsbury\u2019s Section which holds the assets and liabilities of the original Sainsbury\u2019s Pension Scheme, and the Argos Section which holds the assets and liabilities of the Home Retail Group Pension Scheme. Each section\u2019s assets are segregated by deed and ring fenced for the benefit of the members of that section. The Scheme is run by a corporate trustee with nine directors. The Scheme is also used to pay life assurance benefits to current (including new) colleagues. The retirement benefit obligations at the year-end have been calculated by Isio, the actuarial advisers to the Group, using the projected unit credit method and based on adjusting the position at the date of the previous triennial valuation for known events and changes in market conditions as allowed under IAS 19 \u2018Employee Benefits\u2019. Sainsbury\u2019s section The section was closed to new employees on 31 January 2002 and closed to future accrual on 28 September 2013. There are three benefit categories: final salary, career average and cash balance. Final salary and career average benefits are determined by service and salary. Cash balance benefits are determined by the accrued retirement account credits. Argos section The section was closed to new employees in 2009 and to future accrual in January 2013. Pension benefits are based on service and final salary when leaving the Scheme. Triennial valuation The Trustee\u2019s triennial valuation is used to determine the contributions required for the Scheme to pay all the benefits due, now and in the future. The Trustee must allow for a level of prudence and so these assumptions therefore place a relatively high value on the Scheme\u2019s liabilities. By contrast, IAS 19 \u2018Employee Benefits\u2019 requires all companies to value the liabilities on a \u2018best estimate\u2019 basis which places a lower value on the liabilities and therefore a more favourable financial position. As such, the accounting value is different to the result obtained using the Trustee\u2019s triennial valuation basis. The Trustee completed a triennial valuation as at 30 September 2021, resulting in an actuarial surplus of \u00a3130 million (comprising a surplus of \u00a3231 million in the Sainsbury\u2019s section and a \u00a3101 million deficit in the Argos section) on a technical provisions basis, from a deficit of \u00a3538 million in 2018. The asset backed contributions structure (ABC) established by Sainsbury\u2019s in July 2019 continues to deliver as planned. Under the ABC, properties with a valuation of \u00a31,350 million were transferred into a newly formed property holding company \u2013 Sainsbury\u2019s Property Holdings Limited (Propco) from the Sainsbury\u2019s Property Scottish Partnership and other Sainsbury\u2019s Group Companies. The Propco is a wholly owned subsidiary of the Group and leases the transferred properties to other Group companies. Rental receipts facilitate payments of interest and capital on loan notes issued to the Partnership, in which the Scheme holds an interest. The Partnership is controlled by Sainsbury\u2019s and its results are consolidated by the Group. The Scheme\u2019s investment in the Partnership does not qualify as a plan asset for the purposes of the Group\u2019s consolidated financial statements and is therefore not included within the fair value of plan assets. The value of the properties transferred to the Propco remains in the Group\u2019s property, plant and equipment on the balance sheet, and the Group retains full operational flexibility to extend, develop and substitute them. The Scheme\u2019s interest in the Partnership entitled it to annual distributions over up to 20 years initially through three payment streams: 1) Payments to the Sainsbury\u2019s section (\u00a315 million per year) which stopped from December 2021 2) Payments to the Argos section (\u00a320 million per year) 3) Switching payment stream, paid to either the Sainsbury\u2019s section or Argos section (initially \u00a323 million per year, increasing to \u00a333 million by 2038) No other cash contributions were paid during the year (2022: cash contributions of \u00a310 million). The payments to the Sainsbury\u2019s and Argos sections (streams 1 and 2) would stop in 2030, or when the relevant section reached its funding target, if earlier. The Sainsbury\u2019s section reached its funding target on 31 December 2021 and so the first payment stream was permanently switched off, even though the subsequent updating of assumptions under the 2021 triennial valuation resulted in a small deficit on this funding basis. The switching stream (stream 3) was initially paid to the Sainsbury\u2019s section until it reached the funding target, when it switched to the Argos section. Payments continue until 2038 or until both sections have reached their funding targets, if earlier. The level of property in the Propco reduces as the Scheme reaches the funding targets. The level of security was designed to reduce as the Scheme\u2019s funding level improves, as the risk of a Group insolvency to the Scheme reduces. Once a section reaches a specific funding target for three consecutive quarters, the level of security that the Scheme can access reduces at the following 31 March in line with the Residual Security Amount (RSA) caps set out in the ABC framework. The security is currently provided by properties in the ABC which are valued annually. If the value of the security is outside a corridor either side of the RSA, the Company must top up if the value is less, or can chose to remove property from the Propco if the value is higher; however if a default event were to occur, the Scheme would only have rights over the security to the value of the RSA \u2013 any excess value would remain in the Propco and revert to the Company. IFRIC 14 Under IFRIC 14, a company is required to measure any economic benefits available to it in the form of refunds or reductions to future contributions at the maximum amount that is consistent with the terms and conditions of the pension scheme. These are regarded as available to a company if it has an unconditional right to realise them at some point during the life of the pension scheme or when all benefits are finally settled. Such an unconditional right would not exist when the availability of the refund or the reduction in future contribution would be contingent upon factors beyond the company\u2019s control. Management is of the view that it has an unconditional right to a refund of surplus under IFRIC 14. As such no adjustment has been made for potential additional liabilities. In forming this conclusion management has considered whether the Group can control the run-off of the Scheme until there are no liabilities left, consistent with IFRIC 14. For example, if the Trustee has a unilateral power to wind up the Scheme while there are liabilities remaining, then it is viewed that the Group cannot access surplus through this route. For both sections, management have assessed that the Group can control run-off until no liabilities remain by complying with its obligations under the Scheme rules and pensions legislation, and there will therefore be a gradual settlement of the planned liabilities over the life of each section. The Scheme rules list certain situations under which the Trustee can wind up the Scheme; however, whilst there is gradual settlement of the Scheme\u2019s liabilities, these are concluded to be within the control of the Group. As a result, it is concluded that the Trustee does not have a unilateral power to wind up the Scheme nor augment benefits while the Scheme is ongoing. 35 Retirement benefit obligations continued Unfunded pension liabilities The unfunded pension liabilities are unwound when each employee reaches retirement and takes their pension from the Group payroll or is crystallised in the event of an employee leaving or retiring and choosing to take the provision as a one-off cash payment. a) Income statement The amounts recognised in the income statement are as follows: 2023 \u00a3m 2022 \u00a3m Excluded from underlying profit before tax: Interest cost on pension liabilities 1 (221) (197) Interest income on plan assets 277 212 Total included in finance income 56 15 Defined benefit pension scheme expenses (6) (7) Past service credit/(cost) \u2013 3 Settlement gains 2 8 \u2013 Total excluded from underlying profit before tax 58 11 Total income statement income 58 11 1. Includes interest of \u00a31 million for the unfunded pension scheme (2022: \u00a31 million). 2. A settlement credit of \u00a38 million has been recognised relating to a gain on payments made to members exiting the scheme relative to the liabilities. b) Other comprehensive income Remeasurements of the retirement benefit obligations have been recognised as follows: 2023 \u00a3m 2022 \u00a3m Return on plan assets, excluding amounts included in interest (4,739) 739 Actuarial gains/(losses) arising from changes in: Finance assumptions 1 3,518 334 Demographic assumptions 2 38 133 Experience 3 (215) 251 Total actuarial gains 3,341 718 Total remeasurements (1,398) 1,457 1. Includes \u00a313 million for the unfunded pension scheme (2022: \u00a31 million). 2. Includes \u00a31 million for the unfunded pension scheme (2022: \u00a31 million). 3. Includes a charge of \u00a3(1) million for the unfunded pension scheme (2022: \u00a3nil). c) Balance sheet The amounts recognised in the balance sheet are as follows: 2023 2022 Sainsbury\u2019s \u00a3m Argos \u00a3m Group \u00a3m Sainsbury\u2019s \u00a3m Argos \u00a3m Group \u00a3m Present value of funded obligations (5,128) (793) (5,921) (8,060) (1,313) (9,373) Fair value of plan assets 6,007 927 6,934 10,158 1,535 11,693 Retirement benefit surplus 879 134 1,013 2,098 222 2,320 Present value of unfunded obligations (12) (12) (24) (20) (17) (37) Retirement benefit surplus 867 122 989 2,078 205 2,283 The retirement benefit surplus and the associated deferred income tax balance are shown within different line items on the face of the balance sheet. 35 Retirement benefit obligations continued The movements in the Group\u2019s net defined benefit obligations are as follows: 2023 \u00a3m 2022 \u00a3m As at the beginning of the year 2,283 744 Net interest income 56 15 Remeasurement (losses)/gains (1,398) 1,457 Pension scheme expenses (6) (7) Contributions by employer 44 71 Benefits paid 2 \u2013 Past service credit \u2013 3 Settlement gains 8 \u2013 As at the end of the year 989 2,283 The movements in the retirement benefit obligations (including unfunded obligations) are as follows: 2023 \u00a3m 2022 \u00a3m As at the beginning of the year (9,410) (10,256) Interest cost (221) (197) Remeasurement gains 3,341 718 Benefits paid 308 322 Past service credit \u2013 3 Settlement gains 37 \u2013 As at the end of the year (5,945) (9,410) Analysed as: Retirement benefit obligations (5,921) (9,373) Unfunded obligations (24) (37) The movements in the fair value of plan assets are as follows: 2023 \u00a3m 2022 \u00a3m As at the beginning of the year 11,693 11,000 Interest income on plan assets 277 212 Pension scheme expenses (6) (7) Remeasurement (losses)/gains (4,739) 739 Contributions by employer 44 71 Benefits paid (306) (322) Settlement gains (29) \u2013 As at the end of the year 6,934 11,693 Significant estimate \u2013 pension scheme assets The Scheme holds some private market assets as they are expected to deliver a more favourable risk/return profile than public market equivalents. These assets are relatively illiquid (likely to be realised over c.5 years) but the Scheme holds sufficient liquid assets (cash, gilts and other liquid securities) to be confident that it can meet its pension and collateral obligations over time. The valuation of these assets is based on the audited accounts of the funds, where available, and net asset value statements from the investment managers where recent accounts are not available. For many of these investments, the valuations provided are at 30 September. The Group therefore performs a roll-forward for these valuations, adjusting for cash received or paid and applying the changes seen in relevant liquid indices as follows: Asset Class Returns from 30-Sep-22 to 4-Mar-23 Global equity USD return 16.58% Global High Yield Debt USD return 6.73% US loans USD return 6.07% UK REITS GBP return 9.96% The roll-forward has increased the valuation of illiquid assets by \u00a395 million. A 1 per cent increase/decrease in the indices used would have caused a \u00a316 million increase/decrease in the adjustment. Investment strategy and risks associated with the Group\u2019s defined benefit pension scheme The investment strategy of the Scheme is determined by the Trustee. The Trustee considers that its primary responsibility in respect of investments is to ensure, for the duration of the Scheme, that funds will be available to meet the benefit payment obligations as they fall due. Following the completion of the 2021 triennial valuation and updated actuarial assumptions which resulted in a surplus on the statutory basis and the volatility following the mini budget in September 2022 which also had an impact on the Scheme\u2019s funding, the Trustee continues to target being funded on a gilts +0.5% p.a. basis, while limiting the downside risk associated with investment policy wherever possible. The investment objectives target a 50% or better chance of fully funded on this basis by the end of 2024 for the Argos section and the end of 2028 for the Sainsbury\u2019s section. 35 Retirement benefit obligations continued Before the political events in late 2022 and associated significant and rapid market movements, both sections of the Scheme were almost fully hedged against interest rate and inflation changes. However, to best manage the ongoing situation and protect the Scheme by maintaining liquidity levels to settle collateral calls in the event of further significant interest rate volatility, the Trustee decided to reduce the interest rate hedging and the Company also made a short-term loan facility of \u00a3500 million available. The timing of the changes that were implemented for the Sainsbury\u2019s section coincided with in a fall in gilt yields which reduced the ongoing funding level. There was only a slight impact on the Argos section as the reduction in hedging was implemented later. The Trustee did not draw on the short-term loan facility, which was withdrawn, as agreed, in January 2023. As the 2021 triennial valuation was already signed, there was no change to the contributions to the Scheme, and the Company does not currently anticipate any impact on the 2024 triennial valuation contribution requirements. The Trustee has since taken action to partially reinstate the interest rate hedging ratios. The Trustee has also reviewed the collateral sufficiency framework which ensures sufficient high quality liquid assets are maintained to meet liquidity requirements, even in times of market stress and volatility. The level of collateral that the Scheme can call on at any time is well above the limits suggested recently by the Pensions Regulator. The risks associated with achieving the above strategy are as follows: Risk Description Mitigation Investment Strategy Risk Underperformance of the investment strategy relative to the changes in the Scheme\u2019s liabilities reduces the future resources available to meet pension obligations. The Scheme adopts a liability driven investment framework to generate excess asset returns with reference to its liabilities by largely removing its interest and inflation uncertainties. Investment Implementation Risks Poor execution including investment managers\u2019 underperformance relative to their targets leads to lower funding levels. Investment mandates are closely monitored against their portfolio benchmarks and risk allowances set out in investment guidelines. The Investment Committee can terminate consistently underperforming mandates. Custody Risks Inadequate controls lead to inaccurate record keeping and loss of assets through investment fraud. The top tier global custodian Northern Trust oversees the Scheme\u2019s assets. The Trustee also uses an independent third party consultant to periodically review Northern Trust\u2019s performance and compare it to its peers. Sustainability, including ESG and climate risks Investment managers do not have appropriate policies and procedures in place to identify and assess ESG risks and opportunities. The Scheme incorporates ESG, stewardship and other related risks into its Statement of Investment Principles (SIP) and publishes an annual Implementation Statement and a TCFD report. Investment managers are requested to confirm whether they operate in line with the Trustee\u2019s policies. The approach that the Trustee has adopted as part of its ongoing process to deliver a Net Zero goal by 2050 includes investment decisions based on new climate governance and reporting standards, engagement with corporates and government, maintaining outcomes focused on climate objectives in investments, and the role of the Scheme\u2019s investment managers in signing up to the UN Principles of Responsible Investment and having Net Zero targets. ESG risks encompass a broad range of risks across the Environmental, Social and Governance activities of the entities in which the Scheme ultimately invests. Examples of ESG risks could include risks associated with exposure to climate transition (e.g. exposure to fossil fuels), risks associated with a lack of diversity, equity and inclusion, or risks associated with poor corporate governance. Investment Regulatory Risk Insufficient training and awareness of regulatory requirements results in non-compliance with regulations. The Trustee has top tier advisers and is advised by Eversheds Sutherland and CMS Cameron McKenna on legal and regulatory matters, and closely follows changes in regulatory requirements and developments for pensions and investments. Periodic training is provided to the Investment Committee, advisers, and if necessary, the full Board by relevant experts. Investment Liquidity Risks Insufficient liquidity to meet ongoing or unexpected cash flow requirements in respect of member benefit payments, as well as collateral top up requests to manage the Scheme\u2019s derivative positions. The Scheme adopts a collateral sufficiency framework which ensures sufficient high quality liquid assets are maintained in order to meet liquidity requirements, even in times of market stress. The Investment Adviser liaises with the Scheme Actuary and the Pensions Department to understand current and future cash flow requirements. Investment Counterparty Risks Financial losses may be incurred due to failure of counterparties or inability to roll-over derivative positions. Asset Managers manage credit limits for all their derivative counterparty exposures and monitor positions over derivative roll dates. Longevity Risks The Scheme pays benefits longer than expected due to members\u2019 increasing life expectancy. Longevity risk is managed as part of the Scheme\u2019s integrated risk management framework. The Trustee monitors longevity risk and aims to achieve sufficient funding levels by meeting prudent milestone targets which take account of the potential for increased life expectancy. Currency Risks The Scheme\u2019s unhedged foreign currency exposure leads to additional volatility for non-sterling denominated assets\u2019 returns as all benefits are denominated in pound sterling. The Trustee monitors foreign currency exposure and uses hedging programmes to efficiently control foreign currency risk at reasonable cost. Geopolitical Risk The Scheme\u2019s asset returns are negatively impacted by unpredictable geopolitical events. The Trustee adopts a top-down risk management framework and their advisors and asset managers closely monitor all positions impacted by geopolitical events. 35 Retirement benefit obligations continued The major categories of plan assets are as follows: Quoted 2023 \u00a3m Unquoted 1 2023 \u00a3m Quoted 2022 \u00a3m Unquoted 1 2022 \u00a3m Liability matching assets 3,092 1,629 7,096 2,167 Growth assets Equity Private \u2013 429 \u2013 393 Derivatives 2 \u2013 4 \u2013 7 Fixed Income Securities Emerging Market Bonds \u2013 \u2013 139 4 Alternatives Real Estate \u2013 397 \u2013 593 Private Debt \u2013 726 \u2013 733 Diversified Growth \u2013 303 \u2013 301 Cash and Cash equivalents 354 \u2013 260 \u2013 3,446 3,488 7,495 4,198 1. Certain unquoted fixed interest securities, private equity and debt investments and property investments are stated at fair value. These fair values may differ from their realisable values due to the absence of liquid markets in these investments. 2. Swap contract derivatives outstanding at the year-end are stated at the net present value of future discounted cash flows of each leg of the swap. For the comparative period, quoted and unquoted asset balances have been reclassified from \u00a37,793 million and \u00a33,900 million to \u00a37,495 million and \u00a34,198 million to reflect an asset manager\u2019s categorisation of some investments held. Included within liability matching assets are Government Bonds totalling \u00a34,083m (2022: \u00a310,938m), Corporate Bonds totalling \u00a31,988m (2022: \u00a35,549m), and Fixed income derivatives totalling \u00a3356m (2022: \u00a3487m), offset by repurchase agreements totalling \u00a3(1,706)m (2022: \u00a3(7,711)m). Circa 94% of the Scheme\u2019s corporate bonds are invested in investment grade credit. The remainder are either unrated or below investment grade. The Sainsbury\u2019s Pension Scheme adopts a liability driven investment (LDI) framework to manage its funding risk and reduce volatility by largely removing the interest rate and inflation rate impacts of its liabilities. As a result, the value of the Scheme\u2019s assets changes in the similar way to its liabilities, which helps maintain its ability to pay benefits and therefore member security over the long term. Of the above assets, \u00a33,506 million are denominated in pound sterling and \u00a33,427 million are denominated in overseas currencies. d) Assumptions The principal actuarial assumptions used at the balance sheet date are as follows: 2023 % 2022 % Discount rate 5.00 2.40 Inflation rate \u2013 RPI 3.25 3.60 Inflation rate \u2013 CPI 2.55 2.90 Future pension increases 1.90 \u2013 2.95 2.30 \u2013 3.45 Discount rate The discount rate for the Scheme is derived from the expected yields on high quality corporate bonds over the duration of the Group\u2019s pension scheme and extrapolated in line with gilts with no theoretical growth assumptions. High quality corporate bonds are those for which at least one of the main ratings agencies considers to be at least AA (or equivalent). Inflation On 25 November 2022, the Government and UK Statistics Authority\u2019s joint consultation response on RPI reform was published. This confirmed their intention to amend the RPI calculation methodology to be aligned to that already in use for the calculation of the CPI (including housing) with effect from 2030. As a result, the Group reduced the post 2030 gap between RPI and CPI to nil in the prior year, effectively assuming RPI will be aligned with CPI post 2030, resulting in a single weighted average RPI-CPI gap of 0.70% p.a. for the 4 March 2023 year-end. This approach has been applied consistently in the current year. 35 Retirement benefit obligations continued Mortality The base mortality assumptions are based on the SAPS S2 tables, with adjustments to reflect the Scheme\u2019s population. Following the completion of the 2021 triennial valuation and consideration of the previous three years of mortality experience both in the Scheme and the UK as a whole, the Company has decided to update the actuarial mortality base tables that determine the life expectancy assumptions to reflect a best-estimate adjustment derived from analysis carried out for the valuation. Future mortality improvements for the 2023 year-end are CMI 2021 projections with a long term rate of improvement of 1.25 per cent p.a. Future mortality improvements for the 2023 year-end are CMI 2021 projections with a long term rate of improvement of 1.25 per cent p.a. Future mortality improvements for the 2022 year-end were CMI 2021 projections with a long term rate of improvement of 1.25 per cent p.a. While COVID-19 had an impact on mortality in 2020, the impact on future mortality trends is currently unknown. All IAS 19 calculations use the CMI model, which measures potential changes to future mortality trends. The Group\u2019s policy is to use the available version as at the year-end which is still CMI 2021 which was released on 9 March 2022. As a result of the significant change to mortality in the CMI 2020 model, the CMI modified the calibration process for CMI 2020 to allow choice on the weighting placed on an individual year\u2019s data. For the Core version of CMI 2020, a weight of zero per cent was applied to 2020 data and weightings of 100 per cent for other years, so the potentially exceptional 2020 experience was ignored when modelling future improvements. This approach was maintained for CMI 2021, with zero per cent weighting applied to 2020 and 2021 data. A 10 per cent weighting has therefore been applied again to the 2020 and 2021 mortality data, broadly reflecting that the effects of the pandemic were significantly reduced going forwards with mortality rates for 2022 immediately returning to those in 2019. Thereafter, mortality improvements are in line with the CMI 2021 Core model. The impact of different weightings on the Scheme liabilities is included in the sensitivities section within this note. The life expectancy for members aged 65 years at the balance sheet date is as follows: Sainsbury\u2019s section Main Scheme 2023 Years Sainsbury\u2019s section Executive Scheme 2023 Years Argos section 2023 Years Sainsbury\u2019s section Main Scheme 2022 Years Sainsbury\u2019s section Executive Scheme 2022 Years Argos section 2022 Years Male pensioner 19.5 22.7 20.3 19.6 23.8 21.3 Female pensioner 23.3 24.0 23.4 23.5 25.0 23.9 The life expectancy at age 65 for members aged 45 years at the balance sheet date is as follows: Sainsbury\u2019s section Main Scheme 2023 Years Sainsbury\u2019s section Executive Scheme 2023 Years Argos section 2023 Years Sainsbury\u2019s section Main Scheme 2022 Years Sainsbury\u2019s section Executive Scheme 2022 Years Argos section 2022 Years Male pensioner 20.7 24.0 21.6 20.8 25.0 22.5 Female pensioner 24.9 25.5 24.8 25.0 26.5 25.4 e) Sensitivities The present value of the Scheme\u2019s liabilities recognised at the balance sheet date and the net financing charge recognised in the income statement are dependent on the discount rate. Other key assumptions within this calculation are based on market conditions or estimates of future events, including mortality rates. The carrying value of the retirement benefit obligations is impacted by changes to any of the assumptions used, however is most sensitive to changes in the discount rate. The sensitivities are calculated using the same methodology used to calculate the retirement benefit obligation, by considering the impact for a given change in assumption. The net retirement benefit obligation is the difference between the retirement benefit obligation and the fair value of plan assets. Changes in the assumptions may occur at the same time as changes in the fair value of plan assets. There has been no change in the calculation methodology since the prior period. Sainsbury\u2019s \u00a3m Argos \u00a3m Total \u00a3m Financial sensitivities An increase of 0.5% in the discount rate would decrease the present value of funded obligations by 346 61 407 A decrease of 0.5% in the discount rate would increase the present value of funded obligations by 389 68 457 An increase of 0.5% in the inflation rate would increase the present value of funded obligations by 180 44 224 A decrease of 0.5% in the inflation rate would decrease the present value of funded obligations by 175 42 217 An increase of 0.5% in the inflation rate for future pension increases would increase the present value of funded obligations by 87 23 111 A decrease of 0.5% in the inflation rate for future pension increases would reduce the present value of funded obligations by 87 22 108 Demographic sensitivities An increase of one year to the life expectancy would increase the present value of funded obligations by 160 24 183 Changing the 2020 and 2021 weighting parameters in CMI 2021 to 0% would increase the present value of funded obligations by 99 8 107 Changing the 2020 and 2021 weighting parameters in CMI 2021 to 25% would decrease the present value of funded obligations by 54 8 62 35 Retirement benefit obligations continued f) Future benefit payments Details of future committed payments are included in the Background section at the beginning of this note. Expected cash contributions in FY23/24 are approximately \u00a345 million. The duration of the plan liabilities is around 15 years for the Sainsbury\u2019s section and 17 years for the Argos section. The following table provides information on the timing of benefit payments (amounts undiscounted): 2023 \u00a3m 2022 \u00a3m Within the next 12 months (next annual reporting period) 237 240 Between 2 and 5 years 1,104 1,003 Between 6 and 15 years 3,779 3,644 Between 16 and 25 years 3,974 4,176 Beyond 25 years 5,345 6,362 Total expected payments 14,439 15,425 35 Retirement benefit obligations continued ",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEmployeeBenefitsExplanatory",
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"fact-564": {
"value": "Accounting policies \u2013 defined contribution pension schemes The Group contributions to defined contribution pension schemes are charged to the income statement as incurred. Any contributions unpaid at the balance sheet date are included as an accrual as at that date. The Group has no further payment obligations once the contributions have been paid. Accounting policies \u2013 defined benefit pension scheme (Sainsbury\u2019s Pension Scheme) The surplus or deficit recognised in the balance sheet for defined benefit schemes represents the difference between the fair value of the plan assets and the present value of the defined benefit obligation at the balance sheet date. The defined benefit obligation is actuarially calculated on an annual basis using the projected unit credit method. Actuarial gains and losses are reported in the statement of other comprehensive income as incurred, and comprise both the effects of changes in actuarial assumptions and experience adjustments arising because of differences between the previous actuarial assumptions and what has actually occurred. The income statement charge consists of a financing charge, which is the net of interest cost on pension scheme liabilities and interest income on plan assets and defined benefit pension scheme expenses. The financing charge is determined by applying the discount rate used to measure the defined benefit obligation to the pension scheme liabilities and plan assets at the beginning of the financial year. ",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory",
"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
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"fact-525": {
"value": "36 Share-based payments Accounting policies The Group provides benefits to employees (including Directors) of the Group in the form of equity-settled and cash-settled share-based payment transactions, whereby employees render services in exchange for shares, rights over shares or the value of those shares in cash terms. For equity-settled share-based payments, the fair value of the employee services rendered is determined by reference to the fair value of the shares awarded or options granted, excluding the impact of any non-market vesting conditions. All share options are valued using an option-pricing model (Black-Scholes). This fair value is charged to the income statement over the vesting period of the share-based payment scheme with a corresponding increase in equity. For cash-settled share-based payments, the fair value of the employee services rendered is determined at each balance sheet date and the charge recognised through the income statement over the vesting period of the share-based payment scheme, with a corresponding increase in accruals. The value of the charge is adjusted in the income statement over the remainder of the vesting period to reflect expected and actual levels of options vesting, with the corresponding adjustments made in equity and accruals. The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity. The Group recognised \u00a359 million (2022: \u00a358 million) of employee costs (note 34) related to share-based payment transactions made during the financial year. The Group operates several share-based payment schemes as set out below: a) Savings-Related Share Option Scheme (Sharesave) The Group operates a Savings-Related Share Option Scheme, which is open to all UK employees with more than three months\u2019 continuous service. This is an approved HMRC scheme and was established in 1980. Under Sharesave, participants remaining in the Group\u2019s employment at the end of the three-year (and historically also five-year) savings period are entitled to use their savings to purchase shares in the Company at a pre-stated exercise price. Employees leaving for certain reasons can use their savings to purchase shares within six months of their leaving. A reconciliation of Sharesave option movements is shown below: 2023 Number of options million 2023 Weighted average exercise price pence 2022 Number of options million 2022 Weighted average exercise price pence Outstanding at beginning of year 58.3 186 64.1 179 Granted 23.7 167 13.8 228 Lapsed / forfeited (14.0) 206 (10.0) 179 Exercised (8.6) 167 (9.6) 204 Outstanding at end of year 59.4 177 58.3 186 Exercisable at end of year 7.1 166 4.7 238 Exercisable Range 161 to 260 161 to 260 The weighted average share price for options exercised over the year was 258 pence (2022: 259 pence). The weighted average remaining contractual life of options outstanding at 4 March 2023 was 1.9 years (2022: 1.8 years). Options granted during the year were valued using the Black-Scholes option-pricing model. No performance conditions were included in the fair value calculations. The fair value per option granted during the year and the assumptions used in the calculation are as follows: 2023 2022 Share price at grant date (pence) 226 277 Exercise price (pence) 167 228 Expected volatility \u2013 3 Year Period (%) 28.9 30.8 Option life \u2013 3 Year Period (years) 3.2 3.2 Expected dividends (expressed as dividend yield %) 5.6 4.0 Risk-free interest rate \u2013 3 Year Period (%) 3.0 0.1 Fair value per option \u2013 3 Year Period (pence) 57 59 The expected volatility is based on the standard deviation of the Group\u2019s share price for the period immediately prior to the date of grant of award, over the period identical to the vesting period of the award, adjusted for management\u2019s view of future volatility of the share price. b) Long-Term Incentive Plan Under the Long-Term Incentive Plan, shares are conditionally awarded to Senior Managers of the Company. The core awards are calculated as a percentage of the participants\u2019 salaries and scaled according to grades. Performance is measured at the end of the three-year performance period. If the required performance conditions, which are financial and non-financial non-market conditions, have been met, the awards vest and the participants are able to exercise 100% of the awards received. For 2020 awards and prior, recipients were only able to receive 50% of their awards after 3 years and 50% of their awards after 4 years. Options granted will expire five years from the grant date. For Executive Directors, awards will normally be subject to a two-year holding period following the end of the three-year performance period. Options granted to acquire the award of shares will expire six years from the date of grant. Dividends will accrue on the shares that vest in the form of additional shares. The core award can grow by up to four times, dependent on the level of performance. Straight-line vesting will apply if performance falls between two points. Awards are structured as nil cost options. A reconciliation of the number of shares conditionally allocated is shown below: 2023 Million 2022 Million Outstanding at beginning of year 18.5 12.2 Conditionally allocated 9.7 12.9 Released to participants ( 7.4) (5.0) Lapsed (1.8) (1.6) Outstanding at end of year 19.0 18.5 The weighted average remaining contractual life of share options outstanding at 4 March 2023 was 0.9 years (2022: 1.5 years). Details of shares conditionally allocated at 4 March 2023 are set out below: Date of conditional award 2023 Million 2022 Million 11 May 2017 (2017 Future Builder) \u2013 1.1 11 May 2018 (2018 Future Builder) 0.7 2.8 09 May 2019 (2019 Future Builder) 4.4 2.9 07 May 2020 (2020 Future Builder) 3.0 3.3 06 Jun 2021 (2021 Win in Food Plan) 7.6 8.4 01 Jun 2022 (2022 Leaders\u2019 Share Award) 3.3 \u2013 19.0 18.5 The 2021 Win in Food Plan was opened up to a larger population of managers, which was a one-off increase specifically for this plan. 36 Share-based payments continued No performance conditions were included in the fair value calculations. The fair value per option granted during the year and the assumptions used in the calculation are as follows: 2023 2022 Share price at grant date (pence) 230 267 Option life (years) 3 3 Fair value per option (pence) 230 267 During the year, a total number of 7.4 million shares were exercised (2022: 5.0 million shares). The weighted average share price during the year for options exercised was 232 pence (2022: 248 pence). c) Deferred Share Award This plan is closed to new participants, the last awards made under this plan were in 2020/21. The Deferred Share Award targets a diverse range of financial and strategic scorecard measures. These are intended to reward the Directors in the Company, including Executive Directors, for driving the short-term objectives that will directly lead to building the sustainable, long-term growth of the Company. Awards are structured as nil cost options. Share-based awards are made to participants subject to performance against a basket of measures. At least 50 per cent of the awards are based on the delivery of financial performance and returns to shareholders. The balance is based on measures which will assess the Company\u2019s performance relative to its competitors as well as key strategic goals. Performance against the target is measured over one financial year. Any shares awarded are deferred for a further two years to ensure that management\u2019s interests continue to be aligned with those of shareholders. The shares are subject to forfeiture if the participant resigns or is dismissed. Dividends accrue on the shares that vest in the form of additional shares. A reconciliation of the number of shares granted over the year is shown below: 2023 Million 2022 Million Outstanding at beginning of year 1.7 3.6 Granted 1 0.1 0.2 Lapsed \u2013 (0.1) Exercised (1.7) (2.0) Outstanding at end of year 0.1 1.7 1. The awards granted in the current and comparative period relate to dividend shares awarded. The number of shares allocated at the end of the year is set out below: 2023 Million 2022 Million 09 May 2019 \u2013 0.1 07 May 2020 0.1 1.6 0.1 1.7 The weighted average remaining contractual life of share options outstanding at 4 March 2023 was nil years (2022: nil years). The weighted average share price during the year for options exercised was 236 pence (2022: 241 pence). d) Bonus Share Award Senior Managers and supermarket managers receive 60 per cent of their bonus in cash and 40 per cent of the award in shares. Director level managers receive 50 per cent of their bonus in cash and 50 per cent of the award in shares. Before 2021 awards had a three-year deferral period, however awards granted from 2021 now have a deferral period of two years (except for certain colleagues who are subject to a deferral period due to financial services regulations). Dividends accrue on these shares and are released at the end of the deferral period. A reconciliation of the number of shares granted over the year is shown below: 2023 Million 2022 Million Outstanding at beginning of year 17.2 10.6 Granted 14.4 12.6 Exercised in the period (5.9) (4.3) Lapsed (1.3) (1.7) Outstanding at end of year 24.4 17. 2 36 Share-based payments continued The number of shares allocated at the end of the year is set out below: 2023 Million 2022 Million 09 May 2019 \u2013 5.1 07 May 2020 1.0 1.1 07 May 2021 10.3 11.0 01 June 2022 13.1 \u2013 24.4 17. 2 The weighted average remaining contractual life of share options outstanding at 4 March 2023 was 0.6 years (2022: 0.7 years). The weighted average share price during the year for options exercised was 251 pence (2022: 242 pence). 36 Share-based payments continued ",
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"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
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"fact-565": {
"value": "The Group provides benefits to employees (including Directors) of the Group in the form of equity-settled and cash-settled share-based payment transactions, whereby employees render services in exchange for shares, rights over shares or the value of those shares in cash terms. For equity-settled share-based payments, the fair value of the employee services rendered is determined by reference to the fair value of the shares awarded or options granted, excluding the impact of any non-market vesting conditions. All share options are valued using an option-pricing model (Black-Scholes). This fair value is charged to the income statement over the vesting period of the share-based payment scheme with a corresponding increase in equity. For cash-settled share-based payments, the fair value of the employee services rendered is determined at each balance sheet date and the charge recognised through the income statement over the vesting period of the share-based payment scheme, with a corresponding increase in accruals. The value of the charge is adjusted in the income statement over the remainder of the vesting period to reflect expected and actual levels of options vesting, with the corresponding adjustments made in equity and accruals. The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity. The Group recognised \u00a359 million (2022: \u00a358 million) of employee costs (note 34) related to share-based payment transactions made during the financial year. The Group operates several share-based payment schemes as set out below: ",
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"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
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"fact-526": {
"value": "37 Capital commitments At 4 March 2023, capital commitments contracted, but not provided for by the Group, amounted to \u00a3159 million (5 March 2022: \u00a3108 million). In addition, the Group is committed to payments totalling \u00a3101 million (2022: \u00a3nil) in relation to leases that have been signed but not yet commenced. 38 Contingent liabilities The Group has a number of contingent liabilities in respect of historic lease guarantees, particularly in relation to the disposal of assets, which if the current tenant and their ultimate parents become insolvent, may expose the Group to a material liability. This liability decreases over time as the leases expire. The Group has considered a number of factors, including past history of default as well as the profitability and cash generation of the current leaseholders, and has concluded that the likelihood of pay out is remote. Along with other retailers, the Group is currently subject to claims from current and ex-employees in the Employment Tribunal for equal pay under the Equality Act 2010 and/or the Equal Pay Act 1970. There are currently circa 13,000 equal pay claims from circa 8,100 claimants and the Group believes that further claims may be served. The claimants are alleging that their work within Sainsbury\u2019s stores is or was of equal value to that of colleagues working in Sainsbury\u2019s distribution centres, and that differences in terms and conditions relating to pay are not objectively justifiable. The claimants are seeking the differential back pay based on the higher wages in distribution depots, and the equalisation of wages and terms and conditions on an ongoing basis. There are three stages in the tribunal procedure for equal value claims of this nature and the claimants will need to succeed in all three. The first stage is whether store claimants have the legal right to make the comparison with depot workers. Following European and Supreme Court decisions in other litigation, Sainsbury\u2019s has conceded this point. The second stage is the lengthy process to determine whether any of the claimants\u2019 roles are of equal value to their chosen comparators. In the event that any of the claimants succeed at the second stage, there will be a third stage comprising further hearings, in the following years, to consider Sainsbury\u2019s material factor defences, relating to non-discriminatory reasons for any pay differential. Completion of these two stages is likely to take many years which may involve hearings and appeals. It is not possible to predict a final date with any certainty. If the Group is unsuccessful at the end of the litigation the liability could be material but due to the complexity and multitudinous factual and legal uncertainties we are not in a position to predict an outcome, quantum or impact at this stage. There are substantial factual and legal defences to these claims and the Group intends to defend them vigorously. ",
"dimensions": {
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"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
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"fact-566": {
"value": "37 Capital commitments At 4 March 2023, capital commitments contracted, but not provided for by the Group, amounted to \u00a3159 million (5 March 2022: \u00a3108 million). In addition, the Group is committed to payments totalling \u00a3101 million (2022: \u00a3nil) in relation to leases that have been signed but not yet commenced. ",
"dimensions": {
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"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
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"fact-567": {
"value": "38 Contingent liabilities The Group has a number of contingent liabilities in respect of historic lease guarantees, particularly in relation to the disposal of assets, which if the current tenant and their ultimate parents become insolvent, may expose the Group to a material liability. This liability decreases over time as the leases expire. The Group has considered a number of factors, including past history of default as well as the profitability and cash generation of the current leaseholders, and has concluded that the likelihood of pay out is remote. Along with other retailers, the Group is currently subject to claims from current and ex-employees in the Employment Tribunal for equal pay under the Equality Act 2010 and/or the Equal Pay Act 1970. There are currently circa 13,000 equal pay claims from circa 8,100 claimants and the Group believes that further claims may be served. The claimants are alleging that their work within Sainsbury\u2019s stores is or was of equal value to that of colleagues working in Sainsbury\u2019s distribution centres, and that differences in terms and conditions relating to pay are not objectively justifiable. The claimants are seeking the differential back pay based on the higher wages in distribution depots, and the equalisation of wages and terms and conditions on an ongoing basis. There are three stages in the tribunal procedure for equal value claims of this nature and the claimants will need to succeed in all three. The first stage is whether store claimants have the legal right to make the comparison with depot workers. Following European and Supreme Court decisions in other litigation, Sainsbury\u2019s has conceded this point. The second stage is the lengthy process to determine whether any of the claimants\u2019 roles are of equal value to their chosen comparators. In the event that any of the claimants succeed at the second stage, there will be a third stage comprising further hearings, in the following years, to consider Sainsbury\u2019s material factor defences, relating to non-discriminatory reasons for any pay differential. Completion of these two stages is likely to take many years which may involve hearings and appeals. It is not possible to predict a final date with any certainty. If the Group is unsuccessful at the end of the litigation the liability could be material but due to the complexity and multitudinous factual and legal uncertainties we are not in a position to predict an outcome, quantum or impact at this stage. There are substantial factual and legal defences to these claims and the Group intends to defend them vigorously. ",
"dimensions": {
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"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
}
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"fact-527": {
"value": "39 Related party transactions a) Key management personnel The key management personnel of the Group comprise members of the J Sainsbury plc Board of Directors and the Operating Board. The key management personnel compensation is as follows: 2023 \u00a3m 2022 \u00a3m Short-term employee benefits 15 12 Post-employment employee benefits 1 1 Share-based payments 6 6 22 19 Five key management personnel had credit card balances with Financial Services (2022: three). These arose in the normal course of business and were immaterial to the Group and the individuals. Two key management personnel held saving deposit accounts with Financial Services (2022: one). These balances arose in the normal course of business and were immaterial to the Group and the individuals. b) Joint ventures and associates Transactions with joint ventures and associates For the 52 weeks to 4 March 2023, the Group entered into various transactions with joint ventures and associates as set out below. All transactions with joint ventures and associates are at arms-length. 2023 \u00a3m 2022 \u00a3m Dividends and distributions received 1 2 Rental expenses paid (6) (8) Year-end balances arising from transactions with joint ventures and associates 2023 \u00a3m 2022 \u00a3m Other payables (2) (1) c) Retirement benefit obligations As discussed in note 35, the Group has entered into an arrangement with the Pension Scheme Trustee as part of the funding plan for the actuarial deficit in the Scheme. Full details of this arrangement are set out in note 35 to these financial statements. ",
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"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
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},
"fact-568": {
"value": "a) Key management personnel The key management personnel of the Group comprise members of the J Sainsbury plc Board of Directors and the Operating Board. The key management personnel compensation is as follows: 2023 \u00a3m 2022 \u00a3m Short-term employee benefits 15 12 Post-employment employee benefits 1 1 Share-based payments 6 6 22 19 Five key management personnel had credit card balances with Financial Services (2022: three). These arose in the normal course of business and were immaterial to the Group and the individuals. Two key management personnel held saving deposit accounts with Financial Services (2022: one). These balances arose in the normal course of business and were immaterial to the Group and the individuals. ",
"dimensions": {
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"language": "en",
"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
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"fact-528": {
"value": "40 Post balance sheet events Subsequent to the Group\u2019s balance sheet date, on 14 March 2023 the Group exchanged contracts for the purchase of Supermarket Income REIT\u2019s beneficial interest in a commercial property investment pool, in which the Group already held a beneficial interest, refer to note 29. The purchase has been implemented through the acquisition of Cornerford Limited, Horndrift Limited, Avenell Property PLC and Hobart Property PLC. The transaction completed on 17 March 2023 for a total consideration of \u00a3431 million (excluding costs), which is being paid in three tranches. \u00a3279 million was paid on 17 March 2023 and \u00a3117 million will be paid on 10 July 2023, whilst the third tranche of \u00a335 million is conditional on the sale of five stores from the property pool by the Group. Additionally, the Group will fully fund the bond redemptions attached to the property pool, of which \u00a3170.5 million was paid on 20 March 2023 and \u00a3130.4 million will be paid on 13 July 2023. The total consideration and bond redemptions are to be funded by utilising the Group\u2019s cash resources and also by drawing under the committed unsecured term facility, from which the Group drew \u00a3200 million on 14 March 2023. As this transaction took place subsequent to the Group\u2019s balance sheet date, no adjustments are required to be made to the Group\u2019s financial statements. As the transaction exchanged and completed after the balance sheet date, control of the entities acquired only passed to the Group after the balance sheet date and therefore the initial accounting for this transaction has not yet been completed. ",
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"entity": "scheme:213800VGZAAJIKJ9Y484",
"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
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"fact-529": {
"value": "41 Details of related undertakings All companies listed below are owned by the Group and all interests are in ordinary share capital, except where otherwise indicated. All subsidiaries have been consolidated. a) Subsidiary undertakings The Group holds a majority of the voting rights of the following undertakings: Entity Country of incorporation Interest Holding Registered office address* ARG Personal Loans Limited UK 100% Indirect Avebury Argos Business Solutions Limited UK 100% Indirect Avebury Argos Card Transactions Limited UK 100% Indirect 33 Holborn Argos Direct Limited UK 100% Indirect 33 Holborn Argos Distributors (Ireland) Limited Ireland 100% Indirect Unit 7, Ashbourne Retail Park Argos Holdings Limited UK 100% Indirect Avebury Argos Limited UK 100% Indirect Avebury Argos (N.I.) Ltd UK 100% Indirect Forestside Shopping Centre Argos Surbs Investments Limited UK 100% Indirect Avebury Avenell Property plc UK 100% Indirect 33 Holborn Barleygold Limited UK 100% Indirect 50 Bedford Street Bells Stores Limited UK 100% Direct 33 Holborn BLSSP (PHC 7) Limited UK 100% Indirect 33 Holborn Braemar Castle Limited** UK 100% Direct 33 Holborn Brand-Leader's Limited UK 100% Indirect 33 Holborn Chad Valley Limited UK 100% Indirect 33 Holborn Clearance Bargains Limited UK 100% Indirect 33 Holborn Cliffrange Limited UK 100% Indirect 33 Holborn Coolidge Investments Limited UK 100% Indirect 33 Holborn Cornerford Limited**** UK 100% Indirect 33 Holborn Financial Recovery Services Limited UK 100% Indirect Avebury First Stop Stores Limited UK 100% Indirect 33 Holborn Flint Castle Limited** UK 100% Direct 33 Holborn Global (Guernsey) Limited Guernsey 100% Indirect PO Box 33, Dorey Court Habitat Retail Limited UK 100% Indirect Avebury Holborn UK Investments Limited UK 100% Direct 33 Holborn Home Retail Group Limited UK 100% Indirect Avebury Home Retail Group (Cyprus) Limited Cyprus 100% Indirect 5 Anastasios Leventis Street Home Retail Group (Finance) LLP UK 100% Indirect Avebury Home Retail Group (Guernsey) LP Guernsey 100% Indirect PO Box 33, Dorey Court Home Retail Group (Jersey) Limited Jersey 100% Indirect 44 Esplanade Home Retail Group (UK) Limited UK 100% Indirect Avebury Home Retail Group Card Services Limited UK 100% Indirect Avebury Home Retail Group Holdings (Overseas) Limited UK 100% Indirect 33 Holborn Home Retail Group Insurance Services Limited UK 100% Indirect Avebury Home Retail Group Nominees Limited UK 100% Indirect 33 Holborn Home Retail Group UK Service Company Limited UK 100% Indirect 33 Holborn Horndrift Limited**** UK 100% Indirect 33 Holborn J Sainsbury Common Investment Fund Limited UK 100% Indirect 33 Holborn J Sainsbury Distribution Limited UK 100% Direct 33 Holborn J Sainsbury Pension Scheme Trustees Limited UK 100% Direct 33 Holborn J Sainsbury Trustees Limited UK 100% Indirect 33 Holborn Jacksons Stores Limited UK 100% Direct 33 Holborn Jacksons Stores 2002 Limited UK 100% Indirect 33 Holborn JS Information Systems Limited UK 100% Direct 33 Holborn JS Insurance Limited Isle of Man 100% Direct Third Floor, St George's Court JSD (London) Limited UK 100% Indirect 33 Holborn Jungle Online UK 100% Indirect 33 Holborn Jungle.com Limited UK 100% Indirect 33 Holborn Jungle.com Holdings Limited UK 100% Indirect 33 Holborn * See full addresses on page 209. ** Dissolved on 28 March 2023. *** An application has been made to strike off this company from the Companies Register. **** Acquired subsequent to year-end. 41 Details of related undertakings continued Entity Country of incorporation Interest Holding Registered office address* Nash Court (Kenton) Limited UK 100% Indirect 33 Holborn Nectar 360 Limited UK 100% Indirect 33 Holborn Nectar 360 Services LLP UK 100% Indirect 33 Holborn Nectar EMEA Limited UK 100% Indirect 33 Holborn Nectar Loyalty Holding Limited UK 100% Direct 33 Holborn Ramheath Properties Limited UK 100% Direct 33 Holborn Sainsbury Bridgeco Holdco Limited UK 100% Direct 33 Holborn Sainsbury Holdco A Limited UK 100% Direct 33 Holborn Sainsbury Holdco B Limited UK 100% Direct 33 Holborn Sainsbury Propco A Limited UK 100% Indirect 33 Holborn Sainsbury Propco B Limited UK 100% Indirect 33 Holborn Sainsbury Propco C Limited UK 100% Direct 33 Holborn Sainsbury Propco D Limited UK 100% Direct 33 Holborn Sainsbury Property Investments Limited UK 100% Direct 33 Holborn Sainsbury's Argos Asia Limited Hong Kong 100% Indirect Unit 904, 9/F, Tower 2 Sainsbury\u2019s Argos Asia Commercial Limited Hong Kong 100% Indirect Unit 904, 9/F, Tower 2 Sainsbury\u2019s Argos Asia Sourcing Limited Hong Kong 100% Indirect Unit 904, 9/F, Tower 2 Sainsbury's Argos Asia Technical Limited Hong Kong 100% Indirect Unit 904, 9/F, Tower 2 Sainsbury\u2019s Argos Commercial Consulting (Shanghai) Limited China 100% Indirect 26/F, Tower 1 Sainsbury's Bank plc UK 100% Direct 33 Holborn Sainsburys Corporate Director Limited UK 100% Direct 33 Holborn Sainsbury\u2019s Corporate Healthcare Trustee Limited UK 100% Indirect 33 Holborn Sainsbury\u2019s Corporate Secretary Limited UK 100% Direct 33 Holborn Sainsbury\u2019s Group Holdings Limited UK 100% Direct 33 Holborn Sainsbury's Heather GP Limited UK 100% Indirect 3 Lochside Avenue Sainsbury's Intermediate Holdings Limited UK 100% Direct 33 Holborn Sainsbury's Manor GP Limited UK 100% Direct 3 Lochside Avenue Sainsbury's Manor II Property Limited UK 100% Direct 3 Lochside Avenue Sainsbury's Manor Property Limited UK 100% Direct 3 Lochside Avenue Sainsburys (NI) Ltd UK 100% Indirect Forestside Shopping Centre Sainsbury's Rose LP Limited UK 100% Indirect 33 Holborn Sainsbury\u2019s SL Limited UK 100% Indirect 33 Holborn Sainsbury's Supermarkets Ltd UK 100% Direct 33 Holborn Sainsbury\u2019s Thistle Scottish Limited Partnership UK 100% Indirect 3 Lochside Avenue Sainsbury\u2019s Tyne Property Holdings Limited UK 100% Indirect 33 Holborn Software Warehouse Holdings Limited UK 100% Indirect 33 Holborn Stamford House Investments Limited UK 100% Direct 33 Holborn Stamford Properties One Limited UK 100% Direct 33 Holborn Stamford Properties Three Limited UK 100% Direct 33 Holborn Stamford Properties Two Limited UK 100% Direct 33 Holborn Stanhope Finance Limited UK 100% Indirect 33 Holborn Tintagel Castle Limited*** UK 100% Direct 33 Holborn Town Centre Retail (Bicester) Limited UK 100% Indirect 33 Holborn * See full addresses on page 209. ** Dissolved on 28 March 2023. *** An application has been made to strike off this company from the Companies Register. **** Acquired subsequent to year-end. b) Associated undertakings The Group has a participating interest in the following undertakings: Entity Country of incorporation Interest Holding Registered office address* 3BW Limited UK 50% Indirect 5 St John\u2019s Lane Harvest 2 GP Limited UK 50% Indirect 100 Victoria Street Harvest 2 Limited Partnership UK 50% Indirect 100 Victoria Street Harvest Development Management Limited UK 50% Indirect 100 Victoria Street Harvest GP Limited UK 50% Indirect 100 Victoria Street Hedge End Park Limited UK 50% Direct 33 Holborn c) Undertakings other than subsidiaries and associated undertakings The direct or indirect holder of 100 per cent of the voting interests in the following undertakings is an associate of the Group: Entity Country of incorporation Interest Holding Registered office address* Harvest 2 Selly Oak Limited UK 50% Indirect 100 Victoria Street BL Sainsbury Superstores Limited** UK 50% Indirect York House British Land Superstores (Non-Securitised)** UK 50% Indirect York House Pencilscreen Limited** UK 50% Indirect York House d) Overseas branches The Group has the following branches overseas: Entity Country of incorporation Holding Registered office address* Sainsbury\u2019s Argos Asia Limited \u2013 Bangladesh Liaison Office Bangladesh Indirect Level 10, Simpletree Anarkali Sainsbury\u2019s Argos Asia Limited \u2013 India Branch Office India Indirect Unit No. 1, 1st Floor, Ambience Corporate Tower II * See full addresses on page 209. ** Currently in liquidation. e) Subsidiary undertakings exempt from audit The following subsidiaries are exempt from the requirements of the Companies Act 2006 relating to the audit of individual accounts by virtue of section 479A of the Act: Entity Company registered number Argos Holdings Limited 5860214 Argos Surbs Investments Limited 5716474 BLSSP (PCH 7) Limited 04104076 Cliffrange Limited 1967242 Coolidge Investments Limited 07697101 Habitat Retail Limited 7445750 Home Retail Group (Jersey) Limited 106184 Home Retail Group Limited 5863533 Home Retail Group Holdings (Overseas) Limited 0872776 Home Retail Group (UK) Limited 5844516 Manor Property Scottish Partnership N/A Manor Scottish Limited Partnership SL013661 Nash Court (Kenton) Limited 3447714 Nectar EMEA Limited 05821446 Nectar Loyalty Holding Limited 06436907 Ramheath Properties Limited 01762921 Sainsbury\u2019s Bridgeco HoldCo Limited 5644629 Sainsbury\u2019s Group Holdings Limited 11833110 Sainsbury\u2019s Intermediate Holdings Limited 10125892 Sainsbury\u2019s Rose LP Limited 11837174 Sainsbury\u2019s Manor GP Limited SC453278 Sainsbury\u2019s Manor Property Limited SC453263 Sainsbury Property Investments Limited 02184043 Stanhope Finance Limited 4288193 Town Centre Retail (Bicester) Limited 5564905 41 Details of related undertakings continued 41 Details of related undertakings continued f) Full registered office addresses Address Full address 3 Lochside Avenue 3 Lochside Avenue, Edinburgh, EH12 9DJ, United Kingdom 5 Anastasios Leventis Street 5 Anastasios Leventis Street, Leventis Gallery Tower, 8th Floor, 1097 Nicosia, Cyprus 5 St John\u2019s Lane 5 St John\u2019s Lane, London, EC1M 4BH, United Kingdom Unit 904, 9/F, Tower 2 Unit 904, 9/F, Tower 2, The Quayside, 77 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong 26/F, Tower 1 26/F, Tower 1, Kerry Everbright City Phase III-Enterprise Centre, No.128, West Tian Mu Road, Shanghai 200070, People\u2019s Republic of China 33 Holborn 33 Holborn, London, EC1N 2HT, United Kingdom 44 Esplanade 44 Esplanade, St Helier, Jersey, JE4 9WG, Channel Islands 50 Bedford Street 50 Bedford Street, Belfast, BT2 7FN, United Kingdom 100 Victoria Street 100 Victoria Street, London, SW1E 5JL, United Kingdom Avebury Avebury, 489-499 Avebury Boulevard, Milton Keynes, MK9 2NW, United Kingdom Forestside Shopping Centre Forestside Shopping Centre, Upper Galwally, Belfast, BT8 6FX, United Kingdom Level 10, Simpletree Anarkali Level 10, Simpletree Anarkali, 89 Gulshan Avenue Plot 03, Block \u2013 CWS(A), Dhaka \u2013 1212 Bangladesh PO Box 33, Dorey Court PO Box 33, Dorey Court, Admiral Park, St Peter Port, Guernsey, GY1 4AT Third Floor, St George\u2019s Court Third Floor, St George\u2019s Court, Upper Church Street, Douglas, IM1 1EE, Isle of Man Unit 7, Ashbourne Retail Park Unit 7, Ashbourne Retail Park, Ballybin Road, Ashbourne, Co. Meath, Ireland Unit No. 1, 1st Floor, Ambience Corporate Tower II Unit No. 1, 1st Floor, Ambience Corporate Tower II, Ambience Island, NH-8, Gurgaon \u2013 122011, Haryana, India York House York House, 45 Seymour Street, London, W1H 7LX, United Kingdom",
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"period": "2022-03-06T00:00:00/2023-03-05T00:00:00"
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"fact-587": {
"value": "41 Details of related undertakings All companies listed below are owned by the Group and all interests are in ordinary share capital, except where otherwise indicated. All subsidiaries have been consolidated. a) Subsidiary undertakings The Group holds a majority of the voting rights of the following undertakings: Entity Country of incorporation Interest Holding Registered office address* ARG Personal Loans Limited UK 100% Indirect Avebury Argos Business Solutions Limited UK 100% Indirect Avebury Argos Card Transactions Limited UK 100% Indirect 33 Holborn Argos Direct Limited UK 100% Indirect 33 Holborn Argos Distributors (Ireland) Limited Ireland 100% Indirect Unit 7, Ashbourne Retail Park Argos Holdings Limited UK 100% Indirect Avebury Argos Limited UK 100% Indirect Avebury Argos (N.I.) Ltd UK 100% Indirect Forestside Shopping Centre Argos Surbs Investments Limited UK 100% Indirect Avebury Avenell Property plc UK 100% Indirect 33 Holborn Barleygold Limited UK 100% Indirect 50 Bedford Street Bells Stores Limited UK 100% Direct 33 Holborn BLSSP (PHC 7) Limited UK 100% Indirect 33 Holborn Braemar Castle Limited** UK 100% Direct 33 Holborn Brand-Leader's Limited UK 100% Indirect 33 Holborn Chad Valley Limited UK 100% Indirect 33 Holborn Clearance Bargains Limited UK 100% Indirect 33 Holborn Cliffrange Limited UK 100% Indirect 33 Holborn Coolidge Investments Limited UK 100% Indirect 33 Holborn Cornerford Limited**** UK 100% Indirect 33 Holborn Financial Recovery Services Limited UK 100% Indirect Avebury First Stop Stores Limited UK 100% Indirect 33 Holborn Flint Castle Limited** UK 100% Direct 33 Holborn Global (Guernsey) Limited Guernsey 100% Indirect PO Box 33, Dorey Court Habitat Retail Limited UK 100% Indirect Avebury Holborn UK Investments Limited UK 100% Direct 33 Holborn Home Retail Group Limited UK 100% Indirect Avebury Home Retail Group (Cyprus) Limited Cyprus 100% Indirect 5 Anastasios Leventis Street Home Retail Group (Finance) LLP UK 100% Indirect Avebury Home Retail Group (Guernsey) LP Guernsey 100% Indirect PO Box 33, Dorey Court Home Retail Group (Jersey) Limited Jersey 100% Indirect 44 Esplanade Home Retail Group (UK) Limited UK 100% Indirect Avebury Home Retail Group Card Services Limited UK 100% Indirect Avebury Home Retail Group Holdings (Overseas) Limited UK 100% Indirect 33 Holborn Home Retail Group Insurance Services Limited UK 100% Indirect Avebury Home Retail Group Nominees Limited UK 100% Indirect 33 Holborn Home Retail Group UK Service Company Limited UK 100% Indirect 33 Holborn Horndrift Limited**** UK 100% Indirect 33 Holborn J Sainsbury Common Investment Fund Limited UK 100% Indirect 33 Holborn J Sainsbury Distribution Limited UK 100% Direct 33 Holborn J Sainsbury Pension Scheme Trustees Limited UK 100% Direct 33 Holborn J Sainsbury Trustees Limited UK 100% Indirect 33 Holborn Jacksons Stores Limited UK 100% Direct 33 Holborn Jacksons Stores 2002 Limited UK 100% Indirect 33 Holborn JS Information Systems Limited UK 100% Direct 33 Holborn JS Insurance Limited Isle of Man 100% Direct Third Floor, St George's Court JSD (London) Limited UK 100% Indirect 33 Holborn Jungle Online UK 100% Indirect 33 Holborn Jungle.com Limited UK 100% Indirect 33 Holborn Jungle.com Holdings Limited UK 100% Indirect 33 Holborn * See full addresses on page 209. ** Dissolved on 28 March 2023. *** An application has been made to strike off this company from the Companies Register. **** Acquired subsequent to year-end. 41 Details of related undertakings continued Entity Country of incorporation Interest Holding Registered office address* Nash Court (Kenton) Limited UK 100% Indirect 33 Holborn Nectar 360 Limited UK 100% Indirect 33 Holborn Nectar 360 Services LLP UK 100% Indirect 33 Holborn Nectar EMEA Limited UK 100% Indirect 33 Holborn Nectar Loyalty Holding Limited UK 100% Direct 33 Holborn Ramheath Properties Limited UK 100% Direct 33 Holborn Sainsbury Bridgeco Holdco Limited UK 100% Direct 33 Holborn Sainsbury Holdco A Limited UK 100% Direct 33 Holborn Sainsbury Holdco B Limited UK 100% Direct 33 Holborn Sainsbury Propco A Limited UK 100% Indirect 33 Holborn Sainsbury Propco B Limited UK 100% Indirect 33 Holborn Sainsbury Propco C Limited UK 100% Direct 33 Holborn Sainsbury Propco D Limited UK 100% Direct 33 Holborn Sainsbury Property Investments Limited UK 100% Direct 33 Holborn Sainsbury's Argos Asia Limited Hong Kong 100% Indirect Unit 904, 9/F, Tower 2 Sainsbury\u2019s Argos Asia Commercial Limited Hong Kong 100% Indirect Unit 904, 9/F, Tower 2 Sainsbury\u2019s Argos Asia Sourcing Limited Hong Kong 100% Indirect Unit 904, 9/F, Tower 2 Sainsbury's Argos Asia Technical Limited Hong Kong 100% Indirect Unit 904, 9/F, Tower 2 Sainsbury\u2019s Argos Commercial Consulting (Shanghai) Limited China 100% Indirect 26/F, Tower 1 Sainsbury's Bank plc UK 100% Direct 33 Holborn Sainsburys Corporate Director Limited UK 100% Direct 33 Holborn Sainsbury\u2019s Corporate Healthcare Trustee Limited UK 100% Indirect 33 Holborn Sainsbury\u2019s Corporate Secretary Limited UK 100% Direct 33 Holborn Sainsbury\u2019s Group Holdings Limited UK 100% Direct 33 Holborn Sainsbury's Heather GP Limited UK 100% Indirect 3 Lochside Avenue Sainsbury's Intermediate Holdings Limited UK 100% Direct 33 Holborn Sainsbury's Manor GP Limited UK 100% Direct 3 Lochside Avenue Sainsbury's Manor II Property Limited UK 100% Direct 3 Lochside Avenue Sainsbury's Manor Property Limited UK 100% Direct 3 Lochside Avenue Sainsburys (NI) Ltd UK 100% Indirect Forestside Shopping Centre Sainsbury's Rose LP Limited UK 100% Indirect 33 Holborn Sainsbury\u2019s SL Limited UK 100% Indirect 33 Holborn Sainsbury's Supermarkets Ltd UK 100% Direct 33 Holborn Sainsbury\u2019s Thistle Scottish Limited Partnership UK 100% Indirect 3 Lochside Avenue Sainsbury\u2019s Tyne Property Holdings Limited UK 100% Indirect 33 Holborn Software Warehouse Holdings Limited UK 100% Indirect 33 Holborn Stamford House Investments Limited UK 100% Direct 33 Holborn Stamford Properties One Limited UK 100% Direct 33 Holborn Stamford Properties Three Limited UK 100% Direct 33 Holborn Stamford Properties Two Limited UK 100% Direct 33 Holborn Stanhope Finance Limited UK 100% Indirect 33 Holborn Tintagel Castle Limited*** UK 100% Direct 33 Holborn Town Centre Retail (Bicester) Limited UK 100% Indirect 33 Holborn * See full addresses on page 209. ** Dissolved on 28 March 2023. *** An application has been made to strike off this company from the Companies Register. **** Acquired subsequent to year-end. b) Associated undertakings The Group has a participating interest in the following undertakings: Entity Country of incorporation Interest Holding Registered office address* 3BW Limited UK 50% Indirect 5 St John\u2019s Lane Harvest 2 GP Limited UK 50% Indirect 100 Victoria Street Harvest 2 Limited Partnership UK 50% Indirect 100 Victoria Street Harvest Development Management Limited UK 50% Indirect 100 Victoria Street Harvest GP Limited UK 50% Indirect 100 Victoria Street Hedge End Park Limited UK 50% Direct 33 Holborn c) Undertakings other than subsidiaries and associated undertakings The direct or indirect holder of 100 per cent of the voting interests in the following undertakings is an associate of the Group: Entity Country of incorporation Interest Holding Registered office address* Harvest 2 Selly Oak Limited UK 50% Indirect 100 Victoria Street BL Sainsbury Superstores Limited** UK 50% Indirect York House British Land Superstores (Non-Securitised)** UK 50% Indirect York House Pencilscreen Limited** UK 50% Indirect York House d) Overseas branches The Group has the following branches overseas: Entity Country of incorporation Holding Registered office address* Sainsbury\u2019s Argos Asia Limited \u2013 Bangladesh Liaison Office Bangladesh Indirect Level 10, Simpletree Anarkali Sainsbury\u2019s Argos Asia Limited \u2013 India Branch Office India Indirect Unit No. 1, 1st Floor, Ambience Corporate Tower II * See full addresses on page 209. ** Currently in liquidation. e) Subsidiary undertakings exempt from audit The following subsidiaries are exempt from the requirements of the Companies Act 2006 relating to the audit of individual accounts by virtue of section 479A of the Act: Entity Company registered number Argos Holdings Limited 5860214 Argos Surbs Investments Limited 5716474 BLSSP (PCH 7) Limited 04104076 Cliffrange Limited 1967242 Coolidge Investments Limited 07697101 Habitat Retail Limited 7445750 Home Retail Group (Jersey) Limited 106184 Home Retail Group Limited 5863533 Home Retail Group Holdings (Overseas) Limited 0872776 Home Retail Group (UK) Limited 5844516 Manor Property Scottish Partnership N/A Manor Scottish Limited Partnership SL013661 Nash Court (Kenton) Limited 3447714 Nectar EMEA Limited 05821446 Nectar Loyalty Holding Limited 06436907 Ramheath Properties Limited 01762921 Sainsbury\u2019s Bridgeco HoldCo Limited 5644629 Sainsbury\u2019s Group Holdings Limited 11833110 Sainsbury\u2019s Intermediate Holdings Limited 10125892 Sainsbury\u2019s Rose LP Limited 11837174 Sainsbury\u2019s Manor GP Limited SC453278 Sainsbury\u2019s Manor Property Limited SC453263 Sainsbury Property Investments Limited 02184043 Stanhope Finance Limited 4288193 Town Centre Retail (Bicester) Limited 5564905 41 Details of related undertakings continued 41 Details of related undertakings continued f) Full registered office addresses Address Full address 3 Lochside Avenue 3 Lochside Avenue, Edinburgh, EH12 9DJ, United Kingdom 5 Anastasios Leventis Street 5 Anastasios Leventis Street, Leventis Gallery Tower, 8th Floor, 1097 Nicosia, Cyprus 5 St John\u2019s Lane 5 St John\u2019s Lane, London, EC1M 4BH, United Kingdom Unit 904, 9/F, Tower 2 Unit 904, 9/F, Tower 2, The Quayside, 77 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong 26/F, Tower 1 26/F, Tower 1, Kerry Everbright City Phase III-Enterprise Centre, No.128, West Tian Mu Road, Shanghai 200070, People\u2019s Republic of China 33 Holborn 33 Holborn, London, EC1N 2HT, United Kingdom 44 Esplanade 44 Esplanade, St Helier, Jersey, JE4 9WG, Channel Islands 50 Bedford Street 50 Bedford Street, Belfast, BT2 7FN, United Kingdom 100 Victoria Street 100 Victoria Street, London, SW1E 5JL, United Kingdom Avebury Avebury, 489-499 Avebury Boulevard, Milton Keynes, MK9 2NW, United Kingdom Forestside Shopping Centre Forestside Shopping Centre, Upper Galwally, Belfast, BT8 6FX, United Kingdom Level 10, Simpletree Anarkali Level 10, Simpletree Anarkali, 89 Gulshan Avenue Plot 03, Block \u2013 CWS(A), Dhaka \u2013 1212 Bangladesh PO Box 33, Dorey Court PO Box 33, Dorey Court, Admiral Park, St Peter Port, Guernsey, GY1 4AT Third Floor, St George\u2019s Court Third Floor, St George\u2019s Court, Upper Church Street, Douglas, IM1 1EE, Isle of Man Unit 7, Ashbourne Retail Park Unit 7, Ashbourne Retail Park, Ballybin Road, Ashbourne, Co. Meath, Ireland Unit No. 1, 1st Floor, Ambience Corporate Tower II Unit No. 1, 1st Floor, Ambience Corporate Tower II, Ambience Island, NH-8, Gurgaon \u2013 122011, Haryana, India York House York House, 45 Seymour Street, London, W1H 7LX, United Kingdom",
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"fact-569": {
"value": "a) Subsidiary undertakings The Group holds a majority of the voting rights of the following undertakings: Entity Country of incorporation Interest Holding Registered office address* ARG Personal Loans Limited UK 100% Indirect Avebury Argos Business Solutions Limited UK 100% Indirect Avebury Argos Card Transactions Limited UK 100% Indirect 33 Holborn Argos Direct Limited UK 100% Indirect 33 Holborn Argos Distributors (Ireland) Limited Ireland 100% Indirect Unit 7, Ashbourne Retail Park Argos Holdings Limited UK 100% Indirect Avebury Argos Limited UK 100% Indirect Avebury Argos (N.I.) Ltd UK 100% Indirect Forestside Shopping Centre Argos Surbs Investments Limited UK 100% Indirect Avebury Avenell Property plc UK 100% Indirect 33 Holborn Barleygold Limited UK 100% Indirect 50 Bedford Street Bells Stores Limited UK 100% Direct 33 Holborn BLSSP (PHC 7) Limited UK 100% Indirect 33 Holborn Braemar Castle Limited** UK 100% Direct 33 Holborn Brand-Leader's Limited UK 100% Indirect 33 Holborn Chad Valley Limited UK 100% Indirect 33 Holborn Clearance Bargains Limited UK 100% Indirect 33 Holborn Cliffrange Limited UK 100% Indirect 33 Holborn Coolidge Investments Limited UK 100% Indirect 33 Holborn Cornerford Limited**** UK 100% Indirect 33 Holborn Financial Recovery Services Limited UK 100% Indirect Avebury First Stop Stores Limited UK 100% Indirect 33 Holborn Flint Castle Limited** UK 100% Direct 33 Holborn Global (Guernsey) Limited Guernsey 100% Indirect PO Box 33, Dorey Court Habitat Retail Limited UK 100% Indirect Avebury Holborn UK Investments Limited UK 100% Direct 33 Holborn Home Retail Group Limited UK 100% Indirect Avebury Home Retail Group (Cyprus) Limited Cyprus 100% Indirect 5 Anastasios Leventis Street Home Retail Group (Finance) LLP UK 100% Indirect Avebury Home Retail Group (Guernsey) LP Guernsey 100% Indirect PO Box 33, Dorey Court Home Retail Group (Jersey) Limited Jersey 100% Indirect 44 Esplanade Home Retail Group (UK) Limited UK 100% Indirect Avebury Home Retail Group Card Services Limited UK 100% Indirect Avebury Home Retail Group Holdings (Overseas) Limited UK 100% Indirect 33 Holborn Home Retail Group Insurance Services Limited UK 100% Indirect Avebury Home Retail Group Nominees Limited UK 100% Indirect 33 Holborn Home Retail Group UK Service Company Limited UK 100% Indirect 33 Holborn Horndrift Limited**** UK 100% Indirect 33 Holborn J Sainsbury Common Investment Fund Limited UK 100% Indirect 33 Holborn J Sainsbury Distribution Limited UK 100% Direct 33 Holborn J Sainsbury Pension Scheme Trustees Limited UK 100% Direct 33 Holborn J Sainsbury Trustees Limited UK 100% Indirect 33 Holborn Jacksons Stores Limited UK 100% Direct 33 Holborn Jacksons Stores 2002 Limited UK 100% Indirect 33 Holborn JS Information Systems Limited UK 100% Direct 33 Holborn JS Insurance Limited Isle of Man 100% Direct Third Floor, St George's Court JSD (London) Limited UK 100% Indirect 33 Holborn Jungle Online UK 100% Indirect 33 Holborn Jungle.com Limited UK 100% Indirect 33 Holborn Jungle.com Holdings Limited UK 100% Indirect 33 Holborn * See full addresses on page 209. ** Dissolved on 28 March 2023. *** An application has been made to strike off this company from the Companies Register. **** Acquired subsequent to year-end. Entity Country of incorporation Interest Holding Registered office address* Nash Court (Kenton) Limited UK 100% Indirect 33 Holborn Nectar 360 Limited UK 100% Indirect 33 Holborn Nectar 360 Services LLP UK 100% Indirect 33 Holborn Nectar EMEA Limited UK 100% Indirect 33 Holborn Nectar Loyalty Holding Limited UK 100% Direct 33 Holborn Ramheath Properties Limited UK 100% Direct 33 Holborn Sainsbury Bridgeco Holdco Limited UK 100% Direct 33 Holborn Sainsbury Holdco A Limited UK 100% Direct 33 Holborn Sainsbury Holdco B Limited UK 100% Direct 33 Holborn Sainsbury Propco A Limited UK 100% Indirect 33 Holborn Sainsbury Propco B Limited UK 100% Indirect 33 Holborn Sainsbury Propco C Limited UK 100% Direct 33 Holborn Sainsbury Propco D Limited UK 100% Direct 33 Holborn Sainsbury Property Investments Limited UK 100% Direct 33 Holborn Sainsbury's Argos Asia Limited Hong Kong 100% Indirect Unit 904, 9/F, Tower 2 Sainsbury\u2019s Argos Asia Commercial Limited Hong Kong 100% Indirect Unit 904, 9/F, Tower 2 Sainsbury\u2019s Argos Asia Sourcing Limited Hong Kong 100% Indirect Unit 904, 9/F, Tower 2 Sainsbury's Argos Asia Technical Limited Hong Kong 100% Indirect Unit 904, 9/F, Tower 2 Sainsbury\u2019s Argos Commercial Consulting (Shanghai) Limited China 100% Indirect 26/F, Tower 1 Sainsbury's Bank plc UK 100% Direct 33 Holborn Sainsburys Corporate Director Limited UK 100% Direct 33 Holborn Sainsbury\u2019s Corporate Healthcare Trustee Limited UK 100% Indirect 33 Holborn Sainsbury\u2019s Corporate Secretary Limited UK 100% Direct 33 Holborn Sainsbury\u2019s Group Holdings Limited UK 100% Direct 33 Holborn Sainsbury's Heather GP Limited UK 100% Indirect 3 Lochside Avenue Sainsbury's Intermediate Holdings Limited UK 100% Direct 33 Holborn Sainsbury's Manor GP Limited UK 100% Direct 3 Lochside Avenue Sainsbury's Manor II Property Limited UK 100% Direct 3 Lochside Avenue Sainsbury's Manor Property Limited UK 100% Direct 3 Lochside Avenue Sainsburys (NI) Ltd UK 100% Indirect Forestside Shopping Centre Sainsbury's Rose LP Limited UK 100% Indirect 33 Holborn Sainsbury\u2019s SL Limited UK 100% Indirect 33 Holborn Sainsbury's Supermarkets Ltd UK 100% Direct 33 Holborn Sainsbury\u2019s Thistle Scottish Limited Partnership UK 100% Indirect 3 Lochside Avenue Sainsbury\u2019s Tyne Property Holdings Limited UK 100% Indirect 33 Holborn Software Warehouse Holdings Limited UK 100% Indirect 33 Holborn Stamford House Investments Limited UK 100% Direct 33 Holborn Stamford Properties One Limited UK 100% Direct 33 Holborn Stamford Properties Three Limited UK 100% Direct 33 Holborn Stamford Properties Two Limited UK 100% Direct 33 Holborn Stanhope Finance Limited UK 100% Indirect 33 Holborn Tintagel Castle Limited*** UK 100% Direct 33 Holborn Town Centre Retail (Bicester) Limited UK 100% Indirect 33 Holborn * See full addresses on page 209. ** Dissolved on 28 March 2023. *** An application has been made to strike off this company from the Companies Register. **** Acquired subsequent to year-end. ",
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"fact-570": {
"value": "b) Associated undertakings The Group has a participating interest in the following undertakings: Entity Country of incorporation Interest Holding Registered office address* 3BW Limited UK 50% Indirect 5 St John\u2019s Lane Harvest 2 GP Limited UK 50% Indirect 100 Victoria Street Harvest 2 Limited Partnership UK 50% Indirect 100 Victoria Street Harvest Development Management Limited UK 50% Indirect 100 Victoria Street Harvest GP Limited UK 50% Indirect 100 Victoria Street Hedge End Park Limited UK 50% Direct 33 Holborn ",
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"fact-571": {
"value": "c) Undertakings other than subsidiaries and associated undertakings The direct or indirect holder of 100 per cent of the voting interests in the following undertakings is an associate of the Group: Entity Country of incorporation Interest Holding Registered office address* Harvest 2 Selly Oak Limited UK 50% Indirect 100 Victoria Street BL Sainsbury Superstores Limited** UK 50% Indirect York House British Land Superstores (Non-Securitised)** UK 50% Indirect York House Pencilscreen Limited** UK 50% Indirect York House ",
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