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"2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-210": { "value": "0", "decimals": -6, "dimensions": { "concept": "deo:ShareBuybackLiability", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-211": { "value": "117000000", "decimals": -6, "dimensions": { "concept": "deo:ShareBuybackLiability", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-212": { "value": "5300000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:TradeAndOtherCurrentPayables", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-213": { "value": "5887000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:TradeAndOtherCurrentPayables", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-214": { "value": "0", "decimals": -6, "dimensions": { "concept": "ifrs-full:LiabilitiesIncludedInDisposalGroupsClassifiedAsHeldForSale", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-215": { "value": "61000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:LiabilitiesIncludedInDisposalGroupsClassifiedAsHeldForSale", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-216": { "value": "135000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CurrentTaxLiabilitiesCurrent", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-217": { "value": "252000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CurrentTaxLiabilitiesCurrent", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-218": { "value": "119000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CurrentProvisions", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-219": { "value": "159000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CurrentProvisions", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-220": { "value": "7614000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CurrentLiabilities", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-221": { "value": "8442000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CurrentLiabilities", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-222": { "value": "14801000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:LongtermBorrowings", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-223": { "value": "14498000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:LongtermBorrowings", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-224": { "value": "747000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:OtherNoncurrentFinancialLiabilities", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-225": { "value": "703000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:OtherNoncurrentFinancialLiabilities", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-226": { "value": "368000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:NoncurrentPayables", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-227": { "value": "380000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:NoncurrentPayables", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-228": { "value": "243000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:NoncurrentProvisions", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-229": { "value": "258000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:NoncurrentProvisions", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-230": { "value": "2183000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:DeferredTaxLiabilities", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-231": { "value": "2319000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:DeferredTaxLiabilities", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-232": { "value": "373000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:NoncurrentRecognisedLiabilitiesDefinedBenefitPlan", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-233": { "value": "402000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:NoncurrentRecognisedLiabilitiesDefinedBenefitPlan", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-234": { "value": "18715000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:NoncurrentLiabilities", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-235": { "value": "18560000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:NoncurrentLiabilities", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-236": { "value": "26329000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:Liabilities", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-237": { "value": "27002000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:Liabilities", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-238": { "value": "9292000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:NetAssetsLiabilities", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-239": { "value": "9514000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:NetAssetsLiabilities", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-240": { "value": "712000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:IssuedCapital", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-241": { "value": "723000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:IssuedCapital", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-242": { "value": "1351000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:SharePremium", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-243": { "value": "1351000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:SharePremium", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-244": { "value": "1861000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:OtherReserves", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-245": { "value": "2174000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:OtherReserves", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-246": { "value": "3898000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:RetainedEarnings", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-247": { "value": "3550000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:RetainedEarnings", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-248": { "value": "7822000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:EquityAttributableToOwnersOfParent", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-249": { "value": "7798000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:EquityAttributableToOwnersOfParent", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-250": { "value": "1470000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:NoncontrollingInterests", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-251": { "value": "1716000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:NoncontrollingInterests", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-252": { "value": "9292000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:Equity", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-253": { "value": "9514000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:Equity", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-254": { "value": "These consolidated financial statements have been approved by a duly appointed and authorised committee of the Board of Directors on 31 July 2023 and were signed on its behalf by Debra Crew and Lavanya Chandrashekar, Directors.", "dimensions": { "concept": "ifrs-full:DisclosureOfAuthorisationOfFinancialStatementsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-255": { "value": "These consolidated financial statements have been approved by a duly appointed and authorised committee of the Board of Directors on 31 July 2023 and were signed on its behalf by Debra Crew and Lavanya Chandrashekar, Directors.Accounting information and policies
Introduction
This section describes the basis of preparation of the consolidated financial statements and the group\u2019s accounting policies that are applicable to
the financial statements as a whole. Accounting policies, critical accounting estimates and judgements specific to a note are included in the note to
which they relate. Furthermore, the section details new accounting standards, amendments and interpretations, that the group has adopted in the
current financial year or will adopt in subsequent years.
1. Accounting information and policies
(a) Basis of preparation
The consolidated financial statements are prepared in accordance with
international accounting standards in conformity with the requirements
of the Companies Act 2006 and International Financial Reporting
Standards (IFRSs) adopted by the UK (UK-adopted International
Accounting Standards) and IFRSs, as issued by the IASB, including
interpretations issued by the IFRS Interpretations Committee. IFRS as
adopted by the UK differs in certain respects from IFRS as issued by the
IASB. The differences have no impact on the group\u2019s consolidated
financial statements for the years presented. The consolidated financial
statements are prepared on a going concern basis under the historical
cost convention, unless stated otherwise in the relevant accounting
policy.
The preparation of financial statements in conformity with IFRS
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements,
and the reported amounts of revenues and expenses during the year.
Actual results could differ from those estimates.
(b) Going concern
Management prepared cash flow forecasts which were also sensitised
to reflect severe but plausible downside scenarios taking into
consideration the group's principal risks. In the base case scenario,
management included assumptions for mid-single digit net sales
growth, operating margin improvement and global TBA market share
growth. In light of the ongoing geopolitical volatility, the base case
outlook and severe but plausible downside scenarios incorporated
considerations for a prolonged global recession, supply chain
disruptions, higher inflation and further geopolitical deterioration. Even
under these scenarios, the group\u2019s liquidity is still expected to remain
strong, as it was protected by issuing \u20ac500\u00a0million of fixed rate euro
and $2\u00a0billion of fixed rate dollar-denominated bonds in the year ended
30 June 2023. Mitigating actions, should they be required, are all within
management\u2019s control and could include reductions in discretionary
spending such as acquisitions and capital expenditure, as well as a
temporary suspension of the share buyback programme and dividend
payments in the next 12 months, or drawdowns on committed facilities.
Having considered the outcome of these assessments, the Directors are
comfortable that the company is a going concern for at least 12 months
from the date of signing the group's consolidated financial statements.
(c) Consolidation
The consolidated financial statements include the results of the
company and its subsidiaries together with the group\u2019s attributable
share of the results of associates and joint ventures. A subsidiary is an
entity controlled by Diageo plc. The group controls an investee when it is
exposed, or has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through its power
over the investee. Where the group has the ability to exercise joint
control over an entity but has rights to specified assets and obligations
for liabilities of that entity, the entity is included on the basis of the
group\u2019s rights over those assets and liabilities.
(d) Foreign currencies
Items included in the financial statements of the group\u2019s subsidiaries,
associates and joint ventures are measured using the currency of the
primary economic environment in which each entity operates (its
functional currency). The consolidated financial statements are
presented in sterling, which is the functional currency of the parent
company, Diageo plc. The functional currency of Diageo plc is
determined by using management judgement that considers the parent
company as an extension of its subsidiaries.
The income statements and cash flows of non-sterling entities are
translated into sterling at weighted average rates of exchange, except
for subsidiaries in hyperinflationary economies that are translated with
the closing rate at the end of the year and for substantial transactions
that are translated at the rate on the date of the transaction. Exchange
differences arising on the retranslation to closing rates are taken to the
exchange reserve.
Assets and liabilities are translated at closing rates. Exchange
differences arising on the retranslation at closing rates of the opening
balance sheets of overseas entities are taken to the exchange reserve,
as are exchange differences arising on foreign currency borrowings and
financial instruments designated as net investment hedges, to the extent
that they are effective. Tax charges and credits arising on such items are
also taken to the exchange reserve. Gains and losses accumulated in
the exchange reserve are recycled to the income statement when the
foreign operation is sold. Other exchange differences are taken to the
income statement. Transactions in foreign currencies are recorded at
the rate of exchange at the date of the transaction.
The principal foreign exchange rates used in the translation of
financial statements for the three years ended 30 June 2023, expressed
in US dollars and euros per \u00a31, were as follows:
2023
2022
2021
US dollar
Income statement and cash flows(1)
1.20
1.33
1.35
Assets and liabilities(2)
1.26
1.21
1.39
Euro
Income statement and cash flows(1)
1.15
1.18
1.13
Assets and liabilities(2)
1.17
1.16
1.17
(1)Weighted average rates
(2)Closing rates
The group uses foreign exchange hedges to mitigate the effect of
exchange rate movements. For further information, see note 16.
(e) Critical accounting estimates and judgements
Details of critical estimates and judgements which the Directors consider
could have a significant impact on the financial statements are set out
in the related notes as follows:
\u2022Exceptional items \u2013 management judgement whether exceptional or
not \u2013 page 179
\u2022Taxation \u2013 management judgement whether a provision is required
and management estimate of amount of corporate tax payable or
receivable, the recoverability of deferred tax assets and expectation
on manner of recovery of deferred taxes \u2013 pages 183 and 216
\u2022Brands, goodwill, other intangibles and contingent considerations \u2013
management judgement whether the assets and liabilities are to be
recognised and synergies resulting from an acquisition.
Management judgement and estimate are required in determining
future cash flows and appropriate applicable assumptions to support
the intangible asset and contingent consideration value \u2013 pages 184
and 206
\u2022Post employment benefits \u2013 management judgement whether a
surplus can be recovered and management estimate in determining
the assumptions in calculating the liabilities of the funds \u2013 page 195
\u2022Contingent liabilities and legal proceedings \u2013 management
judgement in assessing the likelihood of whether a liability will arise
and an estimate to quantify the possible range of any settlement;
and significant unprovided tax matters where maximum exposure is
provided for each \u2013 page 215
(f) Hyperinflationary accounting
The group applied hyperinflationary accounting for its operations in
Turkey, Venezuela and Lebanon. Turkey has been a hyperinflationary
economy where cumulative inflation for the three years ended 30 June
2022 exceeded 100%. Consequently, since March 2022, the group
applies hyperinflationary accounting for its Turkish operations. The
group\u2019s consolidated financial statements for the years ended 30 June
2023 and 30 June 2022 include the results and financial position of its
Turkish operations restated to the measuring unit current at the end of
each period, with hyperinflationary gains and losses in respect of
monetary items being reported in finance income and charges.
Comparative amounts presented in the consolidated financial
statements were not restated. Hyperinflationary accounting needs to be
applied as if Turkey has always been a hyperinflationary economy,
hence, as per Diageo\u2019s accounting policy choice, the differences
between equity at 30 June 2021 as reported and the equity after the
restatement of the non-monetary items to the measuring unit current at
30 June 2021 were recognised in retained earnings. Such restatement
includes impairment of TRL 2,133 million (\u00a3177 million) recognised on the
goodwill in the Turkey cash-generating unit and TRL 1,627 million (\u00a3135
million) in respect of the Yen\u00ec Raki brand, as a result of the increased
carrying values for those due to hyperinflation adjustments. When
applying IAS 29 on an ongoing basis, comparatives in stable currency
are not restated and the effect of inflating opening net assets to the
measuring unit current at the end of the reporting period is presented in
other comprehensive income. The inflation rate used by the group is the
official rate published by the Turkish Statistical Institute. The movement
in the publicly available official price index for the year ended 30 June
2023 was 38% (2022 \u2013 79%).
Venezuela is a hyperinflationary economy where the government
maintains a regime of strict currency controls with multiple foreign
currency rate systems. The exchange rate used to translate the results of
the group\u2019s Venezuelan operations was VES/\u00a3 3,807 for the year ended
30 June 2023 (2022 \u2013 VES/\u00a3 759). This rate reflects management\u2019s
estimate of the exchange rate considering inflation and the most
appropriate official exchange rate. Movement in the price index for the
year ended 30 June 2023 was 382% (2022 \u2013 268%). The inflation rate
used by the group is provided by an independent valuer because no
reliable, officially published rate is available for Venezuela.
The following table presents the contribution of the group\u2019s
Venezuelan operations to consolidated net sales, operating profit,
operating cash flow and assets for the years ended 30 June 2023 and
30 June 2022 and with the amounts that would have resulted if the
official reference exchange rate had been applied:
Year ended 30 June 2023
Year ended 30 June 2022
At estimated
exchange rate
At official
reference
exchange rate
At estimated
exchange rate
At official
reference
exchange rate
3,807 VES/\u00a3
36 VES/\u00a3
759 VES/\u00a3
7 VES/\u00a3
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
Net sales
\u2014
9
\u2014
15
Operating loss
\u2014
\u2014
(1)
(1)
Other finance
(charges)/income -
hyperinflation
adjustment
(2)
(212)
1
157
Net cash outflow from
operating activities
\u2014
(3)
\u2014
(5)
Net assets
6
657
41
4,606
Fair Value Measurements
\u2022Amendments to IAS 12 International Tax Reform \u2013 Pillar Two Model
Rules
The following standard and amendments issued by the IASB have been
endorsed by the UK and have not been adopted by the group:
\u2022IFRS 17 \u2013 Insurance contracts (effective from the year ending 30 June
2024) is ultimately intended to replace IFRS 4. Based on a
preliminary assessment, the group believes that the adoption of IFRS
17 will not have a significant impact on its consolidated results or
financial position.
\u2022Amendments to IAS 12 - Income taxes (effective from the year ending
30 June 2024) requires an entity to recognise deferred tax on initial
recognition of particular transactions to the extent that the
transaction gives rise to equal amounts of deferred tax assets and
liabilities. The proposed amendments would apply to transactions
such as leases and decommissioning obligations for which an entity
recognises both an asset and a liability. The group believes that the
adoption of these amendments will not have a significant impact on
its consolidated results and financial position.
There are a number of other amendments and clarifications to IFRSs,
effective in future years, which are not expected to significantly impact
the group\u2019s consolidated results or financial position.
(h) Climate change considerations
The impact of climate change assessment and the net zero carbon
emission target for Diageo's direct operations (Scope 1 & 2) for 2030
have been considered as part of the assessment of estimates and
judgements in preparing the group's consolidated financial statements.
The climate change scenario analyses performed in 2023 \u2013
conducted in line with TCFD recommendations (\u2018Transition
Scenario\u2019 (RCP 2.6), a \u2018Moderate Warming\u2019 Scenario (RCP 4.5) and a
\u2018Severe Warming Scenario\u2019 (RCP 8.5)) \u2013 identified no material financial
impact to these financial statements.
The following considerations were made in respect of the financial
statements:
\u2022The impact of climate change on factors (like residual values, useful
lives and depreciation methods) that determine the carrying value of
non-current assets.
\u2022The impact of climate change on forecasts of cash flows used
(including forecast depreciation in line with capital expenditure plans
for Diageo's net zero carbon emission commitment) in impairment
assessments for the value-in-use of non-current assets including
goodwill (see note 9).
\u2022The impact of climate change on post-employment assets.
Results for the year
Introduction
This section explains the results and performance of the group for the three years ended 30 June 2023. Disclosures are provided for segmental
information, operating costs, exceptional items, finance income and charges, the group's share of results of associates and joint ventures, taxation.
For associates, joint ventures and taxation, balance sheet disclosures are also provided in this section.
2. Segmental information
Accounting policies
Sales comprise revenue from contracts with customers from the sale of goods, royalties and rents receivable. Revenue from the sale of goods
includes excise and other duties which the group pays as principal but excludes duties and taxes collected on behalf of third parties, such as
value added tax. Sales are recognised as or when performance obligations are satisfied by transferring control of a good or service to the
customer, which is determined by considering, among other factors, the delivery terms agreed with customers. For the sale of goods, the
transfer of control occurs when the significant risks and rewards of ownership are passed to the customer. Based on the shipping terms
agreed with customers, the transfer of control of goods occurs at the time of dispatch for the majority of sales. Where the transfer of control is
subsequent to the dispatch of goods, the time between dispatch and receipt by the customer is generally less than five days. The group
includes in sales the net consideration to which it expects to be entitled. Sales are recognised to the extent that it is highly probable that a
significant reversal will not occur. Therefore, sales are stated net of expected price discounts, allowances for customer loyalty and certain
promotional activities and similar items. Generally, payment of the transaction price is due within credit terms that are consistent with industry
practices, with no element of financing.
Net sales are sales less excise duties. Diageo incurs excise duties throughout the world. In the majority of countries, excise duties are
effectively a production tax which becomes payable when the product is removed from bonded premises and is not directly related to the
value of sales. It is generally not included as a separate item on external invoices; increases in excise duty are not always passed on to the
customer and where a customer fails to pay for products received the group cannot reclaim the excise duty. The group therefore recognises
excise duty, unless it regards itself as an agent of the regulatory authorities, as a cost to the group.
Advertising costs, point of sale materials and sponsorship payments are charged to marketing in operating profit when the company has a
right of access to the goods or services acquired.
Diageo is an international manufacturer and distributor of premium drinks. Diageo also owns a number of investments in associates and joint
ventures, as set out in note 6.
The segmental information presented is consistent with management reporting provided to the Executive Committee (the chief operating
decision-maker).
The Executive Committee considers the business principally from a geographical perspective based on the location of third-party sales and the
business analysis is presented by geographical segment. In addition to these geographical selling segments, a further segment reviewed by the
Executive Committee is the Supply Chain and Procurement (SC&P) segment, which manufactures products for other group companies and includes
the production sites in the United Kingdom, Ireland, Italy, Guatemala and Mexico, as well as comprises the global procurement function.
The group's operations also include the Corporate segment. Corporate costs are in respect of central costs, including finance, marketing,
corporate relations, human resources and legal, as well as certain information systems, facilities and employee costs that are not allocable to the
geographical segments or to the SC&P.
Diageo uses shared services operations to deliver transaction processing activities for markets and operational entities. These centres are located
in India, Hungary, Colombia and the Philippines. These captive business service centres also perform certain central finance activities, including
elements of financial planning and reporting, treasury and HR services. The costs of shared services operations are recharged to the regions.\u00a0 \u00a0
For planning and management reporting purposes, Diageo uses budgeted exchange rates that are set at the prior year's weighted average
exchange rate. In order to ensure a consistent basis on which performance is measured through the year, prior period results are also restated to the
budgeted exchange rate. Segmental information for net sales and operating profit before exceptional items are reported on a consistent basis with
management reporting. The adjustments required to retranslate the segmental information to actual exchange rates and to reconcile it to the
group\u2019s reported results are shown in the tables below. The comparative segmental information, prior to retranslation, has not been restated at the
current year\u2019s budgeted exchange rates but is presented at the budgeted rates for the respective year.
In addition, for management reporting purposes, Diageo presents the result of acquisitions and disposals completed in the current and prior year
separately from the results of the geographical segments. The impact of acquisitions and disposals on net sales and operating profit is disclosed
under the appropriate geographical segments in the tables below at budgeted exchange rates.
(a) Segmental information for the consolidated income statement
North
America
Europe
Asia
Pacific
Latin
America
and
Caribbean
Africa
SC&P
Eliminate
inter-
segment
sales
Total
operating
segments
Corporate
and other
Total
2023
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
Sales
7,382
5,996
5,403
2,260
2,386
3,073
(3,073)
23,427
88
23,515
Net sales
At budgeted exchange rates(1)
6,052
3,377
3,084
1,642
1,631
2,942
(2,876)
15,852
87
15,939
Acquisitions and disposals
20
20
35
3
104
\u2014
\u2014
182
\u2014
182
SC&P allocation
8
38
8
9
3
(66)
\u2014
\u2014
\u2014
\u2014
Retranslation to actual exchange rates
678
(41)
73
145
(39)
197
(197)
816
1
817
Hyperinflation
\u2014
175
\u2014
\u2014
\u2014
\u2014
\u2014
175
\u2014
175
Net sales
6,758
3,569
3,200
1,799
1,699
3,073
(3,073)
17,025
88
17,113
Operating profit/(loss)
At budgeted exchange rates(1)
2,337
1,076
886
597
347
(32)
\u2014
5,211
(292)
4,919
Acquisitions and disposals
(18)
(13)
5
\u2014
27
\u2014
\u2014
1
(6)
(5)
SC&P allocation
3
(24)
(6)
(3)
(2)
32
\u2014
\u2014
\u2014
\u2014
Fair value remeasurements
87
25
\u2014
1
\u2014
\u2014
\u2014
113
\u2014
113
Retranslation to actual exchange rates
280
18
20
66
(152)
\u2014
\u2014
232
(28)
204
Hyperinflation
\u2014
23
\u2014
\u2014
\u2014
\u2014
\u2014
23
\u2014
23
Operating profit/(loss) before exceptional items
2,689
1,105
905
661
220
\u2014
\u2014
5,580
(326)
5,254
Exceptional operating items
(97)
(8)
(473)
\u2014
(44)
\u2014
\u2014
(622)
\u2014
(622)
Operating profit/(loss)
2,592
1,097
432
661
176
\u2014
\u2014
4,958
(326)
4,632
Non-operating items
328
Net finance charges
(594)
Share of after tax results of associates and joint
ventures
370
Profit before taxation
4,736
North
America
Europe
Asia
Pacific
Latin
America
and
Caribbean
Africa
SC&P
Eliminate
inter-
segment
sales
Total
operating
segments
Corporate
and other
Total
2022
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
Sales
6,682
5,740
5,624
1,945
2,403
2,010
(2,010)
22,394
54
22,448
Net sales
At budgeted exchange rates(1)
5,955
3,258
2,879
1,486
1,699
2,095
(2,016)
15,356
55
15,411
Acquisitions and disposals
34
23
\u2014
3
15
\u2014
\u2014
75
\u2014
75
SC&P allocation
9
46
9
12
3
(79)
\u2014
\u2014
\u2014
\u2014
Retranslation to actual exchange rates
97
(304)
(4)
24
(35)
(6)
6
(222)
(1)
(223)
Hyperinflation
\u2014
189
\u2014
\u2014
\u2014
\u2014
\u2014
189
\u2014
189
Net sales
6,095
3,212
2,884
1,525
1,682
2,010
(2,010)
15,398
54
15,452
Operating profit/(loss)
At budgeted exchange rates(1)
2,388
1,086
703
528
346
(22)
\u2014
5,029
(256)
4,773
Acquisitions and disposals
(28)
11
\u2014
\u2014
(10)
\u2014
\u2014
(27)
\u2014
(27)
SC&P allocation
(1)
(18)
(2)
\u2014
(1)
22
\u2014
\u2014
\u2014
\u2014
Fair value remeasurements
32
36
\u2014
(8)
\u2014
\u2014
\u2014
60
\u2014
60
Retranslation to actual exchange rates
63
(108)
10
18
(20)
\u2014
\u2014
(37)
18
(19)
Hyperinflation
\u2014
10
\u2014
\u2014
\u2014
\u2014
\u2014
10
\u2014
10
Operating profit/(loss) before exceptional items
2,454
1,017
711
538
315
\u2014
\u2014
5,035
(238)
4,797
Exceptional operating items
(1)
(146)
(241)
\u2014
\u2014
\u2014
\u2014
(388)
\u2014
(388)
Operating profit/(loss)
2,453
871
470
538
315
\u2014
\u2014
4,647
(238)
4,409
Non-operating items
(17)
Net finance charges
(422)
Share of after tax results of associates and joint
ventures
417
Profit before taxation
4,387
North
America
Europe
Asia
Pacific
Latin
America
and
Caribbean
Africa
SC&P
Eliminate
inter-
segment
sales
Total
operating
segments
Corporate
and other
Total
2021
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
Sales
5,803
4,795
5,146
1,369
2,020
1,537
(1,537)
19,133
20
19,153
Net sales
At budgeted exchange rates(1)
5,527
2,579
2,561
1,176
1,541
1,627
(1,548)
13,463
20
13,483
Acquisitions and disposals
28
2
\u2014
\u2014
5
\u2014
\u2014
35
\u2014
35
SC&P allocation
9
45
9
13
3
(79)
\u2014
\u2014
\u2014
\u2014
Retranslation to actual exchange rates
(355)
(68)
(82)
(143)
(137)
(11)
11
(785)
\u2014
(785)
Net sales
5,209
2,558
2,488
1,046
1,412
1,537
(1,537)
12,713
20
12,733
Operating profit/(loss)
At budgeted exchange rates(1)
2,469
728
628
422
228
(97)
\u2014
4,378
(218)
4,160
Acquisitions and disposals
(18)
(3)
\u2014
\u2014
\u2014
\u2014
\u2014
(21)
\u2014
(21)
SC&P allocation
(30)
(32)
(5)
(27)
(3)
97
\u2014
\u2014
\u2014
\u2014
Fair value remeasurement of contingent consideration
(9)
(27)
\u2014
\u2014
\u2014
\u2014
\u2014
(36)
\u2014
(36)
Retranslation to actual exchange rates
(175)
(31)
(15)
(92)
(54)
\u2014
\u2014
(367)
10
(357)
Operating profit/(loss) before exceptional items
2,237
635
608
303
171
\u2014
\u2014
3,954
(208)
3,746
Exceptional operating items
\u2014
(15)
\u2014
\u2014
\u2014
\u2014
\u2014
(15)
\u2014
(15)
Operating profit/(loss)
2,237
620
608
303
171
\u2014
\u2014
3,939
(208)
3,731
Non-operating items
14
Net finance charges
(373)
Share of after tax results of associates and joint
ventures
334
Profit before taxation
3,706
(1)These items represent the IFRS 8 performance measures for the geographical and SC&P segments.
(i)The net sales figures for SC&P reported to the Executive Committee primarily comprise inter-segment sales and these are eliminated in a separate column in the above segmental
analysis. Apart from sales by the SC&P segment to the other operating segments, inter-segmental sales are not material.
(ii)The group\u2019s net finance charges are managed centrally and are not attributable to individual operating segments.
(iii)Approximately 38% of annual net sales occurred in the last four months of calendar year 2022.
(b) Other segmental information
North
America
\u00a3 million
Europe
\u00a3 million
Asia
Pacific
\u00a3 million
Latin
America
and
Caribbean
\u00a3 million
Africa
\u00a3 million
SC&P
\u00a3 million
Corporate
and other
\u00a3 million
Total
\u00a3 million
2023
Purchase of property, plant and equipment and computer
software
197
209
166
121
126
356
5
1,180
Depreciation and intangible asset amortisation
(95)
(98)
(61)
(18)
(80)
(134)
(10)
(496)
Exceptional impairment of tangible assets
(52)
2
(22)
\u2014
\u2014
\u2014
\u2014
(72)
Exceptional impairment of intangible assets
(29)
(25)
(444)
\u2014
\u2014
\u2014
\u2014
(498)
2022
Purchase of property, plant and equipment and computer
software
230
187
146
128
139
256
11
1,097
Depreciation and intangible asset amortisation
(80)
(93)
(93)
(16)
(81)
(116)
(10)
(489)
Exceptional impairment of tangible assets
\u2014
(3)
\u2014
\u2014
\u2014
\u2014
\u2014
(3)
Exceptional impairment of intangible assets
\u2014
(96)
(240)
\u2014
\u2014
\u2014
\u2014
(336)
2021
Purchase of property, plant and equipment and computer
software
153
23
56
20
125
125
124
626
Depreciation and intangible asset amortisation
(76)
(31)
(60)
(16)
(79)
(126)
(59)
(447)
(c) Category and geographical analysis
Category analysis
Geographic analysis
Spirits
\u00a3\u00a0million
Beer
\u00a3\u00a0million
Ready to
drink
\u00a3 million
Other
\u00a3 million
Total
\u00a3 million
United
States
\u00a3 million
India
\u00a3 million
Great
Britain
\u00a3 million
Rest of
World
\u00a3 million
Total
\u00a3 million
2023
Sales(1)
19,004
3,355
899
257
23,515
6,972
2,751
2,138
11,654
23,515
Non-current assets(2), (3)
5,816
1,798
2,909
11,204
21,727
2022
Sales(1)
18,164
3,128
882
274
22,448
6,327
3,219
2,142
10,760
22,448
Non-current assets(2), (3)
5,899
2,396
2,413
10,861
21,569
2021
Sales(1)
15,634
2,562
741
216
19,153
5,441
3,011
1,822
8,879
19,153
Non-current assets(2), (3)
4,320
2,561
2,119
10,063
19,063
(1)The geographical analysis of sales is based on the location of third-party customers.
(2)The geographical analysis of non-current assets is based on the geographical location of the assets and comprises intangible assets, property, plant and equipment, biological assets,
investments in associates and joint ventures, other investments and non-current other receivables.
(3)The management information provided to the chief operating decision-maker does not include an analysis of assets and liabilities by category and therefore is not disclosed.
3. Operating costs
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Excise duties
6,402
6,996
6,420
Cost of sales
6,899
5,973
5,038
Marketing
3,051
2,721
2,163
Other operating items
2,531
2,349
1,801
18,883
18,039
15,422
Comprising:
Excise duties
India
1,625
2,182
2,127
Great Britain
1,095
1,172
1,018
United States
687
614
589
Other
2,995
3,028
2,686
Increase in inventories
(513)
(909)
(293)
Raw materials and consumables
4,328
4,017
3,126
Marketing
3,051
2,721
2,163
Other external charges
2,747
2,597
1,978
Staff costs
1,830
1,795
1,586
Depreciation, amortisation and impairment
1,066
828
447
Gains on disposal of properties
(4)
(2)
(1)
Net foreign exchange losses
10
10
22
Other operating income
(34)
(14)
(26)
18,883
18,039
15,422
(a) Other external charges\u00a0
Other external charges include research and development expenditure
in respect of new drinks products and package design of \u00a353 million
(2022 \u2013 \u00a343 million; 2021 \u2013 \u00a340 million) and maintenance and repairs of
\u00a3143 million (2022 \u2013 \u00a3136 million; 2021 \u2013 \u00a3107 million).
(b) Auditors fees
Other external charges include the fees of the principal auditors of the
group, PricewaterhouseCoopers LLP and its affiliates (PwC) and are
analysed below.
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Audit of these financial statements
5.2
4.2
3.8
Audit of financial statements of subsidiaries
5.7
6.1
4.4
Audit related assurance services(1)
2.7
2.5
2.6
Total audit fees (Audit fees)
13.6
12.8
10.8
Other assurance services (Audit related
fees)(2)
1.2
0.7
0.8
14.8
13.5
11.6
(1)Audit related assurance services are in respect of reporting under section 404 of the US
Sarbanes-Oxley Act and the review of the interim financial information.
(2)Other assurance services comprise the aggregate fees for assurance and related
services that are not reported under \u2018total audit fees\u2019.
(i) Disclosure requirements for auditors fees in the United States are different from those
required in the United Kingdom. The terminology by category required in the United
States is disclosed in brackets in the above table.
Audit services provided by firms other than PwC for the year ended 30
June 2023 were \u00a30.1 million (2022 \u2013 \u00a30.1 million; 2021 \u2013 \u00a30.1 million).
Further PwC fees for audit services in respect of post employment plans
were \u00a30.3 million for the year ended 30 June 2023 (2022 \u2013 \u00a30.2 million;
2021 \u2013 \u00a30.2 million).
(c) Staff costs and average number of employees
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Aggregate remuneration
Wages and salaries
1,548
1,557
1,336
Share-based incentive plans
48
59
50
Employer\u2019s social security
115
107
83
Employer\u2019s pension
Defined benefit plans
67
36
82
Defined contribution plans
44
33
25
Other post employment plans
8
3
10
1,830
1,795
1,586
The average number of employees on a full-time equivalent basis
(excluding employees of associates and joint ventures) was as follows:
2023
2022
2021
North America
2,884
2,811
2,562
Europe
2,789
3,014
3,237
Asia Pacific
6,856
6,500
6,474
Latin America and Caribbean
1,495
1,500
1,505
Africa
3,526
4,061
4,016
SC&P
6,934
5,025
5,085
Corporate and other
5,753
5,076
4,687
30,237
27,987
27,566
At 30 June 2023, on a full-time equivalent basis, the group had 30,269
(2022 \u2013 28,558; 2021 \u2013 27,783) employees. The average number of
employees of the group, including part-time employees, for the year
was 30,419 (2022 \u2013 28,137; 2021 \u2013 28,025).
(d) Exceptional operating items
Included in the table above are exceptional operating items as follows:
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Depreciation, amortisation and impairment
Brand and goodwill impairment
498
336
\u2014
Tangible asset impairment and accelerated
depreciation
72
\u2014
\u2014
Staff costs
10
\u2014
5
Other external charges
60
52
13
Other operating income
(18)
\u2014
(3)
Total exceptional operating items (note 4)
622
388
15
Cost of sales
67
\u2014
\u2014
Other operating expenses
555
388
15
4. Exceptional items
Accounting policies
Critical accounting judgements
Exceptional items are those that in management\u2019s judgement
need to be disclosed separately. Such items are included within
the income statement caption to which they relate. Management
believes that separate disclosure of exceptional items and the
classification between operating and non-operating further helps
investors to understand the performance of the group.
Changes in estimates and reversals in relation to items
previously recognised as exceptional are presented consistently
as exceptional in the current year.
Operating items
Exceptional operating items are those that are considered to be
material and unusual or non-recurring in nature and are part of
the operating activities of the group, such as one-off global
restructuring programmes which can be multi-year, impairment
of intangible assets and fixed assets, indirect tax settlements,
property disposals and changes in post employment plans.
Non-operating items
Gains and losses on the sale or directly attributable to a
prospective sale of businesses, brands or distribution rights, step
up gains and losses that arise when an investment becomes an
associate or an associate becomes a subsidiary and other
material, unusual non-recurring items, that are not in respect of
the production, marketing and distribution of premium drinks,
are disclosed as exceptional non-operating items below
operating profit in the income statement.
Taxation items
Exceptional current and deferred tax items comprise material
and unusual or non-recurring items that impact taxation.
Examples include direct tax provisions and settlements in respect
of prior years and the remeasurement of deferred tax assets and
liabilities following tax rate changes.\u00a0
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Exceptional operating items
Brand and goodwill impairment (1)
(498)
(336)
\u2014
Supply chain agility programme (2)
(100)
\u2014
\u2014
Distribution termination fee (3)
(44)
\u2014
\u2014
Winding down Russian operations (4)
20
(50)
\u2014
Other exceptional operating items (5)
\u2014
(2)
(15)
(622)
(388)
(15)
Non-operating items
Sale of businesses and brands
Guinness Cameroun S.A. (6)
310
\u2014
\u2014
Archers brand (7)
20
\u2014
\u2014
USL Popular brands (8)
4
\u2014
\u2014
USL businesses (9)
1
\u2014
3
Tyku brand (10)
(3)
\u2014
\u2014
Picon brand (11)
\u2014
91
\u2014
Meta Abo Brewery (12)
\u2014
(95)
\u2014
Windsor business (13)
\u2014
(19)
\u2014
Step acquisition - Mr Black (14)
(8)
\u2014
\u2014
Other non-operating exceptional items (15)
4
6
11
328
(17)
14
Exceptional items before taxation
(294)
(405)
(1)
Tax on exceptional items (note 7 (b))
186
31
(84)
Total exceptional items
(108)
(374)
(85)
Attributable to:
Equity shareholders of the parent company
33
(271)
(86)
Non-controlling interests
(141)
(103)
1
Total exceptional items
(108)
(374)
(85)
In the year ended 30 June 2022, an impairment charge of \u00a3336\u00a0million
was recognised in exceptional operating items in respect of the
McDowell's brand (\u00a3240\u00a0million), the Bell's brand (\u00a377\u00a0million) and
goodwill related to Smirnov (\u00a319\u00a0million).
For further information, see note 9 (d).
(2) In the year ended 30 June 2023, an exceptional charge of \u00a3100
million was accounted for in respect of the supply chain agility
programme announced in July 2022. With this five-year spanning
programme, Diageo expects to strengthen its supply chain, improve its
resilience and agility, drive efficiencies, deliver additional productivity
savings and make its supply operations more sustainable. Total
implementation cost of the programme is expected to be up to \u00a3500
million over the five-year period, which will comprise non-cash items
and one-off expenses, the majority of which are expected to be
recognised as exceptional operating items. The exceptional charge for
the year ended 30 June 2023 was primarily in respect of accelerated
depreciation, being additional depreciation of assets in the period
directly attributable to the programme, and impairment of property,
plant and equipment in respect of North America and India.
Restructuring cash expenditure was \u00a312 million in the year ended 30
June 2023.
(3) In the year ended 30 June 2023, Diageo agreed with one of its
distributors in Africa to terminate the distribution license of one of its
spirits brands, in respect of which a provision of \u00a344\u00a0million was
provided for and was recognised as an operating exceptional charge.
No payment was made in the period.
(4) In the year ended 30 June 2023, Diageo released unutilised
provisions of \u00a320 million from the \u00a350\u00a0million exceptional charge taken
in the year ended 30 June 2022, in respect of winding down its
operations in Russia.
(5) Other exceptional operating items include subsequent gains and
charges of items that were originally recognised as exceptional at
inception. In the year ended 30 June 2022, other exceptional operating
items resulted in a loss of \u00a32\u00a0million driven by the reinvestment of
'Raising the Bar' corporate tax benefits. In the year ended 30 June 2021,
other exceptional operating items were a loss of \u00a315\u00a0million mainly
driven by the charge of the ongoing litigation in Turkey.
(6) On 26 May 2023, Diageo announced the completion of the sale of
its wholly owned subsidiary in Cameroon, Guinness Cameroun S.A., to
the Castel Group for an aggregate consideration of \u00a3384\u00a0million
resulting in an exceptional gain of \u00a3310\u00a0million, including cumulative
translation gain in the amount of \u00a317\u00a0million recycled to the income
statement.
(7) On 26 October 2022, Diageo completed the sale of its Archers
brand. The transaction resulted in an exceptional gain of \u00a320 million.
(8) On 30 September 2022, Diageo announced the completion of the
sale of the Popular brands of its United Spirits Limited (USL) business.
The transaction resulted in an exceptional gain of \u00a34\u00a0million.
(9) Certain subsidiaries of USL were sold in the year ended 30 June
2023. The sale of these subsidiaries resulted in an exceptional gain of
\u00a31\u00a0million (2022 \u2013 nil; 2021 \u2013 \u00a33\u00a0million).
(10) In the year ended 30 June 2023, Diageo sold its Tyku brand. The
transaction resulted in an exceptional loss of \u00a33\u00a0million.
(11) In May 2022, Diageo sold its Picon brand. The sale resulted in an
exceptional non-operating gain of \u00a391\u00a0million, net of disposal costs.
(12) In the year ended 30 June 2022, a loss of \u00a395\u00a0million was
recognised as a non-operating item attributable to the sale of Meta Abo
Brewery Share Company in Ethiopia.
(13) On 25 March 2022, Diageo agreed to the sale of its Windsor
business in Korea. At 30 June 2022, assets and liabilities attributable to
Windsor business were classified as held for sale and were measured at
the lower of their cost and fair value less cost of disposal. In the year
ended 30 June 2022, a loss of \u00a319\u00a0million was recognised as a non-
operating item, mainly in relation to transaction and other costs directly
attributable to the prospective sale of the business. The conditional
agreement was terminated in the year ended 30 June 2023 as the
buyer was unable to meet certain conditions to completion.
(14) On 29 September 2022, the group acquired the part of the entire
issued share capital of Mr Black Spirits Pty Ltd, owner of Mr Black, the
Australian premium cold brew coffee liqueur, that it did not already
own. As a result of Mr Black becoming a subsidiary of the group in the
year ended 30 June 2023, a loss of \u00a38\u00a0million arose, being the
difference between the book value of the associate prior to the
transaction and its fair value plus transaction costs.
(15) Other exceptional non-operating items include subsequent gains
and charges of items that were originally recognised as exceptional at
inception. In the year ended 30 June 2023, other exceptional non-
operating items resulted in a net gain of \u00a34\u00a0million (2022 \u2013 \u00a36\u00a0million;
2021 \u2013 \u00a311\u00a0million), mainly driven by the deferred consideration received
in respect of the sale of United National Breweries.
For further information on acquisition and sale of businesses and
brands, see notes 8 (a) and 8 (b).
Cash payments and receipts included in net cash inflow from operating
activities in respect of exceptional items were as follows:
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Thalidomide (note 15 (d) (i))
(14)
(16)
(15)
Winding down Russian operations
(13)
(13)
\u2014
Supply chain agility programme
(12)
\u2014
\u2014
Donations
\u2014
(37)
(50)
Indirect tax in Korea
\u2014
\u2014
(10)
Ongoing litigation in Turkey
\u2014
\u2014
(1)
Substitution drawback
\u2014
\u2014
60
Total cash payments
(39)
(66)
(16)
(1)Includes \u00a381 million interest income and \u00a3(522)\u00a0million interest charge in respect of
financial assets and liabilities that are not measured at fair value through income
statement (2022 \u2013 \u00a327 million income and \u00a3(417) million charge; 2021 \u2013 \u00a328 million
income and \u00a3(429) million charge).
6. Investments in associates and joint ventures
Accounting policies
An associate is an undertaking in which the group has a long-term
equity interest and over which it has the power to exercise significant
influence. A joint venture is a joint arrangement whereby the parties
that have joint control of the arrangement have rights to the net
assets of the arrangement. The group\u2019s interest in the net assets of
associates and joint ventures is reported in investments in the
consolidated balance sheet and its interest in their results (net of tax)
is included in the consolidated income statement below the group\u2019s
operating profit. Associates and joint ventures are initially recorded at
cost including transaction costs. Investments in associates and joint
ventures are reviewed for impairment whenever events or
circumstances indicate that the carrying amount may not be
recoverable. The impairment review compares the net carrying value
with the recoverable amount, where the recoverable amount is the
higher of the value in use calculated as the present value of the
group\u2019s share of the associate\u2019s future cash flows and its fair value
less costs of disposal.
Diageo\u2019s principal associate is Mo\u00ebt Hennessy of which Diageo owns
34%. Mo\u00ebt Hennessy is the wines and spirits division of LVMH Mo\u00ebt
Hennessy Louis Vuitton SA (LVMH). LVMH is based in France and is
listed on the Paris Stock Exchange. Mo\u00ebt Hennessy is also based in
France and is a producer and exporter of champagne and cognac
brands.
A number of joint distribution arrangements have been established
with LVMH in Asia Pacific and France, principally covering distribution of
Diageo\u2019s Scotch whisky and gin premium brands and Mo\u00ebt Hennessy\u2019s
champagne and cognac premium brands. Diageo and LVMH have
each undertaken not to engage in any champagne or cognac activities
competing with those of Mo\u00ebt Hennessy. The arrangements also contain
certain provisions for the protection of Diageo as a non-controlling
shareholder in Mo\u00ebt Hennessy.
(a) An analysis of the movement in the group\u2019s investments in
associates and joint ventures is as follows:
Mo\u00ebt
Hennessy
\u00a3 million
Others
\u00a3 million
Total
\u00a3 million
Cost less provisions
At 30 June 2021
3,128
180
3,308
Exchange differences
48
12
60
Additions
\u2014
65
65
Share of profit/(loss) after tax
425
(8)
417
Dividends
(186)
(4)
(190)
Share of movements in other
comprehensive income and equity
(6)
\u2014
(6)
Impairment charged during the year
\u2014
(2)
(2)
At 30 June 2022
3,409
243
3,652
Exchange differences
(51)
(8)
(59)
Additions
\u2014
93
93
Share of profit/(loss) after tax
379
(9)
370
Step acquisition
\u2014
(17)
(17)
Dividends
(214)
(5)
(219)
Share of movements in other
comprehensive income and equity
36
\u2014
36
Transfer
\u2014
1
1
Impairment charged during the year
\u2014
(28)
(28)
At 30 June 2023
3,559
270
3,829
(i)Including acquisition fair value adjustments principally in respect of Mo\u00ebt Hennessy\u2019s
brands and translated at \u00a31 = \u20ac1.17 (2022 \u2013 \u00a31 = \u20ac1.16).
(c) Information on transactions between the group and its associates
and joint ventures is disclosed in note 21.
(d) Investments in associates and joint ventures comprise the cost of
shares less goodwill written off on acquisitions prior to 1 July 1998 of
\u00a31,384\u00a0million (2022 \u2013 \u00a31,340\u00a0million), plus the group\u2019s share of post
acquisition reserves of \u00a32,445\u00a0million (2022 \u2013 \u00a32,312\u00a0million).
(e) The associates and joint ventures have not reported any material
contingent liabilities in their latest financial statements.
7. Taxation
Accounting policies
Current tax is based on taxable profit for the year. Taxable profit is different from accounting profit due to temporary differences between
accounting and tax treatments, and due to items that are never taxable or tax deductible. Tax treatments are not recognised unless it is
probable that a tax authority will accept the treatment. Once considered to be probable, tax treatments are reviewed each year to assess
whether a provision should be taken against full recognition of the treatment on the basis of potential settlement through negotiation and/or
litigation with the relevant tax authorities. Tax provisions are included in current liabilities. Penalties and interest on tax liabilities are included
in operating profit and finance charges, respectively.
Full provision for deferred tax is made for temporary differences between the carrying value of assets and liabilities for financial reporting
purposes and their value for tax purposes, except for deferred tax provision arising on goodwill from business combinations. The amount of
deferred tax reflects the expected recoverable amount and is based on the expected manner of recovery or settlement of the carrying
amount of assets and liabilities, using the basis of taxation enacted or substantively enacted by the balance sheet date. Deferred tax assets
are not recognised where it is more likely than not that the assets will not be realised in the future. No deferred tax liability is provided in
respect of any future remittance of earnings of foreign subsidiaries where the group is able to control the remittance of earnings and it is
probable that such earnings will not be remitted in the foreseeable future, or where no liability would arise on the remittance.
Critical accounting estimates and judgements
The group is required to estimate the corporate tax in each of the jurisdictions in which it operates. Management is required to estimate the
amount that should be recognised as a tax liability or tax asset in many countries which are subject to tax audits which by their nature are
often complex and can take several years to resolve; current tax balances are based on such estimations. Tax provisions are based on
management\u2019s judgement and interpretation of country specific tax law and the likelihood of settlement. However, the actual tax liabilities
could differ from the provision and in such event the group would be required to make an adjustment in a subsequent period which could
have a material impact on the group\u2019s profit for the year.
The evaluation of deferred tax asset recoverability requires estimates to be made regarding the availability of future taxable income. For
brands with an indefinite life, management\u2019s intention is to recover the book value through a potential sale in the future, and therefore the
deferred tax on the brand value is generally recognised using the appropriate country capital gains tax rate. To the extent brands with an
indefinite life have been impaired, management considers this to be an indication of recovery through use and in such a case deferred tax
on the brand value is recognised using the appropriate country corporate income tax rate.
(a) Analysis of taxation charge for the year
United Kingdom
Rest of world
Total
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Current tax
Current year
160
174
100
879
867
684
1,039
1,041
784
Adjustments in respect of prior years
33
10
1
(39)
16
28
(6)
26
29
193
184
101
840
883
712
1,033
1,067
813
Deferred tax
Origination and reversal of temporary differences
25
\u2014
13
(70)
21
18
(45)
21
31
Changes in tax rates
\u2014
2
46
11
1
32
11
3
78
Adjustments in respect of prior years
6
\u2014
8
(35)
(42)
(23)
(29)
(42)
(15)
31
2
67
(94)
(20)
27
(63)
(18)
94
Taxation on profit
224
186
168
746
863
739
970
1,049
907
(b) Exceptional tax (credits)/charges
The taxation charge includes the following exceptional items:
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Brand impairment(1)
(124)
(55)
\u2014
US guarantee fee claim(2)
(57)
\u2014
\u2014
Supply chain agility programme
(23)
\u2014
\u2014
Distribution termination fee
(11)
\u2014
\u2014
Disposal of businesses and brands(3)
29
23
\u2014
Winding down Russian operations
\u2014
3
\u2014
Tax rate change in the United Kingdom(4)
\u2014
\u2014
46
Tax rate change in the Netherlands(5)
\u2014
\u2014
42
Other items
\u2014
(2)
(4)
(186)
(31)
84
(1)In the year ended 30 June 2023, an exceptional tax credit of \u00a3124 million was recognised mainly in respect of the impairment of the McDowell's brand. In the year ended 30 June 2022,
the exceptional tax credit of \u00a355\u00a0million consists of tax impact on the impairment of the McDowell's and Bell's brands for \u00a335\u00a0million and \u00a320\u00a0million, respectively.
(2)In the year ended 30 June 2023, an exceptional tax credit of \u00a357\u00a0million was recognised in respect of the deductibility of fees paid to Diageo plc for guaranteeing externally issued debt
of US group entities. Following engagement with the tax authorities, guarantee fees for the periods ended 30 June 2012 to 30 June 2022 are fully deductible.
(3)In the year ended 30 June 2023, the exceptional net tax charge of \u00a329\u00a0million mainly comprised of a tax charge of \u00a342\u00a0million in respect of the sale of Guinness Cameroun S.A., partly
offset by a tax credit of \u00a310\u00a0million in respect of the sale of certain USL businesses. In the year ended 30 June 2022, a \u00a323\u00a0million exceptional tax charge was recognised in respect of the
gain on the sale of the Picon brand.
(4) On 24 May 2021, legislation was substantively enacted in the UK to increase the corporate tax rate to 25% with effect from 1 April 2023. As a result of the change, an exceptional tax
charge of \u00a346\u00a0million was recognised for the year ended 30 June 2021 in relation to the remeasurement of deferred tax assets and liabilities. In addition, there was a one-off charge of
\u00a348\u00a0million to other comprehensive income and equity, mainly in respect of the remeasurement of the deferred tax liabilities on the post employment assets.
(5)On 15 December 2020, legislation was substantively enacted in the Netherlands to maintain the headline corporate tax rate at 25%, reversing a previously enacted reduction in the
corporate tax rate to 21.7% from 2021. As a result of the change, an exceptional tax charge of \u00a342\u00a0million was recognised for the year ended 30 June 2021 in relation to the
remeasurement of deferred tax liabilities. In the year ended 30 June 2022, the Dutch Senate enacted an increased tax rate of 25.8%. The remeasurement of deferred tax liabilities was
recognised as an underlying tax charge.
(c) Taxation rate reconciliation and factors that may affect future tax charges
2023
\u00a3 million
2023
%
2022
\u00a3 million
2022
%
2021
\u00a3 million
2021
%
Profit before taxation
4,736
4,387
3,706
Notional charge at UK corporation tax rate
971
20.5
833
19.0
704
19.0
Elimination of notional tax on share of after tax results of associates and joint
ventures
(76)
(1.6)
(79)
(1.8)
(63)
(1.7)
Differences in overseas tax rates
95
2.0
161
3.7
128
3.5
Disposal of businesses and brands
(42)
(0.9)
21
0.5
(2)
(0.1)
Other items not chargeable
(63)
(1.3)
(49)
(1.1)
(52)
(1.4)
Impairment
(2)
\u2014
36
0.8
\u2014
\u2014
Other items not deductible
71
1.5
58
1.3
67
1.8
Irrecoverable withholding taxes
38
0.8
39
0.9
25
0.7
Movement in provision in respect of uncertain tax positions(1)
27
0.6
42
0.9
1
\u2014
Changes in tax rates(2)
11
0.2
3
0.1
78
2.1
Adjustments in respect of prior years(3)
(60)
(1.3)
(16)
(0.4)
21
0.6
Taxation on profit
970
20.5
1,049
23.9
907
24.5
Tax rate before exceptional items
\u2014
23.0
\u2014
22.5
\u2014
22.2
(1)Movement in provision in respect of uncertain tax positions includes both current and prior year uncertain tax position movements.
(2)Changes in tax rates for the year ended 30 June 2021 are mainly due to the tax rate change in the Netherlands and the United Kingdom.
(3)Excludes prior year movement in provisions. Also included an exceptional tax credit of \u00a357\u00a0million in respect of the deductibility of fees paid to Diageo plc for guaranteeing externally
issued debt of its US group entities.
The table above reconciles the notional taxation charge calculated at the UK tax rate, to the actual total tax charge. As a group operating in
multiple countries, the actual tax rates applicable to profits in those countries are different from the UK tax rate. The impact is shown in the table
above as differences in overseas tax rates. The group\u2019s worldwide business leads to the consideration of a number of important factors which may
affect future tax charges, such as the levels and mix of profitability in different jurisdictions, transfer pricing regulations, tax rates imposed and tax
regime reforms, acquisitions, disposals, restructuring activities, and settlements or agreements with tax authorities.
Significant ongoing changes in the international tax environment and an increase in global tax audit activity means that tax uncertainties and
associated risks have been gradually increasing. In the medium term, these risks could result in an increase in tax liabilities or adjustments to the
carrying value of deferred tax assets and liabilities. See note 19 (f).
The group has a number of ongoing tax audits worldwide for which provisions are recognised in line with the relevant accounting standard,
taking into account best estimates and management\u2019s judgements concerning the ultimate outcome of the tax audits. For the year ended 30 June
2023, ongoing audits that are provided for individually are not expected to result in a material tax liability. The current tax asset of \u00a3232 million (30
June 2022 \u2013 \u00a3149 million) and tax liability of \u00a3135 million (30 June 2022 \u2013 \u00a3252 million) include \u00a3173 million (30 June 2022 \u2013 \u00a3156 million) of
provisions for tax uncertainties.
The cash tax paid in the year ended 30 June 2023 amounts to \u00a31,201\u00a0million (30 June 2022 \u2013 \u00a3949\u00a0million) and is \u00a3231\u00a0million higher than the
current tax charge (30 June 2022 \u2013 \u00a3100\u00a0million lower). This arises as a result of timing differences between the accrual of income taxes, the
movement in the provision for uncertain tax positions and the actual payment of cash.\u00a0
In December 2021, the OECD released a framework for Pillar Two Model Rules which will introduce a global minimum corporate tax rate of 15%
applicable to multinational enterprise groups with global revenue over \u20ac750 million. The legislation implementing the rules in the UK was
substantively enacted on 20 June 2023 and will apply to Diageo from the financial year ending 30 June 2025 onwards. Diageo is reviewing this
legislation and also monitoring the status of implementation of the model rules outside of the UK to understand the potential impact on the group.
Diageo has applied the temporary exception under IAS 12 in relation to the accounting for deferred taxes arising from the implementation of the
Pillar Two rules.
(d) Deferred tax assets and liabilities
Deferred tax recognised in the consolidated balance sheet comprise the following net deferred tax (liabilities)/assets:
Property,
plant and
equipment
\u00a3 million
Intangible
assets
\u00a3 million
Post
employment
plans
\u00a3 million
Tax losses
\u00a3 million
Other
temporary
differences(1)
\u00a3 million
Total
\u00a3 million
At 30 June 2021
(381)
(1,636)
(129)
57
244
(1,845)
Exchange differences
(21)
(155)
3
3
17
(153)
Recognised in income statement
(42)
(3)
(10)
2
74
21
Reclassification
2
40
\u2014
\u2014
(7)
35
Recognised in other comprehensive loss and equity
(20)
(104)
(103)
\u2014
20
(207)
Tax rate change \u2013 recognised in income statement
(1)
(3)
\u2014
1
\u2014
(3)
Tax rate change \u2013 recognised in other comprehensive loss and equity
\u2014
\u2014
(22)
\u2014
2
(20)
Acquisition of subsidiaries
\u2014
(31)
\u2014
\u2014
\u2014
(31)
Sale of businesses
(5)
\u2014
\u2014
\u2014
3
(2)
At 30 June 2022
(468)
(1,892)
(261)
63
353
(2,205)
Exchange differences
33
113
(3)
1
(10)
134
Recognised in income statement
(30)
93
2
(15)
24
74
Recognised in other comprehensive income and equity
(6)
(30)
152
\u2014
(50)
66
Tax rate change \u2013 recognised in income statement
(1)
(12)
(1)
\u2014
3
(11)
Acquisition of subsidiaries
\u2014
(71)
\u2014
\u2014
\u2014
(71)
Transfer from asset held for sale
(2)
(37)
\u2014
\u2014
5
(34)
Sale of businesses
10
\u2014
(1)
\u2014
(4)
5
At 30 June 2023
(464)
(1,836)
(112)
49
321
(2,042)
employment to determine if any contingent payments are for post-combination employee services, which are excluded from consideration.
On the acquisition of a business, or of an interest in an associate or joint venture, fair values, reflecting conditions at the date of
acquisition, are attributed to the net assets, including identifiable intangible assets and contingent liabilities acquired. Directly attributable
acquisition costs in respect of subsidiary companies acquired are recognised in other external charges as incurred.
The non-controlling interests on the date of acquisition can be measured either at the fair value or at the non-controlling shareholder\u2019s
proportion of the net fair value of the identifiable assets assumed. This choice is made separately for each acquisition.
Where the group has issued a put option over shares held by a non-controlling interest, the group derecognises the non-controlling
interests and instead recognises a contingent deferred consideration liability for the estimated amount likely to be paid to the non-controlling
interest on the exercise of those options. Movements in the estimated liability in respect of put options are recognised in retained earnings.
Transactions with non-controlling interests are recorded directly in retained earnings.
For all entities in which the company directly or indirectly owns equity,\u00a0a judgement is made to determine whether it controls and therefore
should fully consolidate the investee. An assessment is carried out to determine\u00a0whether the group has the exposure or rights to the variable
returns of the investee and has the ability to affect those returns through its power over the investee. To establish control, an analysis is carried
out of\u00a0the substantive and protective rights that the group and the other investors hold. This assessment\u00a0is dependent on the activities and
purpose of the investee and the rights of the other shareholders, such as which party controls the board, executive committee and material
policies of the investee. Determining whether the rights that the group holds are substantive, requires management\u00a0judgement.
Where less than 50% of the equity of an investee is held, and the group holds significantly more voting rights than any other vote holder
or organised group of vote holders, this may be an indicator of de facto control. An assessment is needed to determine all the factors
relevant to the relationship with the investee to ascertain whether control has been established and whether the investee should be
consolidated as a subsidiary. Where voting power and returns from an investment are split equally between two entities then the
arrangement is accounted for as a joint venture.
On an acquisition, fair values are attributed to the assets and liabilities acquired. This may involve material judgement to determine these
values.
(a) Acquisition of businesses
Fair value of net assets acquired and cash consideration paid in respect of the acquisition of subsidiaries in the three years ended 30\u00a0June 2023
were as follows:
Net assets acquired and consideration
Don Papa
\u00a3 million
Other
\u00a3 million
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Brands and other intangibles
293
45
338
120
334
Property, plant and equipment
1
24
25
\u2014
15
Inventories
6
21
27
6
12
Other working capital
(2)
(1)
(3)
3
(3)
Deferred tax
(67)
(4)
(71)
(31)
(15)
Borrowings
\u2014
\u2014
\u2014
\u2014
(8)
(Overdraft)/Cash
(1)
1
\u2014
1
4
Fair value of assets and liabilities
230
86
316
99
339
Goodwill arising on acquisition
64
28
92
70
274
Settlement of pre-existing relationship
\u2014
\u2014
\u2014
(1)
\u2014
Step acquisitions
\u2014
(11)
(11)
(6)
\u2014
Consideration payable
294
103
397
162
613
Satisfied by:
Cash consideration paid
(218)
(98)
(316)
(88)
(358)
Contingent consideration payable
(72)
(4)
(76)
(70)
(253)
Deferred consideration payable
(4)
(1)
(5)
(4)
(2)
(294)
(103)
(397)
(162)
(613)
Acquisitions in the year
On 10 March 2023, Diageo completed the acquisition of Kanlaon
Limited and Chat Noir Co. Inc., (the owner of Don Papa Rum) to
support Diageo\u2019s participation in the super-premium dark rum segment
for upfront cash consideration of \u20ac246\u00a0million (\u00a3218\u00a0million), deferred
consideration of \u20ac4\u00a0million (\u00a34\u00a0million) and contingent consideration of
up to \u20ac178\u00a0million (\u00a3158\u00a0million) through to 2028 subject to certain
financial performance targets, reflecting the brand\u2019s expected growth
potential. The fair value of the contingent consideration of \u20ac82\u00a0million
(\u00a372\u00a0million) was estimated by calculating the present value of the
future expected cash flows which is dependent on management\u2019s
estimates in respect of the forecasting of future cash flows and the
discount rates applicable to the future cash flows. The goodwill arising
on the acquisition of Don Papa Rum represents expected revenue
synergies and the acquired workforce. Don Papa Rum contributed
\u00a310\u00a0million to net sales and \u00a315\u00a0million operating loss to the period, out
of which \u00a315\u00a0million is related to acquisition transaction and integration
costs in the year ended 30 June 2023. The fair value measurement of
assets and liabilities acquired is in progress. The fair values of assets
and liabilities acquired are provisional and will be finalised in the year
ending 30 June 2024.
Diageo completed further acquisitions in the year ended 30 June
2023: (i) on 29 September 2022, the acquisition of the remaining issued
share capital of Mr Black Spirits Pty Ltd, owner of Mr Black, the
Australian premium cold brew coffee liqueur, that it did not already
own; and (ii) on 2 November 2022, the acquisition of the entire issued
share capital of Balcones Distilling, a Texas craft distiller and one of the
leading producers of American single malt whiskey in the United States.
The aggregate up-front cash consideration paid on completion of these
transactions in the year ended 30 June 2023 was \u00a398\u00a0million. \u00a0
Prior year acquisitions
On 31 March 2022, Diageo acquired 100% equity interest in 21Seeds, to
support Diageo's participation in the super premium flavoured tequila
segment, for a total consideration of \u00a362\u00a0million upfront in cash and a
contingent consideration of up to \u00a361\u00a0million linked to performance
targets.
Diageo completed further acquisitions in the year ended 30 June
2022, including (i) on 27 January 2022, the acquisition of Casa UM, to
expand Reserve portfolio with premium artisanal mezcal brand, Mezcal
Uni\u00f3n and (ii) on 29 June 2022, the acquisition of Vivanda, owner of the
technology behind 'What's your Whisky' platform and the Journey of
Flavour experience at Johnnie Walker Princes Street, to support
Diageo's ambition to provide customised brand experiences across all
channels. The aggregate upfront cash consideration paid on
completion of these transactions in the year ended 30 June 2022 was
\u00a326\u00a0million. In addition, these transactions included provision for further
contingent consideration of up to \u00a318\u00a0million in aggregate, linked to
performance targets and a further deferred consideration of \u00a34\u00a0million.
On 30 September 2020, Diageo completed the acquisition of
Aviation Gin LLC (Aviation Gin) and Davos Brands LLC (Davos Brands)
to support Diageo's participation in the super-premium gin segment for
a total consideration of $337 million (\u00a3263 million) upfront in cash and
contingent consideration of up to $275 million (\u00a3214 million) linked to
performance targets.
Diageo also completed a number of additional acquisitions in the year
ended 30 June 2021, comprising: (i) in February 2021, the acquisition of
Chase Distillery Limited, to further support Diageo's participation in the
premium-plus gin segment in the United Kingdom; (ii) in March 2021,
the acquisition of Far West Spirits LLC, owner of the Lone River Ranch
Water brand, to improve Diageo's participation in the ready to drink
category in the United States; and (iii) in April 2021, the acquisition of
Sons of Liberty Spirits Company, to expand Diageo's spirits-based ready
to drink portfolio with Loyal 9 Cocktails. The aggregate upfront cash
consideration paid on completion of these three transactions in the year
ended 30 June 2021 was \u00a395 million. In addition, two of these
transactions included provision for further contingent consideration of
up to \u00a386 million in aggregate, in each case linked to performance
targets, and one of the transactions provided for a further \u00a32\u00a0million of
deferred consideration, of which \u00a31\u00a0million was paid by 30 June 2021.
Purchase of shares of non-controlling interests
On 24 March 2023, Diageo completed the purchase of 14.97% of the
share capital of EABL for an aggregate consideration of KES 22,732
million (\u00a3142\u00a0million) in cash and transaction costs of \u00a34\u00a0million. This
took Diageo\u2019s shareholding in EABL from 50.03% to 65%. EABL was
already controlled and therefore consolidated prior to this transaction.
In the year ended 30 June 2021, EABL, a Diageo subsidiary
completed the acquisition of 30% of shares in Serengeti Breweries
Limited for a consideration of $55 million (\u00a342 million) in cash and
\u00a316\u00a0million in the form of shareholder loan from two Diageo subsidiaries
in 2021, increasing Diageo's effective economic interest from 40.2% to
47.0%.
All transactions were recognised in retained earnings.
(b) Sale of businesses and brands
Cash consideration received and net assets disposed of in respect of sale of businesses and brands in the three years ended 30 June 2023 were as
follows:
Guinness
Cameroun S.A.
\u00a3 million
Other
\u00a3 million
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Sale consideration
Cash received
384
115
499
106
14
(Cash)/overdraft disposed of
(13)
\u2014
(13)
2
\u2014
Transaction and other directly attributable costs paid
(17)
(7)
(24)
(26)
\u2014
Net cash received
354
108
462
82
14
Transaction costs payable
(8)
3
(5)
(16)
1
346
111
457
66
15
Net assets disposed of
Goodwill
\u2014
\u2014
\u2014
(14)
\u2014
Property, plant and equipment
(103)
(3)
(106)
(11)
(2)
Assets and liabilities held for sale
\u2014
(79)
(79)
\u2014
\u2014
Inventories
(24)
(4)
(28)
(4)
\u2014
Other working capital
69
\u2014
69
15
1
Other borrowings
2
\u2014
2
1
\u2014
Corporate tax
(3)
\u2014
(3)
(5)
\u2014
Deferred tax
5
\u2014
5
(2)
\u2014
Post employment benefit liabilities
4
\u2014
4
\u2014
\u2014
(50)
(86)
(136)
(20)
(1)
Impairment charge recognised up until the date of sale
(3)
\u2014
(3)
\u2014
\u2014
Exchange recycled from other comprehensive income
17
1
18
(63)
\u2014
Gain/(loss) on disposal before taxation
310
26
336
(17)
14
Taxation
(42)
13
(29)
(23)
\u2014
Gain/(loss) on disposal after taxation
268
39
307
(40)
14
Impairment reviews are carried out to ensure that intangible assets, including brands, are not carried at above their recoverable amounts.
Value in use and fair value less costs of disposal are both considered for these reviews and any impairment charge is based on these. The
tests are dependent on management\u2019s estimates in respect of the forecasting of future cash flows, the discount rates applicable to the future
cash flows and what expected growth rates are reasonable. Judgement is required in determining the cash-generating units. Such estimates
and judgements are subject to change as a result of changing economic conditions and actual cash flows may differ from forecasts.
The below additional considerations have been applied by management regarding the potential financial impacts of increasing
inflationary pressures, recently observable worldwide:
\u2022changes in the interest rate environment are taken into consideration when determining the discount rates;
\u2022terminal growth rates do not exceed the long-term annual inflation rate of the country or region, thus excluding any increased inflation
growth experienced in the short-term;
\u2022additional sensitivity scenarios are applied for those markets or regions where the inflation and/or the exchange devaluation is
considered significant based on management\u2019s judgement.
Consideration of climate risk impact
The impact of climate risk on the future cash flows has also been considered for scenarios analysed in line with the climate change risk
assessment. The climate change scenario analyses performed in 2023 \u2013 conducted in line with TCFD recommendations (\u2018Transition
Scenario\u2019 (RCP 2.6), a \u2018Moderate Warming\u2019 Scenario (RCP 4.5) and a \u2018Severe Warming Scenario (RCP 8.5)) \u2013 identified no material financial
impact to the current year impairment assessments.
Brands
\u00a3 million
Goodwill
\u00a3 million
Other
intangibles
\u00a3 million
Computer
software
\u00a3 million
Total
\u00a3 million
Cost
At 30 June 2021
8,458
2,627
1,421
673
13,179
Hyperinflation adjustment in respect of Turkey
315
208
\u2014
1
524
Exchange differences
639
145
194
28
1,006
Additions
109
70
55
67
301
Disposals
(23)
(42)
\u2014
(23)
(88)
Reclassification to asset held for sale
(560)
\u2014
\u2014
(8)
(568)
At 30 June 2022
8,938
3,008
1,670
738
14,354
Hyperinflation adjustment in respect of Turkey
81
60
\u2014
\u2014
141
Exchange differences
(531)
(257)
(64)
(16)
(868)
Additions
338
92
13
155
598
Disposals
\u2014
\u2014
\u2014
(26)
(26)
Reclassification from/(to) asset held for sale
453
(29)
\u2014
\u2014
424
At 30 June 2023
9,279
2,874
1,619
851
14,623
Amortisation and impairment
At 30 June 2021
1,097
670
80
568
2,415
Exchange differences
51
60
(1)
25
135
Amortisation for the year
\u2014
\u2014
7
38
45
Impairment
317
19
\u2014
\u2014
336
Disposals
(23)
(28)
\u2014
(20)
(71)
Reclassification to asset held for sale
(400)
\u2014
\u2014
(8)
(408)
At 30 June 2022
1,042
721
86
603
2,452
Exchange differences
(96)
(61)
(1)
(15)
(173)
Amortisation for the year
\u2014
\u2014
16
40
56
Impairment
498
\u2014
\u2014
\u2014
498
Disposals
\u2014
\u2014
\u2014
(24)
(24)
Reclassification from/(to) asset held for sale
315
(13)
\u2014
\u2014
302
At 30 June 2023
1,759
647
101
604
3,111
Carrying amount
At 30 June 2023
7,520
2,227
1,518
247
11,512
At 30 June 2022
7,896
2,287
1,584
135
11,902
At 30 June 2021
7,361
1,957
1,341
105
10,764
(a) Brands
The principal acquired brands, all of which are regarded as having indefinite useful economic lives, are as follows:
Principal markets
2023
\u00a3 million
2022
\u00a3 million
Crown Royal whisky
United States
1,162
1,210
Captain Morgan rum
Global
954
993
Smirnoff vodka
Global
654
681
Johnnie Walker whisky
Global
625
625
Casamigos tequila
United States
479
499
McDowell's No.1 whisky, rum and brandy
India
308
778
Don Papa rum
Europe
282
\u2014
Yen\u00ec raki
Turkey
249
294
Shui Jing Fang Chinese white spirit
Greater China
246
279
Don Julio tequila
United States
235
207
Aviation American gin
United States
209
218
Seagram's 7 Crown whiskey
United States
177
184
Signature whisky
India
176
191
Zacapa rum
Global
152
158
Black Dog whisky
India
149
162
Antiquity whisky
India
145
158
Windsor Premier whisky
Korea
137
\u2014
Gordon's gin
Europe
119
119
Bell's whisky
Europe
102
102
Other brands
960
1,038
7,520
7,896
The brands are protected by trademarks which are renewable indefinitely
in all of the major markets where they are sold. There are not believed
to be any legal, regulatory or contractual provisions that limit the useful
lives of these brands. The nature of the premium drinks industry is that
obsolescence is not a common issue, with indefinite brand lives being
commonplace, and Diageo has a number of brands that were originally
created more than 100 years ago. Accordingly, the Directors believe
that it is appropriate that the brands are treated as having indefinite
lives for accounting purposes and are therefore not amortised.
(b) Goodwill
For the purposes of impairment testing, goodwill has been attributed to
the following cash-generating units:
2023
\u00a3 million
2022
\u00a3 million
North America
767
773
Europe
Turkey
216
255
Asia Pacific
Greater China
124
141
India
673
747
Latin America and Caribbean \u2013 Mexico
161
142
Other cash-generating units
286
229
2,227
2,287
Goodwill has arisen on the acquisition of businesses and includes synergies
arising from cost savings, the opportunity to utilise Diageo\u2019s distribution
network to leverage marketing of the acquired products and the extension
of the group\u2019s portfolio of brands in new markets around the world.
(c) Other intangibles
Other intangibles principally comprise distribution rights. Diageo owns
the global distribution rights for Ketel One vodka products in perpetuity,
and the Directors believe that it is appropriate to treat these rights as
having an indefinite life for accounting purposes. The carrying value at
30 June 2023 was \u00a31,428 million (2022 \u2013 \u00a31,488 million).
(d) Impairment testing
Impairment tests are performed annually, or more frequently if events or
circumstances indicate that the carrying amount may not be
recoverable. Recoverable amounts are calculated based on the value
in use approach, also considering fair value less costs of disposal. The
value in use calculations are based on discounted forecast cash flows
using the assumption that cash flows continue in perpetuity at the
terminal growth rate of each country or region. The individual brands,
other intangibles with indefinite useful lives and the associated property,
plant and equipment are aggregated as separate cash-generating
units. Separate tests are carried out for each cash-generating unit and
for each of the markets. Goodwill is attributed to each of the markets.
The key assumptions used for the value in use calculations are as
follows:
Cash flows
Cash flows are forecasted for each cash-generating unit for the financial
years based on management's approved plans and reflect the
following assumptions:
\u2022Cash flows are projected based on the actual operating results and
a three-year strategic plan approved by management. Cash flows
are extrapolated up to five years using expected growth rates in line
with management\u2019s best estimates. Growth rates reflect expectations
of sales growth, operating costs and margin, based on past
experience and external sources of information. A simple average of
these projections serves as the estimation of the recoverable amount
of the cash-generating units. Management has no information which
would indicate that any of the scenarios are more likely than others;\u00a0
\u2022The five-year forecast period is extended by up to an additional ten
years at acquisition date for some intangible assets and goodwill
when management believes that this period is justified by the
maturity of the market and expects to achieve growth in excess of
the terminal growth rate driven by Diageo\u2019s sales, marketing and
distribution expertise. These cash flows beyond the five-year period
are projected using steady or progressively declining growth rates.
The main exception is India and the USL brands, where the forecast
period is extended by an additional one year of detailed forecasts;\u00a0 \u00a0
\u2022Cash flows for the subsequent years after the forecast period are
extrapolated based on a terminal growth rate which does not
exceed the long-term annual inflation rate of the country or region.
Discount rates
The discount rates used are the weighted average cost of capital which
reflect the returns on government bonds and an equity risk premium
adjusted for the drinks industry specific to the cash-generating units. The
group applies post-tax discount rates to post-tax cash flows as the
valuation calculated using this method closely approximates to
applying pre-tax discount rates to pre-tax cash flows.
For goodwill, these assumptions are based on the cash-generating
unit or group of units to which the goodwill is attributed. For brands,
they are based on a weighted average taking into account the country
or countries where sales are made.
The pre-tax discount rates, terminal and long-term growth rates used
for impairment testing are as follows:
2023
2022
Pre-tax discount
rate
%
Terminal growth
rate
%
Long-term growth
rate
%
Pre-tax discount
rate
%
Terminal growth
rate
%
Long-term growth
rate
%
North America \u2013 United States
9
2
4
8
2
4
Europe
United Kingdom
9
2
5
8
2
4
Turkey
28
16
28
31
15
25
Asia Pacific
Australia
10
3
5
7
2
5
Korea
11
(2)
4
7
2
5
India
14
4
15
14
4
11
Greater China
11
2
6
7
2
7
Latin America and Caribbean
Brazil
16
3
6
12
3
6
Mexico
13
3
6
14
3
6
Africa
Africa Emerging Markets
35
8
18
12
5
11
South Africa
20
5
6
16
\u2014
6
Nigeria
35
5
18
24
12
15
As a result of the impairment review, in the year ended 30 June 2023, an impairment charge of \u00a3420\u00a0million in respect of the McDowell's brand and
\u00a324\u00a0million in respect of the Director\u2019s Special brand were recognised in exceptional operating items. Value in use and fair value less costs of
disposal methodologies were both considered to assess the recoverable amount. The value in use that was calculated exceeded the fair value less
costs of disposal. The charge is mainly driven by the adverse inflationary environment and the reduction in forecast cash flow assumptions in Lower
Prestige and Popular segments in India. The brand impairment reduced the deferred tax liability by \u00a3111\u00a0million. The recoverable amount is
\u00a3379\u00a0million in respect of the McDowell's brand and \u00a311\u00a0million in respect of the Director\u2019s Special brand cash-generating units.
As a result of the impairment review, in the year ended 30 June 2023, an additional impairment charge of \u00a354\u00a0million was recognised in
exceptional operating items in respect of some brands where book value was not recoverable. The charge is mainly driven by strategic change in
some categories as a result of the challenging operating environment and premiumisation. Value in use and fair value less costs of disposal
methodologies were both considered to assess the recoverable amount. The value in use that was calculated exceeded the fair value less costs of
disposal. The brand impairment reduced the deferred tax liability by \u00a313\u00a0million.
In the year ended 30 June 2022, an impairment charge of \u00a3240 million in respect of the McDowell's brand was recognised in exceptional
operating items, based on its value in use. The brand impairment reduced the deferred tax liability by \u00a335 million.
Further, in the year ended 30 June 2022, an impairment charge of \u00a377 million in respect of the Bell\u2019s brand was recognised in exceptional
operating items, based on its value in use. The impairment reduced the deferred tax liability attributable to the brand by \u00a320 million.
In the year ended 30 June 2022, Diageo decided to wind down its operations in Russia. As a result, an impairment charge of \u00a319 million in
respect of the Smirnov goodwill was recognised in exceptional operating items.
The Turkish economy became hyperinflationary for the year ended 30 June 2022, and an impairment charge of TRY 3,760 million (\u00a3312 million)
on the opening carrying amount of the Turkey cash-generating unit was recognised in retained earnings. From this impairment charge, TRY 1,627
million (\u00a3135 million) was directly attributable to the Yen\u00ec Raki brand and the remaining TRY 2,133 million (\u00a3177 million) impairment charge was
recognised on the Turkey goodwill.
(e) Sensitivity to change in key assumptions
Impairment testing for the year ended 30 June 2023 has identified the following cash-generating units as being sensitive to reasonably possible
changes in assumptions.
The table below shows the headroom at 30 June 2023 and the impairment charge that would be required if the assumptions in the calculation
of their value in use were changed:
Increase in discount rate
Decrease in terminal growth rate
Decrease in annual growth rate in
forecast period 2024-2029
Decrease in cash flows(1)
Carrying value
of CGU
\u00a3 million
Headroom
\u00a3 million
Reasonably
possible change
Potential
impairment
charge
\u00a3 million
Reasonably
possible change
Potential
impairment
charge
\u00a3 million
Reasonably
possible change
Potential
impairment
charge
\u00a3 million
Reasonably
possible change
Potential
impairment
charge
\u00a3 million
McDowell's
379
\u2014
1ppt
(38)
1ppt
(26)
2ppt
(67)
10%
(76)
(1)Including reasonably possible changes in productivity saving assumptions
10. Property, plant and equipment
Accounting policies
Land and buildings are stated at cost less accumulated depreciation. Freehold land is not depreciated. Leaseholds are generally depreciated
over the unexpired period of the lease. Other property, plant and equipment are depreciated on a straight-line basis to estimated residual
values over their expected useful lives, and these values and lives are reviewed each year. Subject to these reviews, the estimated useful lives
fall within the following ranges: buildings \u2013 10 to 50 years; within plant and equipment casks and containers \u2013 15 to 50 years; other plant and
equipment \u2013 5 to 40 years; fixtures and fittings \u2013 5 to 10 years; and returnable bottles and crates \u2013 5 to 10 years.
Reviews are carried out if there is an indication that assets may be impaired, to ensure that property, plant and equipment are not carried
at above their recoverable amounts.
Government grants
Government grants are not recognised until there is reasonable assurance that the group will comply with the conditions pursuant to which
they have been granted and that the grants will be received. Government grants in respect of property, plant and equipment are deducted
from the asset that they relate to, reducing the depreciation expense charged to the income statement.
Land and
buildings
\u00a3 million
Plant and
equipment
\u00a3 million
Fixtures
and
fittings
\u00a3 million
Returnable
bottles and
crates
\u00a3 million
Under
construction
\u00a3 million
Total
\u00a3 million
Cost
At 30 June 2021
2,160
4,714
121
528
659
8,182
Hyperinflation adjustment in respect of Turkey and Venezuela
56
32
2
\u2014
7
97
Exchange differences
107
226
1
11
45
390
Sale of businesses
(4)
(58)
(3)
(19)
(1)
(85)
Additions
230
245
8
41
612
1,136
Disposals
(65)
(122)
(15)
(32)
(3)
(237)
Transfers
177
249
10
13
(449)
\u2014
Reclassification to assets held for sale
(8)
(25)
\u2014
\u2014
\u2014
(33)
At 30 June 2022
2,653
5,261
124
542
870
9,450
Hyperinflation adjustment in respect of Turkey and Venezuela
5
10
1
\u2014
4
20
Exchange differences
(166)
(331)
(6)
(49)
(30)
(582)
Acquisitions
8
14
\u2014
3
\u2014
25
Sale of businesses
(35)
(147)
(3)
(55)
(3)
(243)
Additions
111
214
13
50
832
1,220
Disposals
(64)
(141)
(12)
(105)
(2)
(324)
Transfers
146
238
12
28
(424)
\u2014
Reclassification from assets held for sale
2
\u2014
1
\u2014
\u2014
3
At 30 June 2023
2,660
5,118
130
414
1,247
9,569
Depreciation
At 30 June 2021
658
2,218
86
371
\u2014
3,333
Exchange differences
31
94
1
9
\u2014
135
Depreciation charge for the year
125
276
14
29
\u2014
444
Exceptional impairment
2
1
\u2014
\u2014
\u2014
3
Sale of businesses
(4)
(50)
(2)
(18)
\u2014
(74)
Disposals
(62)
(113)
(13)
(30)
\u2014
(218)
Transfers
5
4
(9)
\u2014
\u2014
\u2014
Reclassification to assets held for sale
(5)
(16)
\u2014
\u2014
\u2014
(21)
At 30 June 2022
750
2,414
77
361
\u2014
3,602
Exchange differences
(38)
(176)
(3)
(27)
\u2014
(244)
Depreciation charge for the year
125
269
13
33
\u2014
440
Exceptional accelerated depreciation and impairment
31
41
\u2014
\u2014
\u2014
72
Sale of businesses
(21)
(80)
(2)
(34)
\u2014
(137)
Disposals
(63)
(130)
(11)
(103)
\u2014
(307)
Reclassification from assets held for sale
\u2014
\u2014
1
\u2014
\u2014
1
At 30 June 2023
784
2,338
75
230
\u2014
3,427
Carrying amount
At 30 June 2023
1,876
2,780
55
184
1,247
6,142
At 30 June 2022
1,903
2,847
47
181
870
5,848
At 30 June 2021
1,502
2,496
35
157
659
4,849
The net book value of land and buildings comprises freeholds of \u00a31,481 million (2022 \u2013 \u00a31,444 million), long leaseholds of \u00a33 million (2022 \u2013 \u00a33 million) and
short leaseholds of \u00a3389 million (2022 \u2013 \u00a3410 million). Depreciation was not charged on \u00a3141 million (2022 \u2013 \u00a3114 million) of land.\u00a0
Property, plant and equipment is net of a government grant of \u00a3147 million (2022 \u2013 \u00a3153 million) received in prior years in respect of the
construction of a rum distillery in the US Virgin Islands.
11. Biological assets
Accounting policies
Biological assets held by the group consist of agave (Agave Azul
Tequilana Weber) plants. The harvested plants are used during
the production of tequila.
Biological assets are measured at fair value less costs to sell
on initial recognition and at the end of each reporting period
based on the present value of future cash flows discounted at an
appropriate rate for Mexico.
Agricultural produce is measured at fair value less costs to
sell at the point of harvest which is used as the cost of inventory
when the harvested agave is transferred.
Changes in biological assets were as follows:
Biological
assets
\u00a3 million
Fair value
At 30 June 2021
66
Exchange differences
10
Transferred to inventories
(11)
Fair value change
(5)
Farming cost capitalised
34
At 30 June 2022
94
Exchange differences
15
Transferred to inventories
(8)
Fair value change
\u2014
Farming cost capitalised
55
At 30 June 2023
156
At 30 June 2023, the number of agave plants was approximately
37\u00a0million (2022 \u2013 33\u00a0million), ranging from new plantations up to seven
year-old plants.
12. Leases
Accounting policies
Where the group is the lessee, all leases are recognised on the
balance sheet as right-of-use assets and depreciated on a
straight-line basis with the charge recognised in cost of sales or
in other operating items depending on the nature of the costs.
The liability, recognised as part of net borrowings, is measured at
a discounted value and any interest is charged to finance
charges.
The group recognises services associated with a lease as
other operating expenses. Payments associated with leases
where the value of the asset when it is new is lower than $5,000
(leases of low value assets) and leases with a lease term of 12
months or less (short term leases) are recognised as other
operating expenses. A judgement in calculating the lease
liability at initial recognition includes determining the lease term
where extension or termination options exist. In such instances,
any economic incentive to retain or end a lease are considered
and extension periods are only included when it is considered
reasonably certain that an option to extend a lease will be
exercised.
(a) Movement in right-of-use assets
The company principally leases warehouses, office buildings, plant and
machinery, cars and distribution vehicles in the ordinary course of
business.
Land and
buildings
\u00a3 million
Plant and
equipment
\u00a3 million
Under
construction
\u00a3 million
Total
\u00a3 million
At 30 June 2021
230
184
29
443
Exchange differences
26
14
\u2014
40
Additions
129
56
\u2014
185
Transfers
29
\u2014
(29)
\u2014
Reclassification to
assets held for sale
(1)
(1)
\u2014
(2)
Disposals
(6)
\u2014
\u2014
(6)
Depreciation
(54)
(41)
\u2014
(95)
At 30 June 2022
353
212
\u2014
565
Exchange differences
(3)
(23)
\u2014
(26)
Additions
45
37
\u2014
82
Reclassification from
assets held for sale
1
1
\u2014
2
Derecognition due to
disposal of business
(1)
(1)
\u2014
(2)
Depreciation
(56)
(39)
\u2014
(95)
At 30 June 2023
339
187
\u2014
526
(b) Lease liabilities
2023
\u00a3 million
2022
\u00a3 million
Current lease liabilities
(75)
(85)
Non-current lease liabilities
(373)
(390)
(448)
(475)
The future cash outflows, which are not included in lease liabilities on
the balance sheet, in respect of extension and termination options
which are not reasonably expected to be exercised are estimated at
\u00a3261 million (2022 \u2013 \u00a3282\u00a0million).
(c) Amounts recognised in the consolidated income
statement
In the year ended 30 June 2023, other external charges (within other
operating items) included \u00a357 million (2022 \u2013 \u00a339 million) in respect
of\u00a0leases of low value assets and short term leases and \u00a34 million (2022
\u2013 \u00a39\u00a0million) in respect of variable lease payments. Refer to note 5 for
further information relating to the interest expenses on lease liabilities.
The total cash outflow for leases in the year ended 30 June 2023 was
\u00a3172 million (2022 \u2013 \u00a3154 million).
13. Other investments
Accounting policies
Other investments are equity investments that are not classified
as investments in associates or joint arrangements nor
investments in subsidiaries. They are included in non-current
assets. Subsequent to initial measurement, other investments are
stated at fair value. Gains and losses arising from the changes in
fair value are recognised in the income statement or in other
comprehensive income on a case by case basis. Accumulated
gains and losses included in other comprehensive income are
not recycled to the income statement. Dividends from other
investments are recognised in the consolidated income
statement.
Loans receivable are non-derivative financial assets that are not
classified as equity investments. They are subsequently
measured either at amortised cost using the effective interest
method less allowance for impairment or at fair value with gains
and losses arising from changes in fair value recognised in the
income statement or in other comprehensive income that are
recycled to the income statement on the de-recognition of the
asset. Allowances for expected credit losses are made based on
the risk of non-payment taking into account ageing, previous
experience, economic conditions and forward-looking data.
Such allowances are measured as either 12-months expected
credit losses or lifetime expected credit losses depending on
changes in the credit quality of the counterparty.
Loans
\u00a3 million
Other
investments
\u00a3 million
Total
\u00a3 million
Cost less allowances or fair value
At 30 June 2021
10
30
40
Exchange differences
2
1
3
Additions
6
9
15
Repayments and disposals
(1)
(1)
(2)
Fair value adjustment
\u2014
(13)
(13)
Step acquisitions
\u2014
(6)
(6)
Capitalised interest
1
\u2014
1
Transfer
\u2014
(1)
(1)
At 30 June 2022
18
19
37
Exchange differences
(1)
\u2014
(1)
Additions
20
9
29
Repayments and disposals
(3)
\u2014
(3)
Fair value adjustment
\u2014
(4)
(4)
Capitalised interest
1
\u2014
1
Impairment charged during the year
\u2014
(2)
(2)
At 30 June 2023
35
22
57
At 30 June 2023, loans comprise \u00a36 million (2022 \u2013 \u00a36 million; 2021 \u2013
\u00a33 million) of loans to customers and other third parties, after
allowances of \u00a3121 million (2022 \u2013 \u00a3129 million; 2021 \u2013 \u00a3113 million), and
\u00a329 million (2022 \u2013 \u00a312 million; 2021 \u2013 \u00a37 million) of loans to associates.
14. Post employment benefits \u00a0
Accounting policies
The group\u2019s principal post employment funds are defined benefit
plans. In addition, the group has defined contribution plans,
unfunded post employment medical benefit liabilities and other
unfunded defined benefit post employment liabilities. For post
employment plans other than defined contribution plans, the
amount charged to operating profit is the cost of accruing
pension benefits promised to employees over the year, plus any
changes arising on benefits granted to members by the group
during the year. Net finance charges comprise the net deficit/
surplus on the plans at the beginning of the year, adjusted for
cash flows in the year, multiplied by the discount rate for plan
liabilities. The differences between the fair value of the plans\u2019
assets and the present value of the plans\u2019 liabilities are disclosed
as an asset or liability on the consolidated balance sheet. Any
differences due to changes in assumptions or experience are
recognised in other comprehensive income. The amount of any
pension fund asset recognised on the balance sheet is limited to
any future refunds from the plan or the present value of
reductions in future contributions to the plan.
Contributions payable by the group in respect of defined
contribution plans are charged to operating profit as incurred.
Critical accounting estimates and judgements
Application of IAS 19 requires the exercise of estimate and
judgement in relation to various assumptions.
Diageo determines the assumptions on a country by country
basis in conjunction with its actuaries. Estimates are required in
respect of uncertain future events, including the life expectancy
of members of the funds, salary and pension increases, future
inflation rates, discount rates and employee and pensioner
demographics. The application of different assumptions could
have a significant effect on the amounts reflected in the income
statement, other comprehensive income and the balance sheet.
There may be interdependencies between the assumptions.
Where there is an accounting surplus on a defined benefit
plan, management judgement is necessary to determine
whether the group can obtain economic benefits through a
refund of the surplus or by reducing future contributions to the
plan.
(a) Post employment benefit plans
The group operates a number of pension plans throughout the world,
devised in accordance with local conditions and practices. Diageo's
most significant plans are defined benefit plans and are funded by
payments to separately administered trusts or insurance companies. The
group also operates a number of plans that are generally unfunded,
primarily in the United States, which provide to employees post
employment medical benefits.
The principal plans are in the United Kingdom, Ireland and the
United States where benefits are based on employees\u2019 length of service
and salary at retirement. All valuations were performed by independent
actuaries using the projected unit credit method to determine pension
costs.
The most recent funding valuations of the significant defined benefit
plans were carried out as follows:
Principal plans
Date of valuation
United Kingdom(1)
1 April 2021
Ireland(2)
31 December 2021
United States
1 January 2022
(i)\u00a0 The year ended 30 June 2022 includes settlement gains of \u00a327\u00a0million in respect of the
Enhanced Transfer Values (ETV) exercise carried out in the Irish Schemes and past
service gains of \u00a328\u00a0million as a result of the changes of the benefits in the Irish
Scheme. In the year ended 30 June 2021, the exceptional past service loss of \u00a35\u00a0million
is in respect of the equalisation of Guaranteed Minimum Pension (GMP) benefits for
men and women.
(1) The (charge)/income before taxation is in respect of the following countries:
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
United Kingdom
15
(27)
(46)
Ireland
1
45
4
United States
(32)
(31)
(28)
Other
(15)
(16)
(17)
(31)
(29)
(87)
In addition to the charge in respect of defined benefit post employment
plans, contributions to the group\u2019s defined contribution plans were \u00a344
million (2022 \u2013 \u00a333 million; 2021 \u2013 \u00a325\u00a0million).
The movements in the net surplus for the two years ended 30 June
2023 is set out below:
Plan
assets
\u00a3 million
Plan
liabilities
\u00a3 million
Net
surplus
\u00a3 million
At 30 June 2021
9,892
(9,445)
447
Exchange differences
93
(100)
(7)
Income/(charge) before taxation
176
(205)
(29)
Other comprehensive (loss)/income(1)
(1,432)
2,058
626
Contributions by the group
128
\u2014
128
Settlements paid(2)
(52)
52
\u2014
Employee contributions
5
(5)
\u2014
Benefits paid
(411)
411
\u2014
At 30 June 2022
8,399
(7,234)
1,165
Exchange differences
(49)
55
6
Disposals
\u2014
4
4
Income/(charge) before taxation
298
(329)
(31)
Other comprehensive (loss)/income(1)
(1,435)
785
(650)
Contributions by the group
100
\u2014
100
Employee contributions
5
(5)
\u2014
Benefits paid
(472)
472
\u2014
At 30 June 2023
6,846
(6,252)
594
(1)Excludes surplus restriction.
(2)Includes settlement payment of \u00a352\u00a0million on ETV exercise in Ireland.
The plan assets and liabilities by type of post employment benefit and
country are as follows:
2023
2022
Plan
assets
\u00a3 million
Plan
liabilities
\u00a3 million
Plan
assets
\u00a3 million
Plan
liabilities
\u00a3 million
Pensions
United Kingdom
4,578
(4,041)
6,041
(4,897)
Ireland
1,588
(1,310)
1,645
(1,409)
United States
441
(411)
453
(408)
Other
180
(194)
191
(212)
Post employment medical
2
(227)
2
(225)
Other post employment
57
(69)
67
(83)
6,846
(6,252)
8,399
(7,234)
The balance sheet analysis of the post employment plans is as follows:
2023
2022
Non-
current
assets(1)
\u00a3 million
Non-
current
liabilities
\u00a3 million
Non-
current
assets(1)
\u00a3 million
Non-
current
liabilities
\u00a3 million
Funded plans
960
(132)
1,553
(144)
Unfunded plans
\u2014
(241)
\u2014
(258)
960
(373)
1,553
(402)
(1)Includes surplus restriction of \u00a37 million (2022 \u2013 \u00a314 million).
The disclosures have been prepared in accordance with IFRIC 14. In
particular, where the calculation for a plan results in a surplus, the
recognised asset is limited to the present value of any available future
refunds from the plan or reductions in future contributions to the plan,
and any additional liabilities are recognised as required. At 30 June
2023, the DPS had a net surplus of \u00a3589 million (2022 \u2013 \u00a31,174\u00a0million;
2021 \u2013 \u00a3840 million) and the GIGPS had a net surplus of \u00a3260 million
(2022 a surplus of \u00a3221\u00a0million; 2021 a deficit of \u00a379\u00a0million) and other
schemes in a surplus totalled of \u00a3111\u00a0million (2022 \u2013 \u00a3158\u00a0million; 2021 \u2013
\u00a3178\u00a0million). Both of these surpluses have been recognised, with no
provision made against them, as they are expected to be recoverable
through a combination of a reduction in future cash contributions or
ultimately via a cash refund when the last member\u2019s obligations have
been met.\u00a0
(b) Principal risks and assumptions
The material post employment plans are not exposed to any unusual,
entity-specific or scheme-specific risks but there are general risks:
Inflation \u2013 The majority of the plans\u2019 obligations are linked to inflation.
Higher inflation will lead to increased liabilities which is partially offset
by the plans holding inflation linked gilts, swaps and caps against the
level of inflationary increases.
Interest rate \u2013 The plan liabilities are determined using discount rates
derived from yields on AA-rated corporate bonds. A decrease in
corporate bond yields will increase plan liabilities though this will be
partially offset by an increase in the value of the bonds held by the post
employment plans.
Mortality \u2013 The majority of the obligations are to provide benefits for the
life of the members and their partners, so any increase in life
expectancy will result in an increase in the plans\u2019 liabilities.
Asset returns \u2013 Assets held by the pension plans are invested in a
diversified portfolio of equities, bonds and other assets. Volatility in asset
values will lead to movements in the net deficit/surplus reported in the
consolidated balance sheet for post employment plans which in
addition will also impact the post employment expense in the
consolidated income statement.
The following weighted average assumptions were used to
determine the group\u2019s deficit/surplus in the main post employment
plans at 30 June in the relevant year. The assumptions used to calculate
the charge/credit in the consolidated income statement for the year
ending 30 June are based on the assumptions disclosed as at the
previous 30 June.
United Kingdom
Ireland
United States(1)
2023
%
2022
%
2021
%
2023
%
2022
%
2021
%
2023
%
2022
%
2021
%
Rate of general increase in salaries(2)
3.7
3.6
3.4
3.9
3.8
3.0
\u2014
\u2014
\u2014
Rate of increase to pensions in payment
2.9
2.9
3.1
2.3
2.2
1.7
\u2014
\u2014
\u2014
Rate of increase to deferred pensions
2.7
2.6
2.5
2.4
2.3
1.6
\u2014
\u2014
\u2014
Discount rate for plan liabilities
5.2
3.8
1.9
3.6
3.2
1.0
4.9
4.4
2.7
Inflation \u2013 CPI
2.7
2.6
2.5
2.5
2.4
1.6
2.2
2.3
2.3
Inflation - RPI
3.2
3.1
3.0
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(1)The salary increase assumption in the United States is not a significant assumption as only a minimal amount of members\u2019 pension entitlement is dependent on a member\u2019s projected
final salary.
(2)The salary increase assumptions include an allowance for age-related promotional salary increases.
For the principal UK and Irish pension funds, the table below illustrates the expected age at death of an average worker who retires currently at the
age of 65, and one who is currently aged 45 and subsequently retires at the age of 65:
United Kingdom(1)
Ireland(2)
United States
2023
Age
2022
Age
2021
Age
2023
Age
2022
Age
2021
Age
2023
Age
2022
Age
2021
Age
Retiring currently at age 65
Male
86.8
87.1
87.2
87.2
87.7
86.9
85.6
85.5
85.4
Female
88.4
88.7
88.7
89.6
90.0
89.3
87.2
87.2
87.1
Currently aged 45, retiring at age 65
Male
88.1
88.5
88.6
88.8
89.3
88.6
87.1
87.0
86.9
Female
90.4
90.7
90.8
91.3
91.7
91.1
88.7
88.6
88.5
(1)Based on the CMI\u2019s S3 mortality tables with scaling factors based on the experience of the plan and where people live, with suitable future improvements.
(2)Based on the CMI's S3 mortality tables with scaling factors based on the experience of the plan, with suitable future improvements.
For the significant assumptions, the following sensitivity analyses estimate the potential impacts on the consolidated income statement for the year
ending 30 June 2024 and on the plan liabilities at 30 June 2023:
United Kingdom
Ireland
United States
Benefit/(cost)
Operating
profit
\u00a3 million
Profit after
taxation
\u00a3 million
Plan
liabilities(1)
\u00a3 million
Operating
profit
\u00a3 million
Profit after
taxation
\u00a3 million
Plan
liabilities(1)
\u00a3 million
Operating
profit
\u00a3 million
Profit after
taxation
\u00a3 million
Plan
liabilities(1)
\u00a3 million
Effect of 0.5% increase in discount rate
2
15
259
1
5
85
2
2
22
Effect of 0.5% decrease in discount rate
(2)
(14)
(267)
(1)
(4)
(95)
(2)
(2)
(24)
Effect of 0.5% increase in inflation
(1)
(8)
(156)
\u2014
(2)
(49)
\u2014
(1)
(9)
Effect of 0.5% decrease in inflation
2
8
173
\u2014
2
50
\u2014
1
8
Effect of one year increase in life expectancy
\u2014
(6)
(131)
\u2014
(2)
(55)
\u2014
(1)
(15)
(1)The estimated effect on the liabilities excludes the impact of any interest rate and inflation swaps held by the pension plans.
(i)The sensitivity analyses above have been determined based on reasonably possible changes of the respective assumptions and may not be representative of the actual change. Each
sensitivity is calculated on a change in the key assumption while holding all other assumptions constant. The sensitivity to inflation includes the impact on all inflation linked assumptions
(e.g. pension increases and salary increases where appropriate).
(c) Investment and hedging strategy
The investment strategy for the group\u2019s funded post employment plans is determined locally by the trustees of the plan and/or Diageo, as
appropriate, and takes account of the relevant statutory requirements. The objective of the investment strategy is to achieve a target rate of return in
excess of the movement on the liabilities, whilst taking an acceptable level of investment risk relative to the liabilities. This objective is implemented
by using the funds of the plans to invest in a variety of asset classes that are expected over the long-term to deliver a target rate of return. The
majority of the investment strategies have significant amounts allocated to bonds, in order to provide a natural hedge against movements in the
liabilities of the plans. At 30 June 2023, approximately 97% and 98% (2022 \u2013 100% and 103%) of the UK plans\u2019 liabilities measured on the Trustee's
funding basis (gilts+50bp) were hedged against future movements in interest rates and inflation, respectively, through the combined effect of bonds
and swaps. At 30 June 2023, approximately 92% and 112% (2022 \u2013 70% and 76%) of the Irish plans\u2019 liabilities measured on the Trustee's funding
basis (euro-swaps+50bp) were hedged against future movements in interest rates and inflation, respectively, through the combined effect of bonds
and swaps.
The discount rates used are based on the yields of high-quality fixed income investments. For the UK plans, which represent approximately 65%
of total plan liabilities, the discount rate is determined by reference to the yield curves of AA-rated corporate bonds for which the timing and amount
of cash outflows are similar to those of the plans. A similar process is used to determine the discount rates used for the non-UK plans.
An analysis of the fair value of the plan assets is as follows:
2023
United Kingdom
\u00a3 million
Ireland
\u00a3 million
United States and other
\u00a3 million
Total
\u00a3 million
Quoted
Unquoted
Quoted
Unquoted
Quoted
Unquoted
Quoted
Unquoted
Total
Equities
12
916
\u2014
291
64
98
76
1,305
1,381
Bonds
\u00a0 \u00a0 Fixed-interest government
18
24
\u2014
6
48
8
66
38
104
\u00a0 \u00a0 Inflation-linked government
\u2014
\u2014
\u2014
96
2
2
2
98
100
\u00a0 \u00a0 Investment grade corporate
\u2014
29
\u2014
328
21
227
21
584
605
\u00a0 \u00a0 Non-investment grade
22
289
6
186
2
133
30
608
638
\u00a0 \u00a0 Loan securities
13
526
\u2014
84
\u2014
\u2014
13
610
623
\u00a0 \u00a0 Repurchase agreements
2,351
826
\u2014
\u2014
\u2014
\u2014
2,351
826
3,177
\u00a0 \u00a0 Liability Driven Investment (LDI)
\u2014
\u2014
\u2014
81
\u2014
\u2014
\u2014
81
81
Property
29
462
\u2014
62
\u2014
1
29
525
554
Hedge funds
\u2014
\u2014
\u2014
12
\u2014
5
\u2014
17
17
Interest rate and inflation swaps
\u2014
(971)
102
(18)
\u2014
\u2014
102
(989)
(887)
Cash and other
46
(14)
5
347
\u2014
69
51
402
453
Total bid value of assets
2,491
2,087
113
1,475
137
543
2,741
4,105
6,846
terminate the contingent arrangements comprising mortgages over certain land and buildings and fixed and floating charges over certain
receivables of the group up to a value of \u20ac200 million (\u00a3171 million). The company has agreed with the Trustee conditional contributions of up to
\u20ac35 million (\u00a330 million) by 31 December 2024, \u20ac39 million (\u00a333 million) by 31 December 2027 and \u20ac39 million (\u00a333 million) by 31 December 2030
if a deficit is identified at those valuations.
(e) Timing of benefit payments
The following table provides information on the timing of the benefit payments and the average duration of the defined benefit obligations and the
distribution of the timing of benefit payments:
United Kingdom
Ireland
United States
2023
\u00a3 million
2022
\u00a3 million
2023
\u00a3 million
2022
\u00a3 million
2023
\u00a3 million
2022
\u00a3 million
Maturity analysis of benefits expected to be paid
Within one year
303
295
73
70
57
58
Between 1 to 5 years
1,090
1,082
367
353
174
187
Between 6 to 15 years
2,439
2,556
727
704
331
310
Between 16 to 25 years
2,244
2,252
645
634
206
183
Beyond 25 years
2,664
2,787
747
768
187
174
Total
8,740
8,972
2,559
2,529
955
912
years
years
years
years
years
years
Average duration of the defined benefit obligation
14
15
14
15
9
9
The projected benefit payments are based on the assumptions underlying the assessment of the obligations, including inflation. They are disclosed
undiscounted and therefore appear large relative to the discounted value of the plan liabilities recognised on the consolidated balance sheet. They
are in respect of benefits that have accrued at the balance sheet date and make no allowance for any benefits to be accrued subsequently.
(f) Related party disclosures
Information on transactions between the group and its pension plans is given in note 21.
15. Working capital
Accounting policies
Inventories are stated at the lower of cost and net realisable
value. Cost includes raw materials, direct labour and expenses,
an appropriate proportion of production and other overheads,
but not borrowing costs. Cost is calculated at the weighted
average cost incurred in acquiring inventories. Maturing
inventories and raw materials which are retained for more than
one year are classified as current assets, as they are expected to
be realised in the normal operating cycle.
Trade and other receivables are initially recognised at fair value
less transaction costs and subsequently carried at amortised cost
less any allowance for discounts and doubtful debts. Trade
receivables arise from contracts with customers, and are
recognised when performance obligations are satisfied, and the
consideration due is unconditional as only the passage of time is
required before the payment is received. Allowance losses are
calculated by reviewing lifetime expected credit losses using
historic and forward-looking data on credit risk.
Trade and other payables are initially recognised at fair value
including transaction costs and subsequently carried at
amortised costs. Contingent considerations recognised in
business combinations are subsequently measured at fair value
through income statement. The group evaluates supplier
arrangements against a number of indicators to assess if the
liability has the characteristics of a trade payable or should be
classified as borrowings. This assessment considers the
commercial purpose of the facility, whether payment terms are
similar to customary payment terms, whether the group is legally
discharged from its obligation towards suppliers before the end
of the original payment term, and the group\u2019s involvement in
agreeing terms between banks and suppliers.
Provisions are liabilities of uncertain timing or amount. A
provision is recognised if, as a result of a past event, the group
has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of
economic benefits will be required to settle the obligation.
Provisions are calculated on a discounted basis. The carrying
amounts of provisions are reviewed at each balance sheet date
and adjusted to reflect the current best estimate.
(a) Inventories
2023
\u00a3 million
2022
\u00a3 million
Raw materials and consumables
543
489
Work in progress
132
86
Maturing inventories
5,794
5,229
Finished goods and goods for resale
1,192
1,290
7,661
7,094
Maturing inventories include whisk(e)y, rum, tequila and Chinese white
spirits. The following amounts of inventories are expected to be utilised
after more than one year:
2023
\u00a3 million
2022
\u00a3 million
Raw materials and consumables
23
15
Maturing inventories
4,063
3,713
4,086
3,728
(b) Trade and other receivables
2023
2022
Current
assets
\u00a3 million
Non-current
assets
\u00a3 million
Current
assets
\u00a3 million
Non-current
assets
\u00a3 million
Trade receivables
2,011
\u2014
2,155
\u2014
Interest receivable
12
\u2014
18
\u2014
VAT recoverable and other
prepaid taxes
271
15
290
15
Other receivables
163
13
158
13
Prepayments
229
3
290
9
Accrued income
34
\u2014
22
\u2014
2,720
31
2,933
37
At 30 June 2023, approximately 26%, 14% and 11% of the group\u2019s
trade receivables of \u00a32,011 million are due from counterparties based in
the United States, United Kingdom and India, respectively. Accrued
income primarily represents amounts receivable from customers in
respect of performance obligations satisfied but not yet invoiced.
The aged analysis of trade receivables, net of expected credit loss
allowance, is as follows:
2023
\u00a3 million
2022
\u00a3 million
Not overdue
1,967
2,114
Overdue 1 \u2013 30 days
25
19
Overdue 31 \u2013 60 days
7
8
Overdue 61 \u2013 90 days
3
5
Overdue 91 \u2013 180 days
6
5
Overdue more than 180 days
3
4
2,011
2,155
(c) Trade and other payables
2023
2022
Current
liabilities
\u00a3 million
Non-current
liabilities
\u00a3 million
Current
liabilities
\u00a3 million
Non-current
liabilities
\u00a3 million
Trade payables
2,659
\u2014
2,705
\u2014
Interest payable
237
\u2014
143
\u2014
Tax and social security excluding income tax
632
\u2014
696
\u2014
Other payables
432
368
600
380
Accruals
1,229
\u2014
1,635
\u2014
Deferred income
73
\u2014
90
\u2014
Dividend payable to non-controlling interests
38
\u2014
18
\u2014
5,300
368
5,887
380
Interest payable at 30 June 2023 includes interest on non-derivative financial instruments of \u00a3217 million (2022 \u2013 \u00a3141 million). Accruals at 30 June
2023 include \u00a3561\u00a0million (2022 \u2013 \u00a3613\u00a0million) accrued discounts attributed to sales recognised. Deferred income represents amounts paid by
customers in respect of performance obligations not yet satisfied. The amount of contract liabilities recognised as revenue in the current year is
\u00a390\u00a0million (2022 \u2013 \u00a372\u00a0million). Non-current liabilities include the net present value of contingent consideration in respect of prior acquisitions of
\u00a3293 million (2022 \u2013 \u00a3353\u00a0million). For further information on contingent consideration, please refer to note 16 (g).
Together with the group\u2019s partner banks, supply chain financing (SCF) facilities are provided to suppliers in certain countries. These arrangements
enable suppliers to receive funding earlier than the invoice due date at their discretion and at their own cost. Payment terms continue to be agreed
directly between the group and suppliers, independently from the availability of SCF facilities. Liabilities are settled in accordance with the original
due date of invoices. The group does not incur any fees or receive any rebates where the suppliers choose to utilise these facilities. The group has
determined that it is appropriate to present amounts outstanding subject to SCF arrangements as trade payables. Consistent with this classification,
cash flows are presented either as operating cash flows or cash flows from investing activities, when related to the acquisition of non-current assets.
At 30 June 2023, the amount that has been subject to SCF and accounted for as trade payables was \u00a3727\u00a0million (2022 \u2013 \u00a3789\u00a0million).
(d) Provisions
\u00a0
Thalidomide
\u00a3 million
Other
\u00a3 million
Total
\u00a3 million
At 30 June 2022
178
239
417
Exchange differences
(1)
(26)
(27)
Disposal of businesses
\u2014
(2)
(2)
Provisions charged during the year
\u2014
31
31
Provisions utilised during the year
(14)
(61)
(75)
Transfers from other payables
\u2014
12
12
Unwinding of discounts
5
1
6
At 30 June 2023
168
194
362
Current liabilities
13
106
119
Non-current liabilities
155
88
243
168
194
362
Provisions have been established in respect of the discounted value of the group\u2019s commitment to the UK and Australian Thalidomide Trusts. These
provisions will be utilised over the period of the commitments up to 2037.\u00a0
The largest item in other provisions at 30 June 2023 is \u00a351 million (2022 \u2013 \u00a349\u00a0million) in respect of employee deferred compensation plans which
will be utilised when employees leave the group.
Risk management and capital structure
Introduction
This section sets out the policies and procedures applied to manage the group\u2019s capital structure and the financial risks the group is exposed to.
Diageo considers the following components of its balance sheet to be capital: borrowings and equity. Diageo manages its capital structure to
achieve capital efficiency, provide flexibility to invest through the economic cycle and give efficient access to debt markets at attractive cost levels.
16. Financial instruments and risk management
Accounting policies
Financial assets and liabilities are initially recorded at fair value including, where permitted by IFRS 9, any directly attributable transaction
costs. For those financial assets that are not subsequently held at fair value, the group assesses whether there is evidence of impairment at
each balance sheet date.
The group classifies its financial assets and liabilities into the following categories: financial assets and liabilities at amortised cost, financial
assets and liabilities at fair value through income statement and financial assets at fair value through other comprehensive income.
The accounting policies for other investments and loans are described in note 13, for trade and other receivables and payables in note 15
and for cash and cash equivalents in note 17.
Financial assets and liabilities at fair value through income statement include derivative assets and liabilities. Where financial assets or
liabilities are eligible to be carried at either amortised cost or fair value through other comprehensive income, the group does not apply the
fair value option.
Derivative financial instruments are carried at fair value using a discounted cash flow model based on market data applied consistently
for similar types of instruments. Gains and losses on derivatives that do not qualify for hedge accounting treatment are taken to the income
statement as they arise.
Other financial liabilities are carried at amortised cost unless they are part of a fair value hedge relationship. The difference between the
initial carrying amount of the financial liabilities and their redemption value is recognised in the income statement over the contractual terms
using the effective interest rate method. Financial liabilities in respect of the Zacapa acquisition are recognised at fair value.
Hedge accounting
The group designates and documents certain derivatives as hedging instruments against changes in fair value of recognised assets and
liabilities (fair value hedges), commodity price risk of highly probable forecast transactions, as well as the cash flow risk from a change in
exchange or interest rates (cash flow hedges) and hedges of net investments in foreign operations (net investment hedges). The designated
portion of the hedging instruments is included in other financial assets and liabilities on the consolidated balance sheet. The effectiveness of
such hedges is assessed at inception and at least on a quarterly basis, using prospective testing. Methods used for testing effectiveness
include dollar offset, critical terms, regression analysis and hypothetical models.
Fair value hedges are used to manage the currency and/or interest rate risks to which the fair value of certain assets and liabilities are
exposed. Changes in the fair value of the derivatives are recognised in the income statement, along with any changes in the relevant fair
value of the underlying hedged asset or liability. If such a hedge relationship no longer meets hedge accounting criteria, fair value
movements on the derivative continue to be taken to the income statement while any fair value adjustments made to the underlying hedged
item to that date are amortised through the income statement over its remaining life using the effective interest rate method.
Cash flow hedges are used to hedge the foreign currency risk of highly probable future foreign currency cash flows, the commodity price risk
of highly probable future transactions, as well as the cash flow risk from changes in exchange or interest rates. The effective portion of the
gain or loss on the hedges is recognised in other comprehensive income, while any ineffective part is recognised in the income statement.
Amounts recorded in other comprehensive income are recycled to the income statement in the same period in which the underlying foreign
currency, commodity or interest exposure affects the income statement.
Net investment hedges take the form of either foreign currency borrowings or derivatives. Foreign exchange differences arising on translation
of net investments are recorded in other comprehensive income and included in the exchange reserve. Liabilities used as hedging
instruments are revalued at closing exchange rates and the resulting gains or losses are also recognised in other comprehensive income to
the extent that they are effective, with any ineffectiveness taken to the income statement. Foreign currency contracts hedging net investments
are carried at fair value. Effective fair value movements are recognised in other comprehensive income, with any ineffectiveness taken to the
income statement.
The group\u2019s funding, liquidity and exposure to foreign currency and
interest rate risks are managed by the group\u2019s treasury department. The
treasury department uses a range of financial instruments to manage
these underlying risks.
Treasury operations are conducted within a framework of Board-
approved policies and guidelines, which are recommended and
monitored by the Finance Committee, chaired by the Chief Financial
Officer. The policies and guidelines include benchmark exposure and/
or hedge cover levels for key areas of treasury risk which are
periodically reviewed by the Board following, for example, significant
business, strategic or accounting changes. The framework provides for
limited defined levels of flexibility in execution to allow for the optimal
application of the Board-approved strategies. Transactions arising from
the application of this flexibility are carried at fair value, gains or losses
are taken to the income statement as they arise and are separately
monitored on a daily basis using Value at Risk analysis. In the years
ended 30 June 2023 and 30 June 2022, gains and losses on these
transactions were not material. The group does not use derivatives for
speculative purposes. All transactions in derivative financial instruments
are initially undertaken to manage the risks arising from underlying
business activities.
The group purchases insurance for commercial or, where required,
for legal or contractual reasons. In addition, the group retains insurable
risk where external insurance is not considered an economic means of
mitigating these risks.
The Finance Committee receives a quarterly report on the key
activities of the treasury department, however any exposures which
differ from the defined benchmarks are reported as they arise.\u00a0
(a) Currency risk
The group presents its consolidated financial statements in sterling and
conducts business in many currencies. As a result, it is subject to foreign
currency risk due to exchange rate movements, which will affect the
group\u2019s transactions and the translation of the results and underlying
net assets of its operations. To manage the currency risk, the group uses
certain financial instruments. Where hedge accounting is applied,
hedges are documented and tested for effectiveness on an ongoing
basis.
Hedge of net investment in foreign operations
The group hedges a certain portion of its exposure to fluctuations in the
sterling value of its foreign operations by designating borrowings held in
foreign currencies and\u00a0using foreign currency spots, forwards, swaps
and other financial derivatives. For the year ended 30 June 2023, the
group\u2019s intention was to maintain total net investment Value at Risk to
total net asset value below 20%, where Value at Risk is defined as the
maximum amount of loss over a one-year period with a 95%
probability confidence level.
At 30 June 2023, foreign currency borrowings designated in net
investment hedge relationships amounted to \u00a310,627 million (2022 \u2013
\u00a38,742 million), including financial derivatives.
Hedge of foreign currency debt
The group uses cross currency interest rate swaps to hedge the foreign
currency risk associated with certain foreign currency denominated
borrowings.
Transaction exposure hedging
The group\u2019s policy is to hedge forecast transactional foreign currency
risk on major currency pair exposures up to 24 months, targeting 75%
coverage for the current financial year, and on other currency
exposures up to 18 months. The group\u2019s exposure to foreign currency
risk arising principally on forecasted sales transactions is managed
using forward agreements and options.\u00a0 \u00a0
(b) Interest rate risk
The group has an exposure to interest rate risk, arising principally on
changes in US dollar, euro and sterling interest rates. To manage
interest rate risk, the group manages its proportion of fixed to floating
rate borrowings within limits approved by the Board, primarily through
issuing fixed and floating rate borrowings, and by utilising interest rate
swaps. These practices aim to minimise the group\u2019s net finance charges
with acceptable year-on-year volatility. To facilitate operational
efficiency and effective hedge accounting, for the year ended 30 June
2023 the group\u2019s policy was to maintain fixed rate borrowings within a
band of 40% to 90% of forecast net borrowings. For these calculations,
net borrowings exclude interest rate related fair value adjustments. The
majority of the group\u2019s existing interest rate derivatives are designated
as hedges and are expected to be effective. Fair value of these
derivatives is recognised in the income statement, along with any
changes in the relevant fair value of the underlying hedged asset or
liability. The interest rate profile of the group's net borrowings is as
follows:
2023
2022
\u00a3 million
%
\u00a3 million
%
Fixed rate
11,961
77
11,070
78
Floating rate(1)
3,225
21
2,612
19
Impact of financial derivatives
and fair value adjustments
(93)
(1)
(20)
\u2014
Lease liabilities
448
3
475
3
Net borrowings
15,541
100
14,137
100
(1)The impact on foreign currency borrowings and derivatives in net investment hedges is
largely offset by the foreign exchange difference arising on the translation of net
investments.\u00a0
(2)The impact on the consolidated statement of comprehensive income includes the
impact on the income statement.
(e) Credit risk\u00a0
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the group. Credit risk
arises on cash balances (including bank deposits and cash and cash
equivalents), derivative financial instruments and credit exposures to
customers, including outstanding loans, trade and other receivables,
financial guarantees and committed transactions.
The carrying amount of financial assets of \u00a34,637 million (2022 \u2013
\u00a35,445 million) represents the group\u2019s exposure to credit risk at the
balance sheet date as disclosed in section (i), excluding the impact of
any collateral held or other credit enhancements. A financial asset is in
default when the counterparty fails to pay its contractual obligations.
Financial assets are written off when there is no reasonable expectation
of recovery.
Credit risk is managed separately for financial and business related
credit exposures.
Financial credit risk\u00a0
Diageo aims to minimise its financial credit risk through the application
of risk management policies approved and monitored by the Board.
Counterparties are predominantly limited to investment grade banks
and financial institutions, and policy restricts the exposure to any one
counterparty by setting credit limits taking into account the credit quality
of the counterparty. The group\u2019s policy is designed to ensure that
individual counterparty limits are adhered to and that there are no
significant concentrations of credit risk. The Board also defines the types
of financial instruments which may be transacted. The credit risk arising
through the use of financial instruments for currency, interest rate and
commodity price risk management is estimated with reference to the
fair value of contracts with a positive value, rather than the notional
amount of the instruments themselves. Diageo annually reviews the
credit limits applied and regularly monitors the counterparties\u2019 credit
quality reflecting market credit conditions.
When derivative transactions are undertaken with bank
counterparties, the group may, where appropriate, enter into certain
agreements with such bank counterparties whereby the parties agree to
post cash collateral for the benefit of the other if the net valuations of
the derivatives are above a predetermined threshold. At 30 June 2023,
the collateral held under these agreements amounted to $(19) million
(\u00a3(15) million) (2022 \u2013 $23 million (\u00a319 million)).
Business related credit risk\u00a0
Exposures from loan, trade and other receivables are managed locally
in the operating units where they arise and active risk management is
applied, focusing on country risk, credit limits, ongoing credit evaluation
and monitoring procedures. There is no significant concentration of
credit risk with respect to loans, trade and other receivables as the
group has a large number of customers which are internationally
dispersed.
(f) Liquidity risk\u00a0
Liquidity risk is the risk of Diageo encountering difficulties in meeting its
obligations associated with financial liabilities that are settled by
delivering cash or other financial assets. The group uses short-term
commercial paper to finance its day-to-day operations. The group\u2019s
policy with regard to the expected maturity profile of borrowings is to
limit the amount of such borrowings maturing within 12 months to 50%
of gross borrowings less money market demand deposits, and the level
of commercial paper to 30% of gross borrowings less money market
demand deposits. In addition, the group\u2019s policy is to maintain
backstop facilities with relationship banks to support commercial paper
obligations.
The following tables provide an analysis of the anticipated
contractual cash flows including interest payable for the group\u2019s
financial liabilities and derivative instruments on an undiscounted basis.
Where interest payments are calculated at a floating rate, rates of each
cash flow until maturity of the instruments are calculated based on the
forward yield curve prevailing at the respective year ends. The gross
cash flows of cross currency swaps are presented for the purposes of
this table. All other derivative contracts are presented on a net basis.
Financial assets and liabilities are presented gross in the consolidated
balance sheet although, in practice, the group uses netting
arrangements to reduce its liquidity requirements on these instruments.
Contractual cash flows\u00a0
Due within
1 year
\u00a3 million
Due between
1 and 3 years
\u00a3 million
Due between
3 and 5 years
\u00a3 million
Due after
5 years
\u00a3 million
Total
\u00a3 million
Carrying
amount at
balance
sheet date
\u00a3 million
2023
Borrowings(1)
(1,707)
(3,615)
(2,980)
(8,652)
(16,954)
(16,502)
Interest on borrowings(1)(2)
(541)
(750)
(623)
(1,503)
(3,417)
(217)
Lease capital repayments
(75)
(104)
(69)
(200)
(448)
(448)
Lease future interest payments
(18)
(28)
(19)
(37)
(102)
\u2014
Trade and other financial liabilities(3)
(4,417)
(231)
(122)
(96)
(4,866)
(4,782)
Non-derivative financial liabilities
(6,758)
(4,728)
(3,813)
(10,488)
(25,787)
(21,949)
Cross currency swaps (gross)
Receivable
43
87
87
1,341
1,558
Payable
(28)
(56)
(56)
(930)
(1,070)
Other derivative instruments (net)
19
(88)
(79)
(54)
(202)
Derivative instruments(2)
34
(57)
(48)
357
286
134
2022
Borrowings(1)
(1,524)
(2,842)
(2,738)
(9,276)
(16,380)
(16,020)
Interest on borrowings(1)(2)
(427)
(626)
(560)
(1,622)
(3,235)
(141)
Lease capital repayments
(85)
(107)
(61)
(222)
(475)
(475)
Lease future interest payments
(13)
(20)
(16)
(44)
(93)
\u2014
Trade and other financial liabilities(3)
(4,765)
(123)
(142)
(126)
(5,156)
(5,145)
Non-derivative financial liabilities
(6,814)
(3,718)
(3,517)
(11,290)
(25,339)
(21,781)
Cross currency swaps (gross)
Receivable
851
90
90
1,442
2,473
Payable
(783)
(56)
(56)
(958)
(1,853)
Other derivative instruments (net)
(86)
(123)
(78)
(65)
(352)
Derivative instruments(2)
(18)
(89)
(44)
419
268
22
In the years ended 30 June 2023 and 30 June 2022, the increase in financial assets - other of \u00a38 million (2022 \u2013 \u00a346 million) is principally in respect
of acquisitions.
The movements in level 3 instruments, measured on a recurring basis, are as follows:
Zacapa
financial
liability
Contingent
consideration
recognised on
acquisition of
businesses
Zacapa
financial
liability
Contingent
consideration
recognised on
acquisition of
businesses
2023
\u00a3 million
2023
\u00a3 million
2022
\u00a3 million
2022
\u00a3 million
At the beginning of the year
(216)
(371)
(149)
(429)
Net (losses)/gains included in the income statement
(8)
117
(20)
62
Net gains/(losses) included in exchange in other comprehensive income
9
11
(26)
(39)
Net losses included in retained earnings
(16)
\u2014
(34)
\u2014
Acquisitions
\u2014
(76)
\u2014
(70)
Settlement of liabilities
13
8
13
105
At the end of the year
(218)
(311)
(216)
(371)
(h) Results of hedge relationships
The group targets a one-to-one hedge ratio. The strength of the economic relationship between the hedged items and the hedging instruments is
analysed on an ongoing basis. Ineffectiveness can arise from subsequent change in the forecast transactions as a result of differences in timing,
cash flows or value except when the critical terms of the hedging instrument and hedged item are closely aligned. The change in the credit risk of
the hedging instruments or the hedged items is not expected to be the primary factor in the economic relationship.
The notional amounts, contractual maturities and rates of the hedging instruments designated in hedging relationships by the main risk
categories are as follows:
Notional
amounts
\u00a3 million
Maturity
Range of hedged rates(1)
2023
Net investment hedges
Derivatives in net investment hedges of foreign operations
637
July 2023
US dollar 1.27
Cash flow hedges
Derivatives in cash flow hedge (foreign currency debt)
873
September 2036 - April 2043
US dollar 1.60 - 1.88
Derivatives in cash flow hedge (foreign currency risk)
1,734
September 2023 - December 2024
US dollar 1.05 - 1.33,
Mexican peso 14.76 - 18.38
Derivatives in cash flow hedge (commodity price risk)
217
July 2023 - September 2024
Feed Wheat: 183.75 - 240.00 USD/Bu
LME Aluminium: 2,248 - 3,399 USD/Mt
Fair value hedges
Derivatives in fair value hedge (interest rate risk)
3,999
September 2023 - April 2030
(0.01) - 3.09%
2022
Net investment hedges
Derivatives in net investment hedges of foreign operations
11
July 2022
Turkish lira 22.27
Cash flow hedges
Derivatives in cash flow hedge (foreign currency debt)
1,694
April 2023 - April 2043
US dollar 1.22 - 1.88
Derivatives in cash flow hedge (foreign currency risk)
1,874
September 2022 - June 2024
US dollar 1.22 - 1.42, euro 1.13 - 1.17
Derivatives in cash flow hedge (commodity price risk)
234
July 2022 - March 2024
Natural Gas: 1.67 - 3.57 GBP/therm(ec)
LME Aluminium: 2,009 - 3,399 USD/Mt
Fair value hedges
Derivatives in fair value hedge (interest rate risk)
4,444
September 2022 - April 2030
(0.01) - 3.09%
(1)In case of derivatives in cash flow hedges (commodity price risk and foreign currency risk), the range of the most significant contract\u2019s hedged rates are presented.
For hedges of the cash flow risk from a change in forward exchange rates using cross currency interest rate swaps, the retranslation of the related
bond principal to closing exchange rates and recognition of interest on the related bonds will affect the income statement in each year until the
related bonds mature in 2036 and 2043. Exchange retranslation and the interest on the hedged bonds in the income statement are expected to
offset those on the cross currency swaps in each of the years.\u00a0
In respect of cash flow hedging instruments, a gain of \u00a3247 million (2022 \u2013 \u00a3124 million gain; 2021 \u2013 \u00a3157 million loss) was recognised in other
comprehensive income due to changes in fair value. A gain of \u00a313 million was transferred out of other comprehensive income to other operating
expenses and a loss of \u00a354 million to other finance charges, respectively, (2022 \u2013 a loss of \u00a342 million and a gain of \u00a3239 million; 2021 \u2013 a loss of
\u00a310 million and a loss of \u00a3175 million) to offset the foreign exchange impact on the underlying transactions. A gain of \u00a333 million (2022 \u2013 \u00a346 million
gain, 2021 \u2013 \u00a32 million gain) was transferred out of other comprehensive income to operating profit in relation to commodity hedges. The carrying
amount of hedged items recognised in the consolidated balance sheet in relation to hedges of cash flow risk arising from foreign currency debts
equals the notional value of the hedging instruments at 30 June 2023 and are included within borrowings. The notional amount for cash flow
hedges of foreign currency debt at 30 June 2023 was \u00a3873 million (2022 \u2013 \u00a31,694 million).
For cash flow hedges of forecast transactions at 30 June 2023, based on year end interest and exchange rates, a gain to the income statement
of \u00a3143 million in the year ending 30 June 2024 and a gain of \u00a320 million in the year ending 30 June 2025 is expected to be recognised.
In respect of hedges of foreign currency borrowings that are no longer applicable at 30 June 2023, a loss of \u00a318 million (2022 \u2013 a loss of \u00a319
million) was reported in reserves. There was no significant ineffectiveness on net investment and cash flow hedges during the year ended 30 June
2023.
The \u00a33,999 million (2022 \u2013\u00a0\u00a34,444 million) notional value of hedged items in fair value hedges equals to the notional value of hedging
instruments designated in these relationships at 30 June 2023 and the carrying amount of hedged items are included within borrowings in the
consolidated balance sheet.\u00a0
For fair value hedges that are no longer applicable, the accumulated fair value changes shown on the consolidated balance sheet at 30 June
2023 was \u00a3nil (2022 \u2013 \u00a31 million).
The following table sets out information regarding the effectiveness of hedging relationships designated by the group, as well as the impacts on the
income statement and other comprehensive income:
At the beginning
of the year
\u00a3 million
Consolidated Income
statement
\u00a3 million
Consolidated
statement of
comprehensive
income
\u00a3 million
Other
\u00a3 million
At the end
of the year
\u00a3 million
2023
Net investment hedges
Derivatives in net investment hedges of foreign operations
(1)
\u2014
\u2014
1
\u2014
Cash flow hedges
Derivatives in cash flow hedge (foreign currency debt)
367
(54)
60
(25)
348
Derivatives in cash flow hedge (foreign currency risk)
(77)
(17)
260
17
183
Derivatives in cash flow hedge (commodity price risk)
50
33
(89)
(19)
(25)
Fair value hedges
Derivatives in fair value hedge (interest rate risk)
(283)
(94)
\u2014
\u2014
(377)
Fair value hedge hedged item
276
96
\u2014
\u2014
372
Instruments in fair value hedge relationship
(7)
2
\u2014
\u2014
(5)
2022
Net investment hedges
Derivatives in net investment hedges of foreign operations
\u2014
\u2014
5
(6)
(1)
Cash flow hedges
Derivatives in cash flow hedge (foreign currency debt)
154
239
(6)
(20)
367
Derivatives in cash flow hedge (foreign currency risk)
53
(11)
(130)
11
(77)
Derivatives in cash flow hedge (commodity price risk)
16
46
32
(44)
50
Fair value hedges
Derivatives in fair value hedge (interest rate risk)
63
(346)
\u2014
\u2014
(283)
Fair value hedge hedged item
(65)
341
\u2014
\u2014
276
Instruments in fair value hedge relationship
(2)
(5)
\u2014
\u2014
(7)
(i) Reconciliation of financial instruments\u00a0
The table below sets out the group\u2019s accounting classification of each class of financial assets and liabilities:
Fair value
through income
statement
\u00a3 million
Fair value
through other
comprehensive
income
\u00a3 million
Assets and
liabilities at
amortised cost
\u00a3 million
Not categorised
as a financial
instrument
\u00a3 million
Total
\u00a3 million
Current
\u00a3 million
Non-current
\u00a3 million
2023
Other investments and loans(1)
192
\u2014
31
2
225
\u2014
225
Trade and other receivables
\u2014
\u2014
2,234
517
2,751
2,720
31
Cash and cash equivalents
\u2014
\u2014
1,439
\u2014
1,439
1,439
\u2014
Derivatives in cash flow hedge (foreign currency debt)
348
\u2014
\u2014
\u2014
348
\u2014
348
Derivatives in cash flow hedge (foreign currency risk)
192
\u2014
\u2014
\u2014
192
147
45
Derivatives in cash flow hedge (commodity price risk)
2
\u2014
\u2014
\u2014
2
2
\u2014
Other instruments
198
\u2014
\u2014
\u2014
198
198
\u2014
Leases
\u2014
\u2014
1
\u2014
1
\u2014
1
Total other financial assets
740
\u2014
1
\u2014
741
347
394
Total financial assets
932
\u2014
3,705
519
5,156
4,506
650
Borrowings(2)
\u2014
\u2014
(16,502)
\u2014
(16,502)
(1,701)
(14,801)
Trade and other payables
(311)
\u2014
(4,472)
(885)
(5,668)
(5,300)
(368)
Derivatives in fair value hedge (interest rate risk)
(377)
\u2014
\u2014
\u2014
(377)
(6)
(371)
Derivatives in cash flow hedge (foreign currency risk)
(9)
\u2014
\u2014
\u2014
(9)
(7)
(2)
Derivatives in cash flow hedge (commodity price risk)
(27)
\u2014
\u2014
\u2014
(27)
(26)
(1)
Other instruments
(245)
\u2014
\u2014
\u2014
(245)
(245)
\u2014
Leases
\u2014
\u2014
(448)
\u2014
(448)
(75)
(373)
Total other financial liabilities
(658)
\u2014
(448)
\u2014
(1,106)
(359)
(747)
Total financial liabilities
(969)
\u2014
(21,422)
(885)
(23,276)
(7,360)
(15,916)
Total net financial (liabilities)/assets
(37)
\u2014
(17,717)
(366)
(18,120)
(2,854)
(15,266)
2022
Other investments and loans(1)
180
4
15
1
200
\u2014
200
Trade and other receivables
\u2014
\u2014
2,365
605
2,970
2,933
37
Cash and cash equivalents
\u2014
\u2014
2,285
\u2014
2,285
2,285
\u2014
Derivatives in fair value hedge (interest rate risk)
1
\u2014
\u2014
\u2014
1
\u2014
1
Derivatives in cash flow hedge (foreign currency debt)
367
\u2014
\u2014
\u2014
367
43
324
Derivatives in cash flow hedge (foreign currency risk)
32
\u2014
\u2014
\u2014
32
15
17
Derivatives in cash flow hedge (commodity price risk)
57
\u2014
\u2014
\u2014
57
57
\u2014
Other instruments
136
\u2014
\u2014
\u2014
136
136
\u2014
Leases
\u2014
\u2014
3
\u2014
3
\u2014
3
Total other financial assets
593
\u2014
3
\u2014
596
251
345
Total financial assets
773
4
4,668
606
6,051
5,469
582
Borrowings(2)
\u2014
\u2014
(16,020)
\u2014
(16,020)
(1,522)
(14,498)
Trade and other payables
(371)
\u2014
(4,774)
(1,122)
(6,267)
(5,887)
(380)
Derivatives in fair value hedge (interest rate risk)
(284)
\u2014
\u2014
\u2014
(284)
(1)
(283)
Derivatives in cash flow hedge (foreign currency risk)
(109)
\u2014
\u2014
\u2014
(109)
(81)
(28)
Derivatives in cash flow hedge (commodity price risk)
(7)
\u2014
\u2014
\u2014
(7)
(5)
(2)
Derivatives in net investment hedge
(1)
\u2014
\u2014
\u2014
(1)
(1)
\u2014
Other instruments
(271)
\u2014
(117)
\u2014
(388)
(388)
\u2014
Leases
\u2014
\u2014
(475)
\u2014
(475)
(85)
(390)
Total other financial liabilities
(672)
\u2014
(592)
\u2014
(1,264)
(561)
(703)
Total financial liabilities
(1,043)
\u2014
(21,386)
(1,122)
(23,551)
(7,970)
(15,581)
Total net financial (liabilities)/assets
(270)
4
(16,718)
(516)
(17,500)
(2,501)
(14,999)
During the year, the following bonds were issued and repaid:
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Issued
\u20ac denominated
441
1,371
636
\u00a3 denominated
\u2014
892
395
$ denominated
1,788
\u2014
\u2014
Repaid
\u20ac denominated
\u2014
(769)
(696)
$ denominated
(1,340)
(752)
(551)
889
742
(216)
(1)In the year ended 30 June 2023, net increase in bonds and other borrowings excludes
\u00a32 million cash outflow in respect of derivatives designated in forward point hedges
(2022 \u2013 \u00a34 million).
(2)In the year ended 30 June 2023, other non-cash items are principally in respect of fair
value changes of cross currency interest rate swaps and interest rate swaps of
\u00a3(34)\u00a0million and lease liabilities of \u00a3(82)\u00a0million, partially offset by the \u00a384\u00a0million fair
value change of borrowings. In the year ended 30 June 2022, other non-cash items are
principally in respect of fair value changes of cross currency interest rate swaps and
interest rate swaps of \u00a3(346)\u00a0million and lease liabilities of \u00a3(183)\u00a0million, partially offset
by the \u00a3331 million fair value change of borrowings.
(b) Analysis of net borrowings by currency
2023
2022
Cash and
cash
equivalents
\u00a3 million
Gross
borrowings(1)
\u00a3 million
Cash and
cash
equivalents
\u00a3 million
Gross
borrowings(1)
\u00a3 million
US dollar
542
(5,751)
1,315
(3,260)
Euro(2)
48
(3,864)
61
(2,943)
Sterling
46
(6,227)
67
(9,214)
Indian rupee
123
(31)
26
(74)
Mexican peso
25
(286)
14
(264)
Hungarian forint
3
(261)
2
(214)
Kenyan shilling
28
(253)
53
(254)
Chinese yuan
199
(63)
290
(75)
Nigerian naira
83
\u2014
133
\u2014
Other(2)
342
(244)
324
(124)
Total
1,439
(16,980)
2,285
(16,422)
(1)Includes foreign currency forwards and swaps and leases.
(2)Includes \u00a321 million (Euro) cash and cash equivalents in cash-pooling arrangements
(2022 \u2013 \u00a323 million (Turkish lira and Euro)).
18. Equity
Accounting policies
Own shares represent shares and share options of Diageo plc
that are held in treasury or by employee share trusts for the
purpose of fulfilling obligations in respect of various employee
share plans or were acquired as part of a share buyback
programme. Own shares are treated as a deduction from equity
until the shares are cancelled, reissued or disposed of and when
vest are transferred from own shares to retained earnings at their
weighted average cost.
Share-based payments include share awards and options
granted to directors and employees. The fair value of equity
settled share options and share grants is initially measured at
grant date based on Monte Carlo and Black Scholes models
and is charged to the income statement over the vesting period.
For equity settled shares, the credit is included in retained
earnings. Cancellations of share options are treated as an
acceleration of the vesting period and any outstanding charge is
recognised in operating profit immediately. Any surplus or deficit
arising on the sale of the Diageo plc shares held by the group is
included as a movement in equity.
Dividends are recognised in the financial statements in the year
in which they are approved.
(a) Allotted and fully paid share capital \u2013 ordinary shares
of 28101\u2044108 pence each
Number
of shares
million
Nominal
value
\u00a3 million
At 30 June 2023
2,460
712
At 30 June 2022
2,498
723
At 30 June 2021
2,559
741
the five business days prior to the day the purchase is made and (b) the
higher of the price of the last independent trade and the highest current
independent bid on the trading venue where the purchase is carried
out. The programme expires at the conclusion of the next Annual
General Meeting or on 5 January 2024, if earlier.\u00a0
Diageo completed a total of \u00a31.4\u00a0billion return of capital for the year
ended 30 June 2023, which included \u00a30.9\u00a0billion related to the
successful completion of Diageo\u2019s previous share buyback programme
in which \u00a34.5\u00a0billion of capital was returned to shareholders finalised in
February 2023, and returned an additional \u00a30.5\u00a0billion of capital to
shareholders which was announced as a new share buyback
programme on 16 February 2023 and completed on 2 June 2023.
During the year ended 30 June 2023, the group purchased
38\u00a0million ordinary shares (2022 \u2013 61\u00a0million; 2021 \u2013 3 million),
representing approximately 1.5% of the issued ordinary share capital
(2022 \u2013 2.4%; 2021 \u2013 0.1%) at an average price of 3616 pence per
share, and an aggregate cost of \u00a31,381 million (including \u00a313 million of
transaction costs) (2022 \u2013 3709 pence per share, and an aggregate
cost of \u00a32,284 million, including \u00a316 million of transaction costs; 2021 \u2013
3407 pence per share, and an aggregate cost of \u00a3109\u00a0million, including
\u00a31 million of transaction costs) under the share buyback programme.
The shares purchased under the share buyback programmes were
cancelled.
The monthly breakdown of all shares purchased and the average
price paid per share (excluding expenses) for the year ended 30 June
2023 were as follows:
Period
Number
of shares
purchased under
share buyback
programme
Total number of
shares purchased
Average
price paid
pence
Authorised
purchases
unutilised at
month end
July 2022
1,660,507
1,660,507
3567
177,756,956
August 2022
1,646,883
1,646,883
3820
176,110,073
September 2022
2,273,226
2,273,226
3744
173,836,847
1-6 October 2022
131,864
131,864
3702
173,704,983
7-31 October 2022 (1)
\u2014
\u2014
\u2014
227,870,414
November 2022
4,497,414
4,497,414
3679
223,373,000
December 2022
4,571,923
4,571,923
3710
218,801,077
January 2023
7,989,915
7,989,915
3558
210,811,162
February 2023
1,718,877
1,718,877
3577
209,092,285
March 2023
4,353,777
4,353,777
3541
204,738,508
April 2023
2,883,950
2,883,950
3672
201,854,558
May 2023
5,196,558
5,196,558
3534
196,658,000
June 2023
410,562
410,562
3348
196,247,438
Total
37,335,456
37,335,456
3617
196,247,438
(1)\u00a0 \u00a0 New maximum number of purchasable shares was authorised by shareholders at the
AGM held on 6 October 2022.
(d) Dividends
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Amounts recognised as distributions to
equity shareholders in the year
Final dividend for the year ended 30 June
2022 46.82 pence per share (2021 \u2013 44.59
pence; 2020 \u2013 42.47 pence)
1,066
1,040
992
Interim dividend for the year ended 30 June
2023 30.83 pence per share (2022 \u2013 29.36
pence; 2021 \u2013 27.96 pence)
696
680
654
1,762
1,720
1,646
additional shares in USL in exchange for their 25% interest in PDL and non-controlling interest increased from 42.73% to 42.79%.
(ii) On 24 March 2023, Diageo completed the purchase of an additional 14.97% of the share capital of EABL. This increased Diageo\u2019s controlling shareholding position in EABL from 50.03%
to
(f) Employee share compensation
The group uses a number of share award and option plans to grant to
its directors and employees.
The annual fair value charge in respect of the equity settled plans
for the three years ended 30 June 2023 is as follows:
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Executive share award plans
41
51
41
Executive share option plans
4
4
4
Savings plans
4
4
4
49
59
49
Executive share awards have been made primarily under the Diageo
2014 Long Term Incentive Plan (DLTIP) from September 2014 onwards
and delivered in conditional awards in the form of performance shares,
performance share options, time-vesting restricted stock units (RSUs)
and/or time-vesting share options (or cash-based equivalents in certain
locations for regulatory reasons). Share options are granted at the
market value at the time of grant. Prior to the introduction of the DLTIP,
employees in associated companies were granted awards under the
Diageo plc 2011 Associated Companies Share Incentive Plan (DACSIP).
In the case of Executive Directors, conditional awards of time-vesting
RSUs or forfeitable shares may be awarded under the 2020 Deferred
Bonus Share Plan (DBSP), with vesting not subject to any performance
conditions and not subject to a post-vesting retention period. The DLTIP
plan rules will be presented for renewal at the AGM in September 2023
and any future awards made post approval will be made under the
new plan rules.
Share awards normally vest and are released on the third
anniversary of the grant date. Participants do not make a payment to
receive the award at grant. Executive Directors are required to hold any
vested shares awarded under DLTIP for a further two-year post-vesting
holding period. Share options may normally be exercised between
three and ten years after the grant date. Executives in North America
and Latin America and Caribbean are granted awards over the
company\u2019s ADRs (one ADR is equivalent to four ordinary shares).
Performance shares under the DLTIP (for awards in 2020 and
thereafter) are subject to the achievement of three performance
measures: 1) compound annual growth in profit before exceptional
items over three years; 2) compound annual growth in organic net sales
over three years; 3) environmental, social and governance (ESG)
priorities, weighted 40%, 40% and 20% of the maximum respectively,
as set out in the Directors\u2019 remuneration report. Performance share
options under the DLTIP are subject to the achievement of two equally
weighted performance measures: 1) a comparison of Diageo\u2019s three-
year TSR with a peer group; 2) cumulative free cash flow over a three-
year period, measured at constant exchange rates. Performance
measures and targets are set annually by the Remuneration Committee.
The vesting range is 20% for Executive Directors and 25% for other
participants for achieving minimum performance targets, up to 100%
for achieving the maximum target level. Retesting of the performance
measures is not permitted.
For performance shares under the DLTIP, dividends are accrued on
awards and are given to participants to the extent that the awards
actually vest at the end of the performance period. Dividends are
normally paid out in the form of shares.
Savings plans are provided in the form of a savings-related share
option plan. For UK employees, awards were made under the Diageo
2010 Sharesave plan (for options granted up until 2020) and the
Diageo 2020 Sharesave plan (for options granted from 2021).
For Republic of Ireland (ROI) based employees, awards were made
under the Diageo 2009 Irish Sharesave Scheme (for options granted up
until 2019) and the Diageo 2019 Irish Sharesave Scheme (for options
granted in 2020). These are HMRC and Irish Revenue approved all-
employee savings plans.
For ROI employees, grants from 2021 and 2022 were made under
the Diageo 2020 Sharesave plan which is not an approved plan in the
Republic of Ireland. These plans are made available to UK and ROI
employees who are employed on the annual results announcement
date. Participants can save monthly, with deductions taken directly from
net pay, for a period of 3 or 5 years. In return, employees are granted
the option to buy Diageo shares using the savings accrued at the end of
the relevant savings period and at a 20% discounted option price,
which is set at the time of grant. Provided participants fulfil the terms set
out within the relevant UK or ROI tax approved scheme rules, any gains
from the option exercise are free from UK or ROI income tax. For the
ROI Sharesave awards granted in 2021 and 2022, as these are not
made under a Revenue tax approved plan, the gains from the option
exercise are subject to ROI income tax.
For US employees, the awards are made under the Diageo plc 2017
United States Employee Stock Purchase Plan. Employees agree to make
regular monthly savings for a period of one year and acquire American
Depositary Receipts (ADRs) at 15% discounted price (which is set at the
time of grant) using their contributions at the end of the plan cycle. They
receive the benefit of tax relief if certain conditions are satisfied.
For the three years ended 30 June 2023, the calculation of the fair value
of each share award used the Monte Carlo and Black Scholes pricing
model and the following assumptions:
2023
2022
2021
Risk free interest rate
3.1%
0.4%
(0.1%)
Expected life of the awards
35 months
40 months
36 months
Dividend yield
2.0%
2.1%
2.7%
Weighted average share price
3758 p
3545 p
2557 p
Weighted average fair value of
awards granted in the year
1992 p
2729 p
2107 p
Number of awards granted in
the year
1.7 million
2.1 million
2.1 million
Fair value of all awards granted
in the year
\u00a334 million
\u00a357 million
\u00a345 million
The exercise price of share options outstanding at 30 June 2023 was in
the range of 1709 pence - 3864 pence (2022 \u2013 1704 pence - 4024
pence; 2021 \u2013 1232 pence - 3483 pence).
At 30 June 2023, 2.5\u00a0million share options were exercisable at a
weighted average exercise price of 2443 pence. Weighted average
remaining contractual life of share options was five years at 30 June
2023.
Other financial statements disclosures
Introduction
This section includes additional financial information that are either required by the relevant accounting standards or management considers these
to be material information for shareholders.
19. Contingent liabilities and legal proceedings
Accounting policies
Provision is made for the anticipated settlement costs of legal or
other disputes against the group where it is considered to be
probable that a liability exists and a reliable estimate can be
made of the likely outcome. Where it is possible that a settlement
may be reached or it is not possible to make a reliable estimate
of the estimated financial effect, appropriate disclosure is made
but no provision created.
Critical accounting judgements and estimates
Judgement is necessary in assessing the likelihood that a claim
will succeed, or a liability will arise, and an estimate to quantify
the possible range of any settlement. Due to the inherent
uncertainty in this evaluation process, actual losses may be
different from the liability originally estimated. The group may be
involved in legal proceedings in respect of which it is not
possible to make a reliable estimate of any expected settlement.
In such cases, appropriate disclosure is provided but no
provision is made and no contingent liability is quantified.
(a) Guarantees and related matters
As of 30 June 2023, the group has no material unprovided guarantees
or indemnities in respect of liabilities of third parties.
(b) Acquisition of USL shares from UBHL and related
proceedings in relation to the USL transaction
On 4\u00a0July 2013, Diageo completed its acquisition, under a share
purchase agreement with United Breweries (Holdings) Limited (UBHL)
and various other sellers (the SPA), of shares representing 14.98% in
USL, including shares representing 6.98% from UBHL. The SPA was
signed on 9\u00a0November 2012 as part of the transaction announced by
Diageo in relation to USL on that day (the Original USL Transaction).
Following a series of further transactions, as of 30 June 2023, Diageo
has a 55.88% investment in USL (excluding 2.38% owned by the USL
Benefit Trust).
Prior to the acquisition from UBHL on 4\u00a0July 2013, the High Court of
Karnataka (High Court) had granted leave to UBHL under the Indian
Companies Act 1956 (the Leave Order) to enable the sale by UBHL to
Diageo to take place (the UBHL Share Sale) notwithstanding the
continued existence of certain winding-up petitions that were pending
against UBHL on the date of the SPA. At the time of the completion of
the UBHL Share Sale, the Leave Order remained subject to review on
appeal. However, as stated by Diageo at the time of closing, it was
considered unlikely that any appeal process in respect of the Leave
Order would definitively conclude on a timely basis and, accordingly,
Diageo waived the conditionality under the SPA relating to the absence
of insolvency proceedings in relation to UBHL and acquired the 6.98%
stake in USL from UBHL at that time.
Following appeal and counter-appeal in respect of the Leave Order,
this matter is now before the Supreme Court of India which has issued
an order that the status quo be maintained with regard to the UBHL
Share Sale pending a hearing on the matter before it. Following a
number of adjournments, the next date for a substantive hearing is yet
to be fixed.
In separate proceedings, the High Court passed a winding-up order
against UBHL on 7\u00a0February 2017, and appeals filed by UBHL against
that order have since been dismissed, initially by a division bench of the
High Court and subsequently by the Supreme Court of India.
Diageo continues to believe that the acquisition price of INR 1,440
per share paid to UBHL for the USL shares is fair and reasonable as
regards UBHL, UBHL\u2019s shareholders and UBHL\u2019s secured and unsecured
creditors. However, adverse results for Diageo in the proceedings
referred to above could, absent leave or relief in other proceedings,
ultimately result in Diageo losing title to the 6.98% stake in USL
acquired from UBHL. Diageo believes, including by reason of its rights
under USL\u2019s articles of association to nominate USL\u2019s CEO and CFO
and the right to appoint, through USL, a majority of the directors on the
boards of USL\u2019s subsidiaries as well as its ability as promoter to
nominate for appointment up to two-thirds of USL\u2019s directors for so long
as the chairperson of USL is an independent director, that it would
remain in control of USL and would continue to be able to consolidate
USL as a subsidiary for accounting purposes regardless of the outcome
of this litigation.
There can be no certainty as to the outcome of the existing or any
further related legal proceedings or the time frame within which they
would be concluded.
(c) Continuing matters relating to Dr Vijay Mallya and
affiliates
On 25\u00a0February 2016, Diageo and USL each announced that they had
entered into arrangements with Dr Mallya under which he had agreed
to resign from his position as a director and as chairman of USL and
from his positions in USL\u2019s subsidiaries. \u00a0
Diageo\u2019s agreement with Dr Mallya (the February 2016 Agreement)
provided for a payment of $75 million (\u00a360 million) to Dr Mallya over a
five-year period of which $40\u00a0million (\u00a332\u00a0million) was paid on signing
of the February 2016 Agreement with the balance being payable in
equal instalments of $7\u00a0million (\u00a36\u00a0million) a year over five years
(2017-2021). All payments were subject to and conditional on Dr
Mallya\u2019s compliance with the agreement. The February 2016 Agreement
also provided for the release of Dr Mallya\u2019s personal obligations to
indemnify Diageo Holdings Netherlands B.V. (DHN) in respect of its
earlier liability ($141 million (\u00a3112 million)) under a backstop guarantee
of certain borrowings of Watson Limited (Watson) (a company affiliated
with Dr Mallya).
On account of various breaches and other provisions of agreements
between Dr Mallya and persons connected with him and Diageo and/
or USL, Diageo did not make the five instalment payments due during
the five-year period between 2017 and 2021. In addition, Diageo has
also demanded that Dr Mallya repay the $40 million (\u00a332 million) paid
by Diageo in February 2016 and sought compensation for various losses
incurred by the relevant members of the Diageo group.
On 16\u00a0November 2017, Diageo and other relevant members of the
Diageo group commenced claims in the High Court of Justice in
England and Wales (the English High Court) against Dr Mallya in
relation to these matters. At the same time DHN also commenced
claims in the English High Court against Dr Mallya, his son Sidhartha
Mallya, Watson and Continental Administration Services Limited (CASL)
(a company affiliated with Dr Mallya and understood to hold assets on
trust for him and certain persons affiliated with him) for in excess of $142
million (\u00a3113 million) (plus interest) in relation to Watson\u2019s liability to DHN
in respect of its borrowings referred to above and the breach of
associated security documents. Dr Mallya, Sidhartha Mallya and the
relevant affiliated companies filed a defence to these claims, and Dr
Mallya also filed a counterclaim for payment of the two instalment
payments that had by that time been withheld as described above.
Diageo continues to prosecute its claims and to defend the
counterclaim. As part of these proceedings, Diageo and the other
relevant members of its group filed an application for strike out and/or
summary judgement in respect of certain aspects of the defence filed by
Dr Mallya and the other defendants, including their defence in relation
to Watson and CASL\u2019s liability to repay DHN. The application was
successful resulting in Watson being ordered to pay approximately $135
million (\u00a3107 million) plus various amounts in respect of interest to DHN,
with CASL being held liable as co-surety for 50% of any such amount
unpaid by Watson. These amounts were, contrary to the relevant orders,
not paid by the relevant deadlines and Watson and CASL\u2019s remaining
defences in the proceedings were struck out. Diageo and DHN have
accordingly sought asset disclosure and are considering further
enforcement steps against Watson and CASL, both in the United
Kingdom and in other jurisdictions where they are present or hold
assets.
A trial of the remaining elements of these claims was due to
commence on 21 November 2022. However, on 26 July 2021 Dr Mallya
was declared bankrupt by the English High Court pursuant to a
bankruptcy petition presented by a consortium of Indian banks. Diageo
and the relevant members of its group have informed the Trustee in
Bankruptcy of their position as creditors in the bankruptcy and have
engaged with the Trustee regarding their claims and the status of the
current proceedings. An appeal by Dr Mallya against his bankruptcy
(and an appeal by the bank consortium against orders made in the
course of the bankruptcy proceedings) are pending. In light of the
uncertainty posed by the ongoing bankruptcy proceedings, the trial of
Diageo\u2019s claim was initially relisted to take place in February 2024.
However, Dr Mallya\u2019s appeal against his bankruptcy and the banks\u2019
cross appeal will not now be heard until April 2024, and thus the trial of
Diageo\u2019s claim has been deferred from February 2024 until after those
appeals have been determined.
At this stage, it is not possible to assess the extent to which the
various ongoing proceedings related to the bankruptcy will affect the
remaining elements of the claims by Diageo and the relevant members
of its group.
Upon completion of an initial inquiry in April 2015 into past improper
transactions which identified references to certain additional parties and
matters, USL carried out an additional inquiry into these transactions
(Additional Inquiry) which was completed in July 2016. The Additional
Inquiry, prima facie, identified transactions indicating actual and
potential diversion of funds from USL and its Indian and overseas
subsidiaries to, in most cases, entities that appeared to be affiliated or
associated with Dr Mallya. All amounts identified in the Additional
Inquiry have been provided for or expensed in the financial statements
of USL or its subsidiaries in the respective prior periods. USL has filed
recovery suits against relevant parities identified pursuant to the
Additional Inquiry.
Further, at this stage, it is not possible for the management of USL to
estimate the financial impact on USL, if any, arising out of potential non-
compliance with applicable laws in relation to such fund diversions.
(d) Other matters in relation to USL
In respect of the Watson backstop guarantee arrangements, the
Securities and Exchange Board of India (SEBI) issued a notice to Diageo
on 16 June 2016 that if there is any net liability incurred by Diageo (after
any recovery under relevant security or other arrangements, which
matters remain pending) on account of the Watson backstop
guarantee, such liability, if any, would be considered to be part of the
price paid for the acquisition of USL shares under the SPA which formed
part of the Original USL Transaction and that, in that case, additional
equivalent payments would be required to be made to those
shareholders (representing 0.04% of the shares in USL) who tendered in
the open offer made as part of the Original USL Transaction. Diageo
believes that the Watson backstop guarantee arrangements were not
part of the price paid or agreed to be paid for any USL shares under the
Original USL Transaction and that therefore SEBI's decision was not
consistent with applicable law, and Diageo appealed against it before
the Securities Appellate Tribunal, Mumbai (SAT). On 1 November 2017,
SAT issued an order in respect of Diageo\u2019s appeal in which, amongst
other things, it observed that the relevant officer at SEBI had neither
considered Diageo\u2019s earlier reply nor provided Diageo with an
opportunity to be heard, and accordingly directed SEBI to pass a fresh
order after giving Diageo an opportunity to be heard. Following SAT\u2019s
order, Diageo made its further submissions in the matter, including at a
personal hearing before a Deputy General Manager of SEBI. On 26
June 2019, SEBI issued an order reiterating the directions contained in its
previous notice dated 16 June 2016. As with the previous SEBI notice,
Diageo believes that SEBI's latest order is not consistent with applicable
law. Diageo appealed against this order before SAT and, after a
hearing in March 2023, SAT allowed Diageo\u2019s appeal on 26 July 2023.
Accordingly, SEBI\u2019s order dated 26 June 2019 stands quashed. Under
applicable law, SEBI is entitled to file an appeal against SAT\u2019s order
before the Supreme Court of India. Therefore, pending any appeal
which may be filed by SEBI, there can be no certainty as to its outcome
or the timeframe within which any such appeal would be concluded.
(e) USL\u2019s dispute with IDBI Bank Limited
Prior to the acquisition by Diageo of a controlling interest in USL, USL
had prepaid a term loan of INR 6,280 million (\u00a360 million) taken
through IDBI Bank Limited (IDBI), an Indian bank, which was secured on
certain fixed assets and brands of USL, as well as by a pledge of certain
shares in USL held by the USL Benefit Trust (of which USL is the sole
beneficiary). The maturity date of the loan was 31 March 2015. IDBI
disputed the prepayment, following which USL filed a writ petition in
November 2013 before the High Court of Karnataka (the High Court)
challenging the bank\u2019s actions.
Following the original maturity date of the loan, USL received notices
from IDBI seeking to recall the loan, demanding a further sum of INR
459 million (\u00a34 million) on account of the outstanding principal,
accrued interest and other amounts, and also threatening to enforce the
security in the event that USL did not make these further payments.
Pursuant to an application filed by USL before the High Court in the writ
proceedings, the High Court directed that, subject to USL depositing
such further amount with the bank (which amount was duly deposited
by USL), the bank should hold the amount in a suspense account and
not deal with any of the secured assets including the shares until
disposal of the original writ petition filed by USL before the High Court.
On 27 June 2019, a single judge bench of the High Court issued an
order dismissing the writ petition filed by USL, amongst other things, on
the basis that the matter involved an issue of breach of contract by USL
and was therefore not maintainable in exercise of the court\u2019s writ
jurisdiction. USL filed an appeal against this order before a division
bench of the High Court, which on 30 July 2019 issued an interim order
directing the bank to not deal with any of the secured assets until the
next date of hearing. On 13 January 2020, the division bench of the
High Court admitted the writ appeal and extended the interim stay. This
appeal is currently pending. Based on the assessment of USL\u2019s
management supported by external legal opinions, USL continues to
believe that it has a strong case on the merits and therefore continues to
believe that the secured assets will be released to USL and the aforesaid
amount of INR 459 million (\u00a34 million) remains recoverable from IDBI.
(f) Tax
The international tax environment has seen increased scrutiny and rapid
change over recent years bringing with it greater uncertainty for
multinationals. Against this backdrop, Diageo has been monitoring
developments and continues to engage transparently with the tax
authorities in the countries where Diageo operates to ensure that the
group manages its arrangements on a sustainable basis.
The group operates in a large number of markets with complex tax
and legislative regimes that are open to subjective interpretation, and
for which tax audits can take several years to resolve. In the context of
these operations, it is possible that tax exposures which have not yet
materialised (including those which could arise as a result of tax
assessments) may result in losses to the group. In the circumstances
where tax authorities have raised assessments, challenging
interpretations which may lead to a possible material outflow, these
have been included as contingent liabilities. Where the potential tax
exposures are known to us and have not been assessed, the group
considers disclosure of such matters taking into account their size and
nature, relevant regulatory requirements and potential prejudice of the
future resolution or assessment thereof.
Diageo has a large number of ongoing tax cases in Brazil and India.
Since assessing an accurate value of contingent liabilities in these
markets requires a high degree of judgement, contingent liabilities are
disclosed on the basis of the current known possible exposure from tax
assessment values. While not all of these cases are individually
significant, the current aggregate known possible exposure from tax
assessment values is up to approximately \u00a3616 million for Brazil and up
to approximately \u00a390 million for India. The group believes that the
likelihood that the tax authorities will ultimately prevail is lower than
probable but higher than remote. Due to the fiscal environment in Brazil
and in India, the possibility of further tax assessments related to the
same matters cannot be ruled out and the judicial processes may take
extended periods to conclude. Based on its current assessment, Diageo
believes that no provision is required in respect of these issues.
Payments were made under protest in India in respect of the periods
1\u00a0April 2006 to 31\u00a0March 2019 in relation to tax assessments where the
risk is considered to be remote or possible. These payments have to be
made in order to be able to challenge the assessments and as such
have been recognised as a receivable in the group's balance sheet. The
total amount of payments under protest recognised as a receivable as
at 30\u00a0June 2023 is \u00a3116\u00a0million (corporate tax payments of \u00a3104\u00a0million
and indirect tax payments of \u00a312\u00a0million).
(g) Other disputes
On 31 May 2023, a complaint against Diageo North America, Inc (DNA)
was filed in the Supreme Court of New York by Combs Wine and Spirits
LLC (an entity associated with Mr Sean Combs) alleging, inter alia,
breach of contract in respect of a joint venture agreement related to
DeLe\u00f3n tequila. DNA has also served notice of material breaches and
termination to Mr Combs and his relevant associated entities of certain
agreements related to services provided by Mr Combs and these
entities in respect of C\u00eeroc, and notice of material breaches and an
intent to arbitrate in respect of the DeLe\u00f3n joint venture agreement.
Diageo categorically denies the allegations that have been made by Mr
Combs and his associated parties in the complaint and will defend itself
vigorously. Diageo will refrain from making any further disclosures given
the inherent uncertainties of these matters and the prejudicial nature
any such disclosures may have on the potential outcomes related
thereto or other associated matters.
(h) Other
The group has extensive international operations and routinely makes
judgements on a range of legal, customs and tax matters which are
incidental to the group's operations. Some of these judgements are or
may become the subject of challenges and involve proceedings, the
outcome of which cannot be foreseen. In particular, the group is
currently a defendant in various customs proceedings that challenge
the declared customs value of products imported by certain Diageo
companies. Diageo continues to defend its position vigorously in these
proceedings.
Save as disclosed above, neither Diageo, nor any member of the
Diageo group, is or has been engaged in, nor (so far as Diageo is
aware) is there pending or threatened by or against it, any legal or
arbitration proceedings which may have a significant effect on the
financial position of the Diageo group.
20. Commitments
(a) Capital commitments
Commitments for expenditure on intangibles and property, plant and
equipment not provided for in these consolidated financial statements
are estimated at \u00a3599 million (2022 \u2013 \u00a3399 million; 2021 \u2013 \u00a3263 million).
(b) Other commitments
The future minimum lease rentals payable in the year ended 30 June
2023 for short-term leases and leases of low-value assets are estimated
at \u00a336\u00a0million (2022 \u2013 \u00a313\u00a0million; 2021 \u2013 \u00a311 million). The total future
cash outflows for leases that had not yet commenced, and not
recognised as lease liabilities at 30 June 2023, are estimated at \u00a311
million (2022 \u2013 \u00a311 million; 2021 \u2013 \u00a3132 million).
21. Related party transactions
Transactions between the group and its related parties are made on
terms equivalent to those that prevail in arm\u2019s length transactions.
(a) Subsidiaries
Transactions between the company and its subsidiaries are eliminated
on consolidation and therefore are not disclosed. Details of the principal
group companies are given in note 22.
(b) Associates and joint ventures
Sales and purchases to and from associates and joint ventures are
principally in respect of premium drinks products but also include the
provision of management services.
Transactions and balances with associates and joint ventures are set
out in the table below:
2023
2022
2021
\u00a3 million
\u00a3 million
\u00a3 million
Income statement items
Sales
10
11
8
Purchases
13
31
23
Balance sheet items
Group payables
2
2
5
Group receivables
1
2
1
Loans payable
\u2014
\u2014
9
Loans receivable
197
175
108
Cash flow items
Loans and equity contributions, net
93
66
38
Other disclosures in respect of associates and joint ventures are
included in note 6.
(c) Key management personnel
The key management of the group comprises the Executive and Non-
Executive Directors, the members of the Executive Committee and the
Company Secretary. They are listed under \u2018Board of Directors and
Company Secretary\u2019 and \u2018Executive Committee\u2019.
2023
2022
2021
\u00a3 million
\u00a3 million
\u00a3 million
Salaries and short-term employee benefits
11
10
9
Annual incentive plan
6
13
13
Non-Executive Directors\u2019 fees
1
1
1
Share-based payments(1)
12
19
12
Post employment benefits
2
2
1
Termination benefits
\u2014
\u2014
2
32
45
38
(1)Time-apportioned fair value of unvested options and share awards.
Non-Executive Directors do not receive share-based payments or post
employment benefits.
There were no transactions with these related parties during the year
ended 30 June 2023 on terms other than those that prevail in arm\u2019s
length transactions.
(d) Pension plans
In October 2022, Diageo plc provided an interim credit facility to
Diageo Pension Trust Limited, consisting of \u00a3850\u00a0million for the Diageo
Pension Scheme, to support temporary liquidity challenges until 29
December 2022. In December 2022, the maturity date was extended to
29 June 2023. The facility amount was reduced on 22 May 2023 to
\u00a3350\u00a0million and on 14 June 2023 the maturity date was extended to 11
October 2023. The facility was subsequently cancelled on 25 July 2023.
The Diageo pension plans are recharged with the cost of
administration services provided by the group to the pension plans and
with professional fees paid by the group on behalf of the pension plans.
The total amount recharged for the year was \u00a30.1 million (2022 \u2013 \u00a30.1
million; 2021 \u2013 \u00a30.1 million).
(e) Directors\u2019 remuneration
2023
2022
2021
\u00a3 million
\u00a3 million
\u00a3 million
Salaries and short-term employee benefits
3
3
2
Annual incentive plan
2
4
4
Non-Executive Directors' fees
1
1
1
Share option exercises(1)
\u2014
4
\u2014
Shares vesting(1)
4
3
1
Post employment benefits
1
\u2014
\u2014
11
15
8
(1)Gains on options realised in the year and the benefit from share awards, calculated by
using the share price applicable on the date of exercise of the share options and
release of the awards.
22. Principal group companies
The companies listed below include those which principally affect the profits and assets of the group. The operating companies listed below may
carry on the business described in the countries listed in conjunction with their subsidiaries and other group companies.
Country of
incorporation
Country of operation
Percentage of
equity owned(1)
Business description
Subsidiaries
Diageo Ireland Unlimited Company
Ireland
Worldwide
100%
Production, marketing and distribution of premium drinks
Diageo Great Britain Limited
England
Great Britain
100%
Marketing and distribution of premium drinks
Diageo Scotland Limited
Scotland
Worldwide
100%
Production, marketing and distribution of premium drinks
Diageo Brands B.V.
Netherlands
Worldwide
100%
Marketing and distribution of premium drinks
Diageo North America, Inc.
United States
Worldwide
100%
Production, importing, marketing and distribution of premium drinks
United Spirits Limited(2)
India
India
55.88%
Production, importing, marketing and distribution of premium drinks
Diageo Capital plc(3)
Scotland
United Kingdom
100%
Financing company for the group
Diageo Capital B.V.(3)
Netherlands
Netherlands
100%
Financing company for the group
Diageo Finance plc(3)
England
United Kingdom
100%
Financing company for the group
Diageo Investment Corporation
United States
United States
100%
Financing company for the US group
Mey \u0130\u00e7ki Sanayi ve Ticaret A.\u015e.
Turkey
Turkey
100%
Production, marketing and distribution of premium drinks
Associates
Mo\u00ebt Hennessy, SAS(4)
France
France
34%
Production, marketing and distribution of premium drinks
(1)All percentages, unless otherwise stated, are in respect of holdings of ordinary share capital and are equivalent to the percentages of voting rights held by the group.
(2)Percentage ownership excludes 2.38% owned by the USL Benefit Trust.
(3)Directly owned by Diageo plc.
(4)French limited liability company.
23. Post balance sheet events
Starting 1 July 2023, in line with reporting requirements the functional currency of Diageo plc has changed from sterling to US dollar which is applied
prospectively. This is because the group's share of net sales and expenses in the US and other countries whose currencies correlate closely with the
US dollar has been increasing over the years, and that trend is expected to continue in line with the group's strategic focus. Diageo has also decided
to change its presentation currency to US dollar with effect from 1 July 2023, applied retrospectively, as it believes that this change will provide better
alignment of the reporting of performance with its business exposures.
Diageo will propose adopting new Articles of Association (New Articles) at the AGM to be held on 28 September 2023 which reflects the change
in the functional currency of Diageo plc and presentation currency of the group from sterling to US dollar. The New Articles shall, among other
things, empower the Board to declare and/or pay dividends in any currency or currencies and enable the Board to make provisions for
shareholders to receive dividends in a different currency to the currency in which dividends were declared. Subject to the approval of the New
Articles by shareholders at the AGM and commencing with the interim dividend that is expected to be declared in January 2024, Diageo\u2019s future
dividends will be declared in US dollar. Holders of ordinary shares will continue to receive their dividends in sterling but will have the option to elect
to receive it in US dollar. Holders of ADRs will continue to receive dividends in US dollar.
On 31 July 2023, the Board approved plans for a further return of capital programme of $1.0\u00a0billion to shareholders.
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"dimensions": { "concept": "ifrs-full:CashAndCashEquivalentsIfDifferentFromStatementOfFinancialPosition", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2021-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-623": { "value": "1439000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CashAndCashEquivalents", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-624": { "value": "2285000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CashAndCashEquivalents", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-625": { "value": "2749000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CashAndCashEquivalents", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2021-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-626": { "value": "36000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:BankOverdraftsClassifiedAsCashEquivalents", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-627": { "value": "74000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:BankOverdraftsClassifiedAsCashEquivalents", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-628": { "value": "112000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:BankOverdraftsClassifiedAsCashEquivalents", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2021-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-629": { "value": "1403000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CashAndCashEquivalentsIfDifferentFromStatementOfFinancialPosition", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-630": { "value": "2211000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CashAndCashEquivalentsIfDifferentFromStatementOfFinancialPosition", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-631": { "value": "2637000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:CashAndCashEquivalentsIfDifferentFromStatementOfFinancialPosition", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2021-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-632": { "value": "Accounting information and policies
1. Accounting information and policies
(a) Basis of preparation
The consolidated financial statements are prepared in accordance with
international accounting standards in conformity with the requirements
of the Companies Act 2006 and International Financial Reporting
Standards (IFRSs) adopted by the UK (UK-adopted International
Accounting Standards) and IFRSs, as issued by the IASB, including
interpretations issued by the IFRS Interpretations Committee. IFRS as
adopted by the UK differs in certain respects from IFRS as issued by the
IASB. The differences have no impact on the group\u2019s consolidated
financial statements for the years presented. The consolidated financial
statements are prepared on a going concern basis under the historical
cost convention, unless stated otherwise in the relevant accounting
policy.
The preparation of financial statements in conformity with IFRS
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements,
and the reported amounts of revenues and expenses during the year.
Actual results could differ from those estimates.
(b) Going concern
Management prepared cash flow forecasts which were also sensitised
to reflect severe but plausible downside scenarios taking into
consideration the group's principal risks. In the base case scenario,
management included assumptions for mid-single digit net sales
growth, operating margin improvement and global TBA market share
growth. In light of the ongoing geopolitical volatility, the base case
outlook and severe but plausible downside scenarios incorporated
considerations for a prolonged global recession, supply chain
disruptions, higher inflation and further geopolitical deterioration. Even
under these scenarios, the group\u2019s liquidity is still expected to remain
strong, as it was protected by issuing \u20ac500\u00a0million of fixed rate euro
and $2\u00a0billion of fixed rate dollar-denominated bonds in the year ended
30 June 2023. Mitigating actions, should they be required, are all within
management\u2019s control and could include reductions in discretionary
spending such as acquisitions and capital expenditure, as well as a
temporary suspension of the share buyback programme and dividend
payments in the next 12 months, or drawdowns on committed facilities.
Having considered the outcome of these assessments, the Directors are
comfortable that the company is a going concern for at least 12 months
from the date of signing the group's consolidated financial statements.
(c) Consolidation
The consolidated financial statements include the results of the
company and its subsidiaries together with the group\u2019s attributable
share of the results of associates and joint ventures. A subsidiary is an
entity controlled by Diageo plc. The group controls an investee when it is
exposed, or has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through its power
over the investee. Where the group has the ability to exercise joint
control over an entity but has rights to specified assets and obligations
for liabilities of that entity, the entity is included on the basis of the
group\u2019s rights over those assets and liabilities.
(d) Foreign currencies
Items included in the financial statements of the group\u2019s subsidiaries,
associates and joint ventures are measured using the currency of the
primary economic environment in which each entity operates (its
functional currency). The consolidated financial statements are
presented in sterling, which is the functional currency of the parent
company, Diageo plc. The functional currency of Diageo plc is
determined by using management judgement that considers the parent
company as an extension of its subsidiaries.
The income statements and cash flows of non-sterling entities are
translated into sterling at weighted average rates of exchange, except
for subsidiaries in hyperinflationary economies that are translated with
the closing rate at the end of the year and for substantial transactions
that are translated at the rate on the date of the transaction. Exchange
differences arising on the retranslation to closing rates are taken to the
exchange reserve.
Assets and liabilities are translated at closing rates. Exchange
differences arising on the retranslation at closing rates of the opening
balance sheets of overseas entities are taken to the exchange reserve,
as are exchange differences arising on foreign currency borrowings and
financial instruments designated as net investment hedges, to the extent
that they are effective. Tax charges and credits arising on such items are
also taken to the exchange reserve. Gains and losses accumulated in
the exchange reserve are recycled to the income statement when the
foreign operation is sold. Other exchange differences are taken to the
income statement. Transactions in foreign currencies are recorded at
the rate of exchange at the date of the transaction.
The principal foreign exchange rates used in the translation of
financial statements for the three years ended 30 June 2023, expressed
in US dollars and euros per \u00a31, were as follows:
2023
2022
2021
US dollar
Income statement and cash flows(1)
1.20
1.33
1.35
Assets and liabilities(2)
1.26
1.21
1.39
Euro
Income statement and cash flows(1)
1.15
1.18
1.13
Assets and liabilities(2)
1.17
1.16
1.17
(1)Weighted average rates
(2)Closing rates
The group uses foreign exchange hedges to mitigate the effect of
exchange rate movements. For further information, see note 16.
(e) Critical accounting estimates and judgements
Details of critical estimates and judgements which the Directors consider
could have a significant impact on the financial statements are set out
in the related notes as follows:
\u2022Exceptional items \u2013 management judgement whether exceptional or
not \u2013 page 179
\u2022Taxation \u2013 management judgement whether a provision is required
and management estimate of amount of corporate tax payable or
receivable, the recoverability of deferred tax assets and expectation
on manner of recovery of deferred taxes \u2013 pages 183 and 216
\u2022Brands, goodwill, other intangibles and contingent considerations \u2013
management judgement whether the assets and liabilities are to be
recognised and synergies resulting from an acquisition.
Management judgement and estimate are required in determining
future cash flows and appropriate applicable assumptions to support
the intangible asset and contingent consideration value \u2013 pages 184
and 206
\u2022Post employment benefits \u2013 management judgement whether a
surplus can be recovered and management estimate in determining
the assumptions in calculating the liabilities of the funds \u2013 page 195
\u2022Contingent liabilities and legal proceedings \u2013 management
judgement in assessing the likelihood of whether a liability will arise
and an estimate to quantify the possible range of any settlement;
and significant unprovided tax matters where maximum exposure is
provided for each \u2013 page 215
(f) Hyperinflationary accounting
The group applied hyperinflationary accounting for its operations in
Turkey, Venezuela and Lebanon. Turkey has been a hyperinflationary
economy where cumulative inflation for the three years ended 30 June
2022 exceeded 100%. Consequently, since March 2022, the group
applies hyperinflationary accounting for its Turkish operations. The
group\u2019s consolidated financial statements for the years ended 30 June
2023 and 30 June 2022 include the results and financial position of its
Turkish operations restated to the measuring unit current at the end of
each period, with hyperinflationary gains and losses in respect of
monetary items being reported in finance income and charges.
Comparative amounts presented in the consolidated financial
statements were not restated. Hyperinflationary accounting needs to be
applied as if Turkey has always been a hyperinflationary economy,
hence, as per Diageo\u2019s accounting policy choice, the differences
between equity at 30 June 2021 as reported and the equity after the
restatement of the non-monetary items to the measuring unit current at
30 June 2021 were recognised in retained earnings. Such restatement
includes impairment of TRL 2,133 million (\u00a3177 million) recognised on the
goodwill in the Turkey cash-generating unit and TRL 1,627 million (\u00a3135
million) in respect of the Yen\u00ec Raki brand, as a result of the increased
carrying values for those due to hyperinflation adjustments. When
applying IAS 29 on an ongoing basis, comparatives in stable currency
are not restated and the effect of inflating opening net assets to the
measuring unit current at the end of the reporting period is presented in
other comprehensive income. The inflation rate used by the group is the
official rate published by the Turkish Statistical Institute. The movement
in the publicly available official price index for the year ended 30 June
2023 was 38% (2022 \u2013 79%).
Venezuela is a hyperinflationary economy where the government
maintains a regime of strict currency controls with multiple foreign
currency rate systems. The exchange rate used to translate the results of
the group\u2019s Venezuelan operations was VES/\u00a3 3,807 for the year ended
30 June 2023 (2022 \u2013 VES/\u00a3 759). This rate reflects management\u2019s
estimate of the exchange rate considering inflation and the most
appropriate official exchange rate. Movement in the price index for the
year ended 30 June 2023 was 382% (2022 \u2013 268%). The inflation rate
used by the group is provided by an independent valuer because no
reliable, officially published rate is available for Venezuela.
The following table presents the contribution of the group\u2019s
Venezuelan operations to consolidated net sales, operating profit,
operating cash flow and assets for the years ended 30 June 2023 and
30 June 2022 and with the amounts that would have resulted if the
official reference exchange rate had been applied:
Year ended 30 June 2023
Year ended 30 June 2022
At estimated
exchange rate
At official
reference
exchange rate
At estimated
exchange rate
At official
reference
exchange rate
3,807 VES/\u00a3
36 VES/\u00a3
759 VES/\u00a3
7 VES/\u00a3
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
Net sales
\u2014
9
\u2014
15
Operating loss
\u2014
\u2014
(1)
(1)
Other finance
(charges)/income -
hyperinflation
adjustment
(2)
(212)
1
157
Net cash outflow from
operating activities
\u2014
(3)
\u2014
(5)
Net assets
6
657
41
4,606
Fair Value Measurements
\u2022Amendments to IAS 12 International Tax Reform \u2013 Pillar Two Model
Rules
The following standard and amendments issued by the IASB have been
endorsed by the UK and have not been adopted by the group:
\u2022IFRS 17 \u2013 Insurance contracts (effective from the year ending 30 June
2024) is ultimately intended to replace IFRS 4. Based on a
preliminary assessment, the group believes that the adoption of IFRS
17 will not have a significant impact on its consolidated results or
financial position.
\u2022Amendments to IAS 12 - Income taxes (effective from the year ending
30 June 2024) requires an entity to recognise deferred tax on initial
recognition of particular transactions to the extent that the
transaction gives rise to equal amounts of deferred tax assets and
liabilities. The proposed amendments would apply to transactions
such as leases and decommissioning obligations for which an entity
recognises both an asset and a liability. The group believes that the
adoption of these amendments will not have a significant impact on
its consolidated results and financial position.
There are a number of other amendments and clarifications to IFRSs,
effective in future years, which are not expected to significantly impact
the group\u2019s consolidated results or financial position.
(h) Climate change considerations
The impact of climate change assessment and the net zero carbon
emission target for Diageo's direct operations (Scope 1 & 2) for 2030
have been considered as part of the assessment of estimates and
judgements in preparing the group's consolidated financial statements.
The climate change scenario analyses performed in 2023 \u2013
conducted in line with TCFD recommendations (\u2018Transition
Scenario\u2019 (RCP 2.6), a \u2018Moderate Warming\u2019 Scenario (RCP 4.5) and a
\u2018Severe Warming Scenario\u2019 (RCP 8.5)) \u2013 identified no material financial
impact to these financial statements.
The following considerations were made in respect of the financial
statements:
\u2022The impact of climate change on factors (like residual values, useful
lives and depreciation methods) that determine the carrying value of
non-current assets.
\u2022The impact of climate change on forecasts of cash flows used
(including forecast depreciation in line with capital expenditure plans
for Diageo's net zero carbon emission commitment) in impairment
assessments for the value-in-use of non-current assets including
goodwill (see note 9).
\u2022The impact of climate change on post-employment assets.
Accounting policies
Sales comprise revenue from contracts with customers from the sale of goods, royalties and rents receivable. Revenue from the sale of goods
includes excise and other duties which the group pays as principal but excludes duties and taxes collected on behalf of third parties, such as
value added tax. Sales are recognised as or when performance obligations are satisfied by transferring control of a good or service to the
customer, which is determined by considering, among other factors, the delivery terms agreed with customers. For the sale of goods, the
transfer of control occurs when the significant risks and rewards of ownership are passed to the customer. Based on the shipping terms
agreed with customers, the transfer of control of goods occurs at the time of dispatch for the majority of sales. Where the transfer of control is
subsequent to the dispatch of goods, the time between dispatch and receipt by the customer is generally less than five days. The group
includes in sales the net consideration to which it expects to be entitled. Sales are recognised to the extent that it is highly probable that a
significant reversal will not occur. Therefore, sales are stated net of expected price discounts, allowances for customer loyalty and certain
promotional activities and similar items. Generally, payment of the transaction price is due within credit terms that are consistent with industry
practices, with no element of financing.
Net sales are sales less excise duties. Diageo incurs excise duties throughout the world. In the majority of countries, excise duties are
effectively a production tax which becomes payable when the product is removed from bonded premises and is not directly related to the
value of sales. It is generally not included as a separate item on external invoices; increases in excise duty are not always passed on to the
customer and where a customer fails to pay for products received the group cannot reclaim the excise duty. The group therefore recognises
excise duty, unless it regards itself as an agent of the regulatory authorities, as a cost to the group.
Advertising costs, point of sale materials and sponsorship payments are charged to marketing in operating profit when the company has a
right of access to the goods or services acquired.
Accounting policies
Critical accounting judgements
Exceptional items are those that in management\u2019s judgement
need to be disclosed separately. Such items are included within
the income statement caption to which they relate. Management
believes that separate disclosure of exceptional items and the
classification between operating and non-operating further helps
investors to understand the performance of the group.
Changes in estimates and reversals in relation to items
previously recognised as exceptional are presented consistently
as exceptional in the current year.
Operating items
Exceptional operating items are those that are considered to be
material and unusual or non-recurring in nature and are part of
the operating activities of the group, such as one-off global
restructuring programmes which can be multi-year, impairment
of intangible assets and fixed assets, indirect tax settlements,
property disposals and changes in post employment plans.
Non-operating items
Gains and losses on the sale or directly attributable to a
prospective sale of businesses, brands or distribution rights, step
up gains and losses that arise when an investment becomes an
associate or an associate becomes a subsidiary and other
material, unusual non-recurring items, that are not in respect of
the production, marketing and distribution of premium drinks,
are disclosed as exceptional non-operating items below
operating profit in the income statement.
Taxation items
Exceptional current and deferred tax items comprise material
and unusual or non-recurring items that impact taxation.
Examples include direct tax provisions and settlements in respect
of prior years and the remeasurement of deferred tax assets and
liabilities following tax rate changes.\u00a0
Accounting policies
Net interest includes interest income and charges in respect of
financial instruments and the results of hedging transactions
used to manage interest rate risk.\u00a0
Finance charges directly attributable to the acquisition,
construction or production of a qualifying asset, being an asset
that necessarily takes a substantial period of time to get ready
for its intended use or sale, are added to the cost of that asset.
Borrowing costs which are not capitalised are recognised in the
income statement using the effective interest method. All other
finance charges are recognised primarily in the income
statement in the year in which they are incurred.\u00a0
Net other finance charges include items in respect of post
employment plans, the discount unwind of long-term obligations
and hyperinflation charges. The results of operations in
hyperinflationary economies are adjusted to reflect the changes
in the purchasing power of the local currency of the entity before
being translated to sterling.\u00a0
The impact of derivatives, excluding cash flow hedges that
are in respect of commodity price risk management or those that
are used to hedge the currency risk of highly probable future
currency cash flows, is included in interest income or interest
charge.\u00a0
Accounting policies
An associate is an undertaking in which the group has a long-term
equity interest and over which it has the power to exercise significant
influence. A joint venture is a joint arrangement whereby the parties
that have joint control of the arrangement have rights to the net
assets of the arrangement. The group\u2019s interest in the net assets of
associates and joint ventures is reported in investments in the
consolidated balance sheet and its interest in their results (net of tax)
is included in the consolidated income statement below the group\u2019s
operating profit. Associates and joint ventures are initially recorded at
cost including transaction costs. Investments in associates and joint
ventures are reviewed for impairment whenever events or
circumstances indicate that the carrying amount may not be
recoverable. The impairment review compares the net carrying value
with the recoverable amount, where the recoverable amount is the
higher of the value in use calculated as the present value of the
group\u2019s share of the associate\u2019s future cash flows and its fair value
less costs of disposal.
Accounting policies
Current tax is based on taxable profit for the year. Taxable profit is different from accounting profit due to temporary differences between
accounting and tax treatments, and due to items that are never taxable or tax deductible. Tax treatments are not recognised unless it is
probable that a tax authority will accept the treatment. Once considered to be probable, tax treatments are reviewed each year to assess
whether a provision should be taken against full recognition of the treatment on the basis of potential settlement through negotiation and/or
litigation with the relevant tax authorities. Tax provisions are included in current liabilities. Penalties and interest on tax liabilities are included
in operating profit and finance charges, respectively.
Full provision for deferred tax is made for temporary differences between the carrying value of assets and liabilities for financial reporting
purposes and their value for tax purposes, except for deferred tax provision arising on goodwill from business combinations. The amount of
deferred tax reflects the expected recoverable amount and is based on the expected manner of recovery or settlement of the carrying
amount of assets and liabilities, using the basis of taxation enacted or substantively enacted by the balance sheet date. Deferred tax assets
are not recognised where it is more likely than not that the assets will not be realised in the future. No deferred tax liability is provided in
respect of any future remittance of earnings of foreign subsidiaries where the group is able to control the remittance of earnings and it is
probable that such earnings will not be remitted in the foreseeable future, or where no liability would arise on the remittance.
Critical accounting estimates and judgements
The group is required to estimate the corporate tax in each of the jurisdictions in which it operates. Management is required to estimate the
amount that should be recognised as a tax liability or tax asset in many countries which are subject to tax audits which by their nature are
often complex and can take several years to resolve; current tax balances are based on such estimations. Tax provisions are based on
management\u2019s judgement and interpretation of country specific tax law and the likelihood of settlement. However, the actual tax liabilities
could differ from the provision and in such event the group would be required to make an adjustment in a subsequent period which could
have a material impact on the group\u2019s profit for the year.
The evaluation of deferred tax asset recoverability requires estimates to be made regarding the availability of future taxable income. For
brands with an indefinite life, management\u2019s intention is to recover the book value through a potential sale in the future, and therefore the
deferred tax on the brand value is generally recognised using the appropriate country capital gains tax rate. To the extent brands with an
indefinite life have been impaired, management considers this to be an indication of recovery through use and in such a case deferred tax
on the brand value is recognised using the appropriate country corporate income tax rate.
Accounting policies
The consolidated financial statements include the results of the company and its subsidiaries together with the group\u2019s attributable share of
the results of associates and joint ventures. The results of subsidiaries acquired or sold are included in the income statement from, or up to,
the date that control passes.
Business combinations are accounted for using the acquisition method. Identifiable assets, liabilities and contingent liabilities acquired are
measured at fair value at acquisition date. The consideration payable is measured at fair value and includes the fair value of any contingent
consideration. Among other factors, the group considers the nature of, and compensation for the selling shareholders' continuing
employment to determine if any contingent payments are for post-combination employee services, which are excluded from consideration.
On the acquisition of a business, or of an interest in an associate or joint venture, fair values, reflecting conditions at the date of
acquisition, are attributed to the net assets, including identifiable intangible assets and contingent liabilities acquired. Directly attributable
acquisition costs in respect of subsidiary companies acquired are recognised in other external charges as incurred.
The non-controlling interests on the date of acquisition can be measured either at the fair value or at the non-controlling shareholder\u2019s
proportion of the net fair value of the identifiable assets assumed. This choice is made separately for each acquisition.
Where the group has issued a put option over shares held by a non-controlling interest, the group derecognises the non-controlling
interests and instead recognises a contingent deferred consideration liability for the estimated amount likely to be paid to the non-controlling
interest on the exercise of those options. Movements in the estimated liability in respect of put options are recognised in retained earnings.
Transactions with non-controlling interests are recorded directly in retained earnings.
For all entities in which the company directly or indirectly owns equity,\u00a0a judgement is made to determine whether it controls and therefore
should fully consolidate the investee. An assessment is carried out to determine\u00a0whether the group has the exposure or rights to the variable
returns of the investee and has the ability to affect those returns through its power over the investee. To establish control, an analysis is carried
out of\u00a0the substantive and protective rights that the group and the other investors hold. This assessment\u00a0is dependent on the activities and
purpose of the investee and the rights of the other shareholders, such as which party controls the board, executive committee and material
policies of the investee. Determining whether the rights that the group holds are substantive, requires management\u00a0judgement.
Where less than 50% of the equity of an investee is held, and the group holds significantly more voting rights than any other vote holder
or organised group of vote holders, this may be an indicator of de facto control. An assessment is needed to determine all the factors
relevant to the relationship with the investee to ascertain whether control has been established and whether the investee should be
consolidated as a subsidiary. Where voting power and returns from an investment are split equally between two entities then the
arrangement is accounted for as a joint venture.
On an acquisition, fair values are attributed to the assets and liabilities acquired. This may involve material judgement to determine these
values.
Accounting policies
Acquired intangible assets are held on the consolidated balance sheet at cost less accumulated amortisation and impairment losses.
Acquired brands and other intangible assets are initially recognised at fair value if they are controlled through contractual or other legal
rights, or are separable from the rest of the business, and the fair value can be reliably measured. Where these assets are regarded as
having indefinite useful economic lives, they are not amortised.
Goodwill represents the excess of the aggregate of the consideration transferred, the value of any non-controlling interests and the fair
value of any previously held equity interest in the subsidiary acquired over the fair value of the identifiable net assets. Goodwill arising on
acquisitions prior to 1 July 1998 was eliminated against reserves, and this goodwill has not been reinstated. Goodwill arising subsequent to 1
July 1998 has been capitalised.
Amortisation and impairment of intangible assets is based on their useful economic lives and they are amortised on a straight-line basis
and reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. Goodwill and
intangible assets that are regarded as having indefinite useful economic lives are not amortised and are reviewed for impairment at least
annually or when there is an indication that the assets may be impaired. Impairment reviews compare the net carrying value with the
recoverable amount (where recoverable amount is the higher of fair value less costs of disposal and value in use) and in case the net
carrying value exceeds the recoverable amount an impairment charge is recognised. Amortisation and any impairment write downs are
charged to other operating expenses in the income statement.
Computer software is amortised on a straight-line basis to estimated residual value over its expected useful life. Residual values and
useful lives are reviewed each year. Subject to these reviews, the estimated useful lives are up to eight years.\u00a0
Critical accounting estimates and judgements
Assessment of the recoverable amount of an intangible asset and the useful economic life of an asset are based on management's estimates.
Impairment reviews are carried out to ensure that intangible assets, including brands, are not carried at above their recoverable amounts.
Value in use and fair value less costs of disposal are both considered for these reviews and any impairment charge is based on these. The
tests are dependent on management\u2019s estimates in respect of the forecasting of future cash flows, the discount rates applicable to the future
cash flows and what expected growth rates are reasonable. Judgement is required in determining the cash-generating units. Such estimates
and judgements are subject to change as a result of changing economic conditions and actual cash flows may differ from forecasts.
The below additional considerations have been applied by management regarding the potential financial impacts of increasing
inflationary pressures, recently observable worldwide:
\u2022changes in the interest rate environment are taken into consideration when determining the discount rates;
\u2022terminal growth rates do not exceed the long-term annual inflation rate of the country or region, thus excluding any increased inflation
growth experienced in the short-term;
\u2022additional sensitivity scenarios are applied for those markets or regions where the inflation and/or the exchange devaluation is
considered significant based on management\u2019s judgement.
Consideration of climate risk impact
The impact of climate risk on the future cash flows has also been considered for scenarios analysed in line with the climate change risk
assessment. The climate change scenario analyses performed in 2023 \u2013 conducted in line with TCFD recommendations (\u2018Transition
Scenario\u2019 (RCP 2.6), a \u2018Moderate Warming\u2019 Scenario (RCP 4.5) and a \u2018Severe Warming Scenario (RCP 8.5)) \u2013 identified no material financial
impact to the current year impairment assessments.
Accounting policies
Land and buildings are stated at cost less accumulated depreciation. Freehold land is not depreciated. Leaseholds are generally depreciated
over the unexpired period of the lease. Other property, plant and equipment are depreciated on a straight-line basis to estimated residual
values over their expected useful lives, and these values and lives are reviewed each year. Subject to these reviews, the estimated useful lives
fall within the following ranges: buildings \u2013 10 to 50 years; within plant and equipment casks and containers \u2013 15 to 50 years; other plant and
equipment \u2013 5 to 40 years; fixtures and fittings \u2013 5 to 10 years; and returnable bottles and crates \u2013 5 to 10 years.
Reviews are carried out if there is an indication that assets may be impaired, to ensure that property, plant and equipment are not carried
at above their recoverable amounts.
Government grants
Government grants are not recognised until there is reasonable assurance that the group will comply with the conditions pursuant to which
they have been granted and that the grants will be received. Government grants in respect of property, plant and equipment are deducted
from the asset that they relate to, reducing the depreciation expense charged to the income statement.
Accounting policies
Biological assets held by the group consist of agave (Agave Azul
Tequilana Weber) plants. The harvested plants are used during
the production of tequila.
Biological assets are measured at fair value less costs to sell
on initial recognition and at the end of each reporting period
based on the present value of future cash flows discounted at an
appropriate rate for Mexico.
Agricultural produce is measured at fair value less costs to
sell at the point of harvest which is used as the cost of inventory
when the harvested agave is transferred.
Accounting policies
Where the group is the lessee, all leases are recognised on the
balance sheet as right-of-use assets and depreciated on a
straight-line basis with the charge recognised in cost of sales or
in other operating items depending on the nature of the costs.
The liability, recognised as part of net borrowings, is measured at
a discounted value and any interest is charged to finance
charges.
The group recognises services associated with a lease as
other operating expenses. Payments associated with leases
where the value of the asset when it is new is lower than $5,000
(leases of low value assets) and leases with a lease term of 12
months or less (short term leases) are recognised as other
operating expenses. A judgement in calculating the lease
liability at initial recognition includes determining the lease term
where extension or termination options exist. In such instances,
any economic incentive to retain or end a lease are considered
and extension periods are only included when it is considered
reasonably certain that an option to extend a lease will be
exercised.
Accounting policies
Other investments are equity investments that are not classified
as investments in associates or joint arrangements nor
investments in subsidiaries. They are included in non-current
assets. Subsequent to initial measurement, other investments are
stated at fair value. Gains and losses arising from the changes in
fair value are recognised in the income statement or in other
comprehensive income on a case by case basis. Accumulated
gains and losses included in other comprehensive income are
not recycled to the income statement. Dividends from other
investments are recognised in the consolidated income
statement.
Loans receivable are non-derivative financial assets that are not
classified as equity investments. They are subsequently
measured either at amortised cost using the effective interest
method less allowance for impairment or at fair value with gains
and losses arising from changes in fair value recognised in the
income statement or in other comprehensive income that are
recycled to the income statement on the de-recognition of the
asset. Allowances for expected credit losses are made based on
the risk of non-payment taking into account ageing, previous
experience, economic conditions and forward-looking data.
Such allowances are measured as either 12-months expected
credit losses or lifetime expected credit losses depending on
changes in the credit quality of the counterparty.
Accounting policies
The group\u2019s principal post employment funds are defined benefit
plans. In addition, the group has defined contribution plans,
unfunded post employment medical benefit liabilities and other
unfunded defined benefit post employment liabilities. For post
employment plans other than defined contribution plans, the
amount charged to operating profit is the cost of accruing
pension benefits promised to employees over the year, plus any
changes arising on benefits granted to members by the group
during the year. Net finance charges comprise the net deficit/
surplus on the plans at the beginning of the year, adjusted for
cash flows in the year, multiplied by the discount rate for plan
liabilities. The differences between the fair value of the plans\u2019
assets and the present value of the plans\u2019 liabilities are disclosed
as an asset or liability on the consolidated balance sheet. Any
differences due to changes in assumptions or experience are
recognised in other comprehensive income. The amount of any
pension fund asset recognised on the balance sheet is limited to
any future refunds from the plan or the present value of
reductions in future contributions to the plan.
Contributions payable by the group in respect of defined
contribution plans are charged to operating profit as incurred.
Critical accounting estimates and judgements
Application of IAS 19 requires the exercise of estimate and
judgement in relation to various assumptions.
Diageo determines the assumptions on a country by country
basis in conjunction with its actuaries. Estimates are required in
respect of uncertain future events, including the life expectancy
of members of the funds, salary and pension increases, future
inflation rates, discount rates and employee and pensioner
demographics. The application of different assumptions could
have a significant effect on the amounts reflected in the income
statement, other comprehensive income and the balance sheet.
There may be interdependencies between the assumptions.
Where there is an accounting surplus on a defined benefit
plan, management judgement is necessary to determine
whether the group can obtain economic benefits through a
refund of the surplus or by reducing future contributions to the
plan.
Accounting policies
Inventories are stated at the lower of cost and net realisable
value. Cost includes raw materials, direct labour and expenses,
an appropriate proportion of production and other overheads,
but not borrowing costs. Cost is calculated at the weighted
average cost incurred in acquiring inventories. Maturing
inventories and raw materials which are retained for more than
one year are classified as current assets, as they are expected to
be realised in the normal operating cycle.
Trade and other receivables are initially recognised at fair value
less transaction costs and subsequently carried at amortised cost
less any allowance for discounts and doubtful debts. Trade
receivables arise from contracts with customers, and are
recognised when performance obligations are satisfied, and the
consideration due is unconditional as only the passage of time is
required before the payment is received. Allowance losses are
calculated by reviewing lifetime expected credit losses using
historic and forward-looking data on credit risk.
Trade and other payables are initially recognised at fair value
including transaction costs and subsequently carried at
amortised costs. Contingent considerations recognised in
business combinations are subsequently measured at fair value
through income statement. The group evaluates supplier
arrangements against a number of indicators to assess if the
liability has the characteristics of a trade payable or should be
classified as borrowings. This assessment considers the
commercial purpose of the facility, whether payment terms are
similar to customary payment terms, whether the group is legally
discharged from its obligation towards suppliers before the end
of the original payment term, and the group\u2019s involvement in
agreeing terms between banks and suppliers.
Provisions are liabilities of uncertain timing or amount. A
provision is recognised if, as a result of a past event, the group
has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of
economic benefits will be required to settle the obligation.
Provisions are calculated on a discounted basis. The carrying
amounts of provisions are reviewed at each balance sheet date
and adjusted to reflect the current best estimate.
Accounting policies
Financial assets and liabilities are initially recorded at fair value including, where permitted by IFRS 9, any directly attributable transaction
costs. For those financial assets that are not subsequently held at fair value, the group assesses whether there is evidence of impairment at
each balance sheet date.
The group classifies its financial assets and liabilities into the following categories: financial assets and liabilities at amortised cost, financial
assets and liabilities at fair value through income statement and financial assets at fair value through other comprehensive income.
The accounting policies for other investments and loans are described in note 13, for trade and other receivables and payables in note 15
and for cash and cash equivalents in note 17.
Financial assets and liabilities at fair value through income statement include derivative assets and liabilities. Where financial assets or
liabilities are eligible to be carried at either amortised cost or fair value through other comprehensive income, the group does not apply the
fair value option.
Derivative financial instruments are carried at fair value using a discounted cash flow model based on market data applied consistently
for similar types of instruments. Gains and losses on derivatives that do not qualify for hedge accounting treatment are taken to the income
statement as they arise.
Other financial liabilities are carried at amortised cost unless they are part of a fair value hedge relationship. The difference between the
initial carrying amount of the financial liabilities and their redemption value is recognised in the income statement over the contractual terms
using the effective interest rate method. Financial liabilities in respect of the Zacapa acquisition are recognised at fair value.
Hedge accounting
The group designates and documents certain derivatives as hedging instruments against changes in fair value of recognised assets and
liabilities (fair value hedges), commodity price risk of highly probable forecast transactions, as well as the cash flow risk from a change in
exchange or interest rates (cash flow hedges) and hedges of net investments in foreign operations (net investment hedges). The designated
portion of the hedging instruments is included in other financial assets and liabilities on the consolidated balance sheet. The effectiveness of
such hedges is assessed at inception and at least on a quarterly basis, using prospective testing. Methods used for testing effectiveness
include dollar offset, critical terms, regression analysis and hypothetical models.
Fair value hedges are used to manage the currency and/or interest rate risks to which the fair value of certain assets and liabilities are
exposed. Changes in the fair value of the derivatives are recognised in the income statement, along with any changes in the relevant fair
value of the underlying hedged asset or liability. If such a hedge relationship no longer meets hedge accounting criteria, fair value
movements on the derivative continue to be taken to the income statement while any fair value adjustments made to the underlying hedged
item to that date are amortised through the income statement over its remaining life using the effective interest rate method.
Cash flow hedges are used to hedge the foreign currency risk of highly probable future foreign currency cash flows, the commodity price risk
of highly probable future transactions, as well as the cash flow risk from changes in exchange or interest rates. The effective portion of the
gain or loss on the hedges is recognised in other comprehensive income, while any ineffective part is recognised in the income statement.
Amounts recorded in other comprehensive income are recycled to the income statement in the same period in which the underlying foreign
currency, commodity or interest exposure affects the income statement.
Net investment hedges take the form of either foreign currency borrowings or derivatives. Foreign exchange differences arising on translation
of net investments are recorded in other comprehensive income and included in the exchange reserve. Liabilities used as hedging
instruments are revalued at closing exchange rates and the resulting gains or losses are also recognised in other comprehensive income to
the extent that they are effective, with any ineffectiveness taken to the income statement. Foreign currency contracts hedging net investments
are carried at fair value. Effective fair value movements are recognised in other comprehensive income, with any ineffectiveness taken to the
income statement.
Accounting policies
Borrowings are initially recognised at fair value net of transaction
costs and are subsequently reported at amortised cost. Certain
bonds are designated in fair value hedge relationship. In these
cases, the amortised cost is adjusted for the fair value of the risk
being hedged, with changes in value recognised in the income
statement. The fair value adjustment is calculated using a
discounted cash flow technique based on unadjusted market
data.\u00a0
Bank overdrafts form an integral part of the group\u2019s cash
management and are included as a component of net cash and
cash equivalents in the consolidated statement of cash flows.
Cash and cash equivalents comprise cash in hand and deposits
which are readily convertible to known amounts of cash and
which are subject to insignificant risk of changes in value and
have an original maturity of three months or less, including
money market deposits, commercial paper and investments.
Net borrowings are defined as gross borrowings (short-term
borrowings and long-term borrowings plus lease liabilities plus
interest rate hedging instruments, cross currency interest rate
swaps and foreign currency forwards and swaps used to
manage borrowings) less cash and cash equivalents.
Accounting policies
Own shares represent shares and share options of Diageo plc
that are held in treasury or by employee share trusts for the
purpose of fulfilling obligations in respect of various employee
share plans or were acquired as part of a share buyback
programme. Own shares are treated as a deduction from equity
until the shares are cancelled, reissued or disposed of and when
vest are transferred from own shares to retained earnings at their
weighted average cost.
Share-based payments include share awards and options
granted to directors and employees. The fair value of equity
settled share options and share grants is initially measured at
grant date based on Monte Carlo and Black Scholes models
and is charged to the income statement over the vesting period.
For equity settled shares, the credit is included in retained
earnings. Cancellations of share options are treated as an
acceleration of the vesting period and any outstanding charge is
recognised in operating profit immediately. Any surplus or deficit
arising on the sale of the Diageo plc shares held by the group is
included as a movement in equity.
Dividends are recognised in the financial statements in the year
in which they are approved.
Accounting policies
Provision is made for the anticipated settlement costs of legal or
other disputes against the group where it is considered to be
probable that a liability exists and a reliable estimate can be
made of the likely outcome. Where it is possible that a settlement
may be reached or it is not possible to make a reliable estimate
of the estimated financial effect, appropriate disclosure is made
but no provision created.
Critical accounting judgements and estimates
Judgement is necessary in assessing the likelihood that a claim
will succeed, or a liability will arise, and an estimate to quantify
the possible range of any settlement. Due to the inherent
uncertainty in this evaluation process, actual losses may be
different from the liability originally estimated. The group may be
involved in legal proceedings in respect of which it is not
possible to make a reliable estimate of any expected settlement.
In such cases, appropriate disclosure is provided but no
provision is made and no contingent liability is quantified.
", "dimensions": { "concept": "ifrs-full:DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-633": { "value": "
(a) Basis of preparation
The consolidated financial statements are prepared in accordance with
international accounting standards in conformity with the requirements
of the Companies Act 2006 and International Financial Reporting
Standards (IFRSs) adopted by the UK (UK-adopted International
Accounting Standards) and IFRSs, as issued by the IASB, including
interpretations issued by the IFRS Interpretations Committee. IFRS as
adopted by the UK differs in certain respects from IFRS as issued by the
IASB. The differences have no impact on the group\u2019s consolidated
financial statements for the years presented. The consolidated financial
statements are prepared on a going concern basis under the historical
cost convention, unless stated otherwise in the relevant accounting
policy.
The preparation of financial statements in conformity with IFRS
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements,
and the reported amounts of revenues and expenses during the year.
Actual results could differ from those estimates.", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-634": { "value": "
The consolidated financial statements are prepared in accordance with
international accounting standards in conformity with the requirements
of the Companies Act 2006 and International Financial Reporting
Standards (IFRSs) adopted by the UK (UK-adopted International
Accounting Standards) and IFRSs, as issued by the IASB, including
interpretations issued by the IFRS Interpretations Committee. IFRS as
adopted by the UK differs in certain respects from IFRS as issued by the
IASB. The differences have no impact on the group\u2019s consolidated
financial statements for the years presented. The consolidated financial
statements are prepared on a going concern basis under the historical
cost convention, unless stated otherwise in the relevant accounting
policy.", "dimensions": { "concept": "ifrs-full:DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-635": { "value": "
The preparation of financial statements in conformity with IFRS
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements,
and the reported amounts of revenues and expenses during the year.
Actual results could differ from those estimates.", "dimensions": { "concept": "ifrs-full:StatementOfIFRSCompliance", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-636": { "value": "
(b) Going concern
Management prepared cash flow forecasts which were also sensitised
to reflect severe but plausible downside scenarios taking into
consideration the group's principal risks. In the base case scenario,
management included assumptions for mid-single digit net sales
growth, operating margin improvement and global TBA market share
growth. In light of the ongoing geopolitical volatility, the base case
outlook and severe but plausible downside scenarios incorporated
considerations for a prolonged global recession, supply chain
disruptions, higher inflation and further geopolitical deterioration. Even
under these scenarios, the group\u2019s liquidity is still expected to remain
strong, as it was protected by issuing \u20ac500\u00a0million of fixed rate euro
and $2\u00a0billion of fixed rate dollar-denominated bonds in the year ended
30 June 2023. Mitigating actions, should they be required, are all within
management\u2019s control and could include reductions in discretionary
spending such as acquisitions and capital expenditure, as well as a
temporary suspension of the share buyback programme and dividend
payments in the next 12 months, or drawdowns on committed facilities.
Having considered the outcome of these assessments, the Directors are
comfortable that the company is a going concern for at least 12 months
from the date of signing the group's consolidated financial statements.
", "dimensions": { "concept": "ifrs-full:DisclosureOfGoingConcernExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-637": { "value": "
(c) Consolidation
The consolidated financial statements include the results of the
company and its subsidiaries together with the group\u2019s attributable
share of the results of associates and joint ventures. A subsidiary is an
entity controlled by Diageo plc. The group controls an investee when it is
exposed, or has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through its power
over the investee. Where the group has the ability to exercise joint
control over an entity but has rights to specified assets and obligations
for liabilities of that entity, the entity is included on the basis of the
group\u2019s rights over those assets and liabilities.", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-638": { "value": "
(d) Foreign currencies
Items included in the financial statements of the group\u2019s subsidiaries,
associates and joint ventures are measured using the currency of the
primary economic environment in which each entity operates (its
functional currency). The consolidated financial statements are
presented in sterling, which is the functional currency of the parent
company, Diageo plc. The functional currency of Diageo plc is
determined by using management judgement that considers the parent
company as an extension of its subsidiaries.
The income statements and cash flows of non-sterling entities are
translated into sterling at weighted average rates of exchange, except
for subsidiaries in hyperinflationary economies that are translated with
the closing rate at the end of the year and for substantial transactions
that are translated at the rate on the date of the transaction. Exchange
differences arising on the retranslation to closing rates are taken to the
exchange reserve.
Assets and liabilities are translated at closing rates. Exchange
differences arising on the retranslation at closing rates of the opening
balance sheets of overseas entities are taken to the exchange reserve,
as are exchange differences arising on foreign currency borrowings and
financial instruments designated as net investment hedges, to the extent
that they are effective. Tax charges and credits arising on such items are
also taken to the exchange reserve. Gains and losses accumulated in
the exchange reserve are recycled to the income statement when the
foreign operation is sold. Other exchange differences are taken to the
income statement. Transactions in foreign currencies are recorded at
the rate of exchange at the date of the transaction.
The principal foreign exchange rates used in the translation of
financial statements for the three years ended 30 June 2023, expressed
in US dollars and euros per \u00a31, were as follows:
2023
2022
2021
US dollar
Income statement and cash flows(1)
1.20
1.33
1.35
Assets and liabilities(2)
1.26
1.21
1.39
Euro
Income statement and cash flows(1)
1.15
1.18
1.13
Assets and liabilities(2)
1.17
1.16
1.17
(1)Weighted average rates
(2)Closing rates
The group uses foreign exchange hedges to mitigate the effect of
exchange rate movements. For further information, see note 16.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-639": { "value": "
Items included in the financial statements of the group\u2019s subsidiaries,
associates and joint ventures are measured using the currency of the
primary economic environment in which each entity operates (its
functional currency). The consolidated financial statements are
presented in sterling, which is the functional currency of the parent
company, Diageo plc. The functional currency of Diageo plc is
determined by using management judgement that considers the parent
company as an extension of its subsidiaries.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFunctionalCurrencyExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-640": { "value": "
(e) Critical accounting estimates and judgements
Details of critical estimates and judgements which the Directors consider
could have a significant impact on the financial statements are set out
in the related notes as follows:
\u2022Exceptional items \u2013 management judgement whether exceptional or
not \u2013 page 179
\u2022Taxation \u2013 management judgement whether a provision is required
and management estimate of amount of corporate tax payable or
receivable, the recoverability of deferred tax assets and expectation
on manner of recovery of deferred taxes \u2013 pages 183 and 216
\u2022Brands, goodwill, other intangibles and contingent considerations \u2013
management judgement whether the assets and liabilities are to be
recognised and synergies resulting from an acquisition.
Management judgement and estimate are required in determining
future cash flows and appropriate applicable assumptions to support
the intangible asset and contingent consideration value \u2013 pages 184
and 206
\u2022Post employment benefits \u2013 management judgement whether a
surplus can be recovered and management estimate in determining
the assumptions in calculating the liabilities of the funds \u2013 page 195
\u2022Contingent liabilities and legal proceedings \u2013 management
judgement in assessing the likelihood of whether a liability will arise
and an estimate to quantify the possible range of any settlement;
and significant unprovided tax matters where maximum exposure is
provided for each \u2013 page 215
", "dimensions": { "concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-641": { "value": "
(f) Hyperinflationary accounting
The group applied hyperinflationary accounting for its operations in
Turkey, Venezuela and Lebanon. Turkey has been a hyperinflationary
economy where cumulative inflation for the three years ended 30 June
2022 exceeded 100%. Consequently, since March 2022, the group
applies hyperinflationary accounting for its Turkish operations. The
group\u2019s consolidated financial statements for the years ended 30 June
2023 and 30 June 2022 include the results and financial position of its
Turkish operations restated to the measuring unit current at the end of
each period, with hyperinflationary gains and losses in respect of
monetary items being reported in finance income and charges.
Comparative amounts presented in the consolidated financial
statements were not restated. Hyperinflationary accounting needs to be
applied as if Turkey has always been a hyperinflationary economy,
hence, as per Diageo\u2019s accounting policy choice, the differences
between equity at 30 June 2021 as reported and the equity after the
restatement of the non-monetary items to the measuring unit current at
30 June 2021 were recognised in retained earnings. Such restatement
includes impairment of TRL 2,133 million (\u00a3177 million) recognised on the
goodwill in the Turkey cash-generating unit and TRL 1,627 million (\u00a3135
million) in respect of the Yen\u00ec Raki brand, as a result of the increased
carrying values for those due to hyperinflation adjustments. When
applying IAS 29 on an ongoing basis, comparatives in stable currency
are not restated and the effect of inflating opening net assets to the
measuring unit current at the end of the reporting period is presented in
other comprehensive income. The inflation rate used by the group is the
official rate published by the Turkish Statistical Institute. The movement
in the publicly available official price index for the year ended 30 June
2023 was 38% (2022 \u2013 79%).
Venezuela is a hyperinflationary economy where the government
maintains a regime of strict currency controls with multiple foreign
currency rate systems. The exchange rate used to translate the results of
the group\u2019s Venezuelan operations was VES/\u00a3 3,807 for the year ended
30 June 2023 (2022 \u2013 VES/\u00a3 759). This rate reflects management\u2019s
estimate of the exchange rate considering inflation and the most
appropriate official exchange rate. Movement in the price index for the
year ended 30 June 2023 was 382% (2022 \u2013 268%). The inflation rate
used by the group is provided by an independent valuer because no
reliable, officially published rate is available for Venezuela.
The following table presents the contribution of the group\u2019s
Venezuelan operations to consolidated net sales, operating profit,
operating cash flow and assets for the years ended 30 June 2023 and
30 June 2022 and with the amounts that would have resulted if the
official reference exchange rate had been applied:
Year ended 30 June 2023
Year ended 30 June 2022
At estimated
exchange rate
At official
reference
exchange rate
At estimated
exchange rate
At official
reference
exchange rate
3,807 VES/\u00a3
36 VES/\u00a3
759 VES/\u00a3
7 VES/\u00a3
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
Net sales
\u2014
9
\u2014
15
Operating loss
\u2014
\u2014
(1)
(1)
Other finance
(charges)/income -
hyperinflation
adjustment
(2)
(212)
1
157
Net cash outflow from
operating activities
\u2014
(3)
\u2014
(5)
Net assets
6
657
41
4,606
Fair Value Measurements
\u2022Amendments to IAS 12 International Tax Reform \u2013 Pillar Two Model
Rules
The following standard and amendments issued by the IASB have been
endorsed by the UK and have not been adopted by the group:
\u2022IFRS 17 \u2013 Insurance contracts (effective from the year ending 30 June
2024) is ultimately intended to replace IFRS 4. Based on a
preliminary assessment, the group believes that the adoption of IFRS
17 will not have a significant impact on its consolidated results or
financial position.
\u2022Amendments to IAS 12 - Income taxes (effective from the year ending
30 June 2024) requires an entity to recognise deferred tax on initial
recognition of particular transactions to the extent that the
transaction gives rise to equal amounts of deferred tax assets and
liabilities. The proposed amendments would apply to transactions
such as leases and decommissioning obligations for which an entity
recognises both an asset and a liability. The group believes that the
adoption of these amendments will not have a significant impact on
its consolidated results and financial position.
There are a number of other amendments and clarifications to IFRSs,
effective in future years, which are not expected to significantly impact
the group\u2019s consolidated results or financial position.
(h) Climate change considerations
The impact of climate change assessment and the net zero carbon
emission target for Diageo's direct operations (Scope 1 & 2) for 2030
have been considered as part of the assessment of estimates and
judgements in preparing the group's consolidated financial statements.
The climate change scenario analyses performed in 2023 \u2013
conducted in line with TCFD recommendations (\u2018Transition
Scenario\u2019 (RCP 2.6), a \u2018Moderate Warming\u2019 Scenario (RCP 4.5) and a
\u2018Severe Warming Scenario\u2019 (RCP 8.5)) \u2013 identified no material financial
impact to these financial statements.
The following considerations were made in respect of the financial
statements:
\u2022The impact of climate change on factors (like residual values, useful
lives and depreciation methods) that determine the carrying value of
non-current assets.
\u2022The impact of climate change on forecasts of cash flows used
(including forecast depreciation in line with capital expenditure plans
for Diageo's net zero carbon emission commitment) in impairment
assessments for the value-in-use of non-current assets including
goodwill (see note 9).
\u2022The impact of climate change on post-employment assets.
", "dimensions": { "concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-643": { "value": "
2. Segmental information
Accounting policies
Sales comprise revenue from contracts with customers from the sale of goods, royalties and rents receivable. Revenue from the sale of goods
includes excise and other duties which the group pays as principal but excludes duties and taxes collected on behalf of third parties, such as
value added tax. Sales are recognised as or when performance obligations are satisfied by transferring control of a good or service to the
customer, which is determined by considering, among other factors, the delivery terms agreed with customers. For the sale of goods, the
transfer of control occurs when the significant risks and rewards of ownership are passed to the customer. Based on the shipping terms
agreed with customers, the transfer of control of goods occurs at the time of dispatch for the majority of sales. Where the transfer of control is
subsequent to the dispatch of goods, the time between dispatch and receipt by the customer is generally less than five days. The group
includes in sales the net consideration to which it expects to be entitled. Sales are recognised to the extent that it is highly probable that a
significant reversal will not occur. Therefore, sales are stated net of expected price discounts, allowances for customer loyalty and certain
promotional activities and similar items. Generally, payment of the transaction price is due within credit terms that are consistent with industry
practices, with no element of financing.
Net sales are sales less excise duties. Diageo incurs excise duties throughout the world. In the majority of countries, excise duties are
effectively a production tax which becomes payable when the product is removed from bonded premises and is not directly related to the
value of sales. It is generally not included as a separate item on external invoices; increases in excise duty are not always passed on to the
customer and where a customer fails to pay for products received the group cannot reclaim the excise duty. The group therefore recognises
excise duty, unless it regards itself as an agent of the regulatory authorities, as a cost to the group.
Advertising costs, point of sale materials and sponsorship payments are charged to marketing in operating profit when the company has a
right of access to the goods or services acquired.
Diageo is an international manufacturer and distributor of premium drinks. Diageo also owns a number of investments in associates and joint
ventures, as set out in note 6.
The segmental information presented is consistent with management reporting provided to the Executive Committee (the chief operating
decision-maker).
The Executive Committee considers the business principally from a geographical perspective based on the location of third-party sales and the
business analysis is presented by geographical segment. In addition to these geographical selling segments, a further segment reviewed by the
Executive Committee is the Supply Chain and Procurement (SC&P) segment, which manufactures products for other group companies and includes
the production sites in the United Kingdom, Ireland, Italy, Guatemala and Mexico, as well as comprises the global procurement function.
The group's operations also include the Corporate segment. Corporate costs are in respect of central costs, including finance, marketing,
corporate relations, human resources and legal, as well as certain information systems, facilities and employee costs that are not allocable to the
geographical segments or to the SC&P.
Diageo uses shared services operations to deliver transaction processing activities for markets and operational entities. These centres are located
in India, Hungary, Colombia and the Philippines. These captive business service centres also perform certain central finance activities, including
elements of financial planning and reporting, treasury and HR services. The costs of shared services operations are recharged to the regions.\u00a0 \u00a0
For planning and management reporting purposes, Diageo uses budgeted exchange rates that are set at the prior year's weighted average
exchange rate. In order to ensure a consistent basis on which performance is measured through the year, prior period results are also restated to the
budgeted exchange rate. Segmental information for net sales and operating profit before exceptional items are reported on a consistent basis with
management reporting. The adjustments required to retranslate the segmental information to actual exchange rates and to reconcile it to the
group\u2019s reported results are shown in the tables below. The comparative segmental information, prior to retranslation, has not been restated at the
current year\u2019s budgeted exchange rates but is presented at the budgeted rates for the respective year.
In addition, for management reporting purposes, Diageo presents the result of acquisitions and disposals completed in the current and prior year
separately from the results of the geographical segments. The impact of acquisitions and disposals on net sales and operating profit is disclosed
under the appropriate geographical segments in the tables below at budgeted exchange rates.
(a) Segmental information for the consolidated income statement
North
America
Europe
Asia
Pacific
Latin
America
and
Caribbean
Africa
SC&P
Eliminate
inter-
segment
sales
Total
operating
segments
Corporate
and other
Total
2023
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
Sales
7,382
5,996
5,403
2,260
2,386
3,073
(3,073)
23,427
88
23,515
Net sales
At budgeted exchange rates(1)
6,052
3,377
3,084
1,642
1,631
2,942
(2,876)
15,852
87
15,939
Acquisitions and disposals
20
20
35
3
104
\u2014
\u2014
182
\u2014
182
SC&P allocation
8
38
8
9
3
(66)
\u2014
\u2014
\u2014
\u2014
Retranslation to actual exchange rates
678
(41)
73
145
(39)
197
(197)
816
1
817
Hyperinflation
\u2014
175
\u2014
\u2014
\u2014
\u2014
\u2014
175
\u2014
175
Net sales
6,758
3,569
3,200
1,799
1,699
3,073
(3,073)
17,025
88
17,113
Operating profit/(loss)
At budgeted exchange rates(1)
2,337
1,076
886
597
347
(32)
\u2014
5,211
(292)
4,919
Acquisitions and disposals
(18)
(13)
5
\u2014
27
\u2014
\u2014
1
(6)
(5)
SC&P allocation
3
(24)
(6)
(3)
(2)
32
\u2014
\u2014
\u2014
\u2014
Fair value remeasurements
87
25
\u2014
1
\u2014
\u2014
\u2014
113
\u2014
113
Retranslation to actual exchange rates
280
18
20
66
(152)
\u2014
\u2014
232
(28)
204
Hyperinflation
\u2014
23
\u2014
\u2014
\u2014
\u2014
\u2014
23
\u2014
23
Operating profit/(loss) before exceptional items
2,689
1,105
905
661
220
\u2014
\u2014
5,580
(326)
5,254
Exceptional operating items
(97)
(8)
(473)
\u2014
(44)
\u2014
\u2014
(622)
\u2014
(622)
Operating profit/(loss)
2,592
1,097
432
661
176
\u2014
\u2014
4,958
(326)
4,632
Non-operating items
328
Net finance charges
(594)
Share of after tax results of associates and joint
ventures
370
Profit before taxation
4,736
North
America
Europe
Asia
Pacific
Latin
America
and
Caribbean
Africa
SC&P
Eliminate
inter-
segment
sales
Total
operating
segments
Corporate
and other
Total
2022
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
Sales
6,682
5,740
5,624
1,945
2,403
2,010
(2,010)
22,394
54
22,448
Net sales
At budgeted exchange rates(1)
5,955
3,258
2,879
1,486
1,699
2,095
(2,016)
15,356
55
15,411
Acquisitions and disposals
34
23
\u2014
3
15
\u2014
\u2014
75
\u2014
75
SC&P allocation
9
46
9
12
3
(79)
\u2014
\u2014
\u2014
\u2014
Retranslation to actual exchange rates
97
(304)
(4)
24
(35)
(6)
6
(222)
(1)
(223)
Hyperinflation
\u2014
189
\u2014
\u2014
\u2014
\u2014
\u2014
189
\u2014
189
Net sales
6,095
3,212
2,884
1,525
1,682
2,010
(2,010)
15,398
54
15,452
Operating profit/(loss)
At budgeted exchange rates(1)
2,388
1,086
703
528
346
(22)
\u2014
5,029
(256)
4,773
Acquisitions and disposals
(28)
11
\u2014
\u2014
(10)
\u2014
\u2014
(27)
\u2014
(27)
SC&P allocation
(1)
(18)
(2)
\u2014
(1)
22
\u2014
\u2014
\u2014
\u2014
Fair value remeasurements
32
36
\u2014
(8)
\u2014
\u2014
\u2014
60
\u2014
60
Retranslation to actual exchange rates
63
(108)
10
18
(20)
\u2014
\u2014
(37)
18
(19)
Hyperinflation
\u2014
10
\u2014
\u2014
\u2014
\u2014
\u2014
10
\u2014
10
Operating profit/(loss) before exceptional items
2,454
1,017
711
538
315
\u2014
\u2014
5,035
(238)
4,797
Exceptional operating items
(1)
(146)
(241)
\u2014
\u2014
\u2014
\u2014
(388)
\u2014
(388)
Operating profit/(loss)
2,453
871
470
538
315
\u2014
\u2014
4,647
(238)
4,409
Non-operating items
(17)
Net finance charges
(422)
Share of after tax results of associates and joint
ventures
417
Profit before taxation
4,387
North
America
Europe
Asia
Pacific
Latin
America
and
Caribbean
Africa
SC&P
Eliminate
inter-
segment
sales
Total
operating
segments
Corporate
and other
Total
2021
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
Sales
5,803
4,795
5,146
1,369
2,020
1,537
(1,537)
19,133
20
19,153
Net sales
At budgeted exchange rates(1)
5,527
2,579
2,561
1,176
1,541
1,627
(1,548)
13,463
20
13,483
Acquisitions and disposals
28
2
\u2014
\u2014
5
\u2014
\u2014
35
\u2014
35
SC&P allocation
9
45
9
13
3
(79)
\u2014
\u2014
\u2014
\u2014
Retranslation to actual exchange rates
(355)
(68)
(82)
(143)
(137)
(11)
11
(785)
\u2014
(785)
Net sales
5,209
2,558
2,488
1,046
1,412
1,537
(1,537)
12,713
20
12,733
Operating profit/(loss)
At budgeted exchange rates(1)
2,469
728
628
422
228
(97)
\u2014
4,378
(218)
4,160
Acquisitions and disposals
(18)
(3)
\u2014
\u2014
\u2014
\u2014
\u2014
(21)
\u2014
(21)
SC&P allocation
(30)
(32)
(5)
(27)
(3)
97
\u2014
\u2014
\u2014
\u2014
Fair value remeasurement of contingent consideration
(9)
(27)
\u2014
\u2014
\u2014
\u2014
\u2014
(36)
\u2014
(36)
Retranslation to actual exchange rates
(175)
(31)
(15)
(92)
(54)
\u2014
\u2014
(367)
10
(357)
Operating profit/(loss) before exceptional items
2,237
635
608
303
171
\u2014
\u2014
3,954
(208)
3,746
Exceptional operating items
\u2014
(15)
\u2014
\u2014
\u2014
\u2014
\u2014
(15)
\u2014
(15)
Operating profit/(loss)
2,237
620
608
303
171
\u2014
\u2014
3,939
(208)
3,731
Non-operating items
14
Net finance charges
(373)
Share of after tax results of associates and joint
ventures
334
Profit before taxation
3,706
(1)These items represent the IFRS 8 performance measures for the geographical and SC&P segments.
(i)The net sales figures for SC&P reported to the Executive Committee primarily comprise inter-segment sales and these are eliminated in a separate column in the above segmental
analysis. Apart from sales by the SC&P segment to the other operating segments, inter-segmental sales are not material.
(ii)The group\u2019s net finance charges are managed centrally and are not attributable to individual operating segments.
(iii)Approximately 38% of annual net sales occurred in the last four months of calendar year 2022.
(b) Other segmental information
North
America
\u00a3 million
Europe
\u00a3 million
Asia
Pacific
\u00a3 million
Latin
America
and
Caribbean
\u00a3 million
Africa
\u00a3 million
SC&P
\u00a3 million
Corporate
and other
\u00a3 million
Total
\u00a3 million
2023
Purchase of property, plant and equipment and computer
software
197
209
166
121
126
356
5
1,180
Depreciation and intangible asset amortisation
(95)
(98)
(61)
(18)
(80)
(134)
(10)
(496)
Exceptional impairment of tangible assets
(52)
2
(22)
\u2014
\u2014
\u2014
\u2014
(72)
Exceptional impairment of intangible assets
(29)
(25)
(444)
\u2014
\u2014
\u2014
\u2014
(498)
2022
Purchase of property, plant and equipment and computer
software
230
187
146
128
139
256
11
1,097
Depreciation and intangible asset amortisation
(80)
(93)
(93)
(16)
(81)
(116)
(10)
(489)
Exceptional impairment of tangible assets
\u2014
(3)
\u2014
\u2014
\u2014
\u2014
\u2014
(3)
Exceptional impairment of intangible assets
\u2014
(96)
(240)
\u2014
\u2014
\u2014
\u2014
(336)
2021
Purchase of property, plant and equipment and computer
software
153
23
56
20
125
125
124
626
Depreciation and intangible asset amortisation
(76)
(31)
(60)
(16)
(79)
(126)
(59)
(447)
(c) Category and geographical analysis
Category analysis
Geographic analysis
Spirits
\u00a3\u00a0million
Beer
\u00a3\u00a0million
Ready to
drink
\u00a3 million
Other
\u00a3 million
Total
\u00a3 million
United
States
\u00a3 million
India
\u00a3 million
Great
Britain
\u00a3 million
Rest of
World
\u00a3 million
Total
\u00a3 million
2023
Sales(1)
19,004
3,355
899
257
23,515
6,972
2,751
2,138
11,654
23,515
Non-current assets(2), (3)
5,816
1,798
2,909
11,204
21,727
2022
Sales(1)
18,164
3,128
882
274
22,448
6,327
3,219
2,142
10,760
22,448
Non-current assets(2), (3)
5,899
2,396
2,413
10,861
21,569
2021
Sales(1)
15,634
2,562
741
216
19,153
5,441
3,011
1,822
8,879
19,153
Non-current assets(2), (3)
4,320
2,561
2,119
10,063
19,063
(1)The geographical analysis of sales is based on the location of third-party customers.
(2)The geographical analysis of non-current assets is based on the geographical location of the assets and comprises intangible assets, property, plant and equipment, biological assets,
investments in associates and joint ventures, other investments and non-current other receivables.
(3)The management information provided to the chief operating decision-maker does not include an analysis of assets and liabilities by category and therefore is not disclosed.", "dimensions": { "concept": "ifrs-full:DisclosureOfEntitysReportableSegmentsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-644": { "value": "
Accounting policies
Sales comprise revenue from contracts with customers from the sale of goods, royalties and rents receivable. Revenue from the sale of goods
includes excise and other duties which the group pays as principal but excludes duties and taxes collected on behalf of third parties, such as
value added tax. Sales are recognised as or when performance obligations are satisfied by transferring control of a good or service to the
customer, which is determined by considering, among other factors, the delivery terms agreed with customers. For the sale of goods, the
transfer of control occurs when the significant risks and rewards of ownership are passed to the customer. Based on the shipping terms
agreed with customers, the transfer of control of goods occurs at the time of dispatch for the majority of sales. Where the transfer of control is
subsequent to the dispatch of goods, the time between dispatch and receipt by the customer is generally less than five days. The group
includes in sales the net consideration to which it expects to be entitled. Sales are recognised to the extent that it is highly probable that a
significant reversal will not occur. Therefore, sales are stated net of expected price discounts, allowances for customer loyalty and certain
promotional activities and similar items. Generally, payment of the transaction price is due within credit terms that are consistent with industry
practices, with no element of financing.
Net sales are sales less excise duties. Diageo incurs excise duties throughout the world. In the majority of countries, excise duties are
effectively a production tax which becomes payable when the product is removed from bonded premises and is not directly related to the
value of sales. It is generally not included as a separate item on external invoices; increases in excise duty are not always passed on to the
customer and where a customer fails to pay for products received the group cannot reclaim the excise duty. The group therefore recognises
excise duty, unless it regards itself as an agent of the regulatory authorities, as a cost to the group.
Advertising costs, point of sale materials and sponsorship payments are charged to marketing in operating profit when the company has a
right of access to the goods or services acquired.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSegmentReportingExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-645": { "value": "
Sales comprise revenue from contracts with customers from the sale of goods, royalties and rents receivable. Revenue from the sale of goods
includes excise and other duties which the group pays as principal but excludes duties and taxes collected on behalf of third parties, such as
value added tax. Sales are recognised as or when performance obligations are satisfied by transferring control of a good or service to the
customer, which is determined by considering, among other factors, the delivery terms agreed with customers. For the sale of goods, the
transfer of control occurs when the significant risks and rewards of ownership are passed to the customer. Based on the shipping terms
agreed with customers, the transfer of control of goods occurs at the time of dispatch for the majority of sales. Where the transfer of control is
subsequent to the dispatch of goods, the time between dispatch and receipt by the customer is generally less than five days. The group
includes in sales the net consideration to which it expects to be entitled. Sales are recognised to the extent that it is highly probable that a
significant reversal will not occur. Therefore, sales are stated net of expected price discounts, allowances for customer loyalty and certain
promotional activities and similar items. Generally, payment of the transaction price is due within credit terms that are consistent with industry
practices, with no element of financing.
Net sales are sales less excise duties. Diageo incurs excise duties throughout the world. In the majority of countries, excise duties are
effectively a production tax which becomes payable when the product is removed from bonded premises and is not directly related to the
value of sales. It is generally not included as a separate item on external invoices; increases in excise duty are not always passed on to the
customer and where a customer fails to pay for products received the group cannot reclaim the excise duty. The group therefore recognises
excise duty, unless it regards itself as an agent of the regulatory authorities, as a cost to the group.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRecognitionOfRevenue", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-646": { "value": "
(a) Segmental information for the consolidated income statement
North
America
Europe
Asia
Pacific
Latin
America
and
Caribbean
Africa
SC&P
Eliminate
inter-
segment
sales
Total
operating
segments
Corporate
and other
Total
2023
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
Sales
7,382
5,996
5,403
2,260
2,386
3,073
(3,073)
23,427
88
23,515
Net sales
At budgeted exchange rates(1)
6,052
3,377
3,084
1,642
1,631
2,942
(2,876)
15,852
87
15,939
Acquisitions and disposals
20
20
35
3
104
\u2014
\u2014
182
\u2014
182
SC&P allocation
8
38
8
9
3
(66)
\u2014
\u2014
\u2014
\u2014
Retranslation to actual exchange rates
678
(41)
73
145
(39)
197
(197)
816
1
817
Hyperinflation
\u2014
175
\u2014
\u2014
\u2014
\u2014
\u2014
175
\u2014
175
Net sales
6,758
3,569
3,200
1,799
1,699
3,073
(3,073)
17,025
88
17,113
Operating profit/(loss)
At budgeted exchange rates(1)
2,337
1,076
886
597
347
(32)
\u2014
5,211
(292)
4,919
Acquisitions and disposals
(18)
(13)
5
\u2014
27
\u2014
\u2014
1
(6)
(5)
SC&P allocation
3
(24)
(6)
(3)
(2)
32
\u2014
\u2014
\u2014
\u2014
Fair value remeasurements
87
25
\u2014
1
\u2014
\u2014
\u2014
113
\u2014
113
Retranslation to actual exchange rates
280
18
20
66
(152)
\u2014
\u2014
232
(28)
204
Hyperinflation
\u2014
23
\u2014
\u2014
\u2014
\u2014
\u2014
23
\u2014
23
Operating profit/(loss) before exceptional items
2,689
1,105
905
661
220
\u2014
\u2014
5,580
(326)
5,254
Exceptional operating items
(97)
(8)
(473)
\u2014
(44)
\u2014
\u2014
(622)
\u2014
(622)
Operating profit/(loss)
2,592
1,097
432
661
176
\u2014
\u2014
4,958
(326)
4,632
Non-operating items
328
Net finance charges
(594)
Share of after tax results of associates and joint
ventures
370
Profit before taxation
4,736
North
America
Europe
Asia
Pacific
Latin
America
and
Caribbean
Africa
SC&P
Eliminate
inter-
segment
sales
Total
operating
segments
Corporate
and other
Total
2022
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
Sales
6,682
5,740
5,624
1,945
2,403
2,010
(2,010)
22,394
54
22,448
Net sales
At budgeted exchange rates(1)
5,955
3,258
2,879
1,486
1,699
2,095
(2,016)
15,356
55
15,411
Acquisitions and disposals
34
23
\u2014
3
15
\u2014
\u2014
75
\u2014
75
SC&P allocation
9
46
9
12
3
(79)
\u2014
\u2014
\u2014
\u2014
Retranslation to actual exchange rates
97
(304)
(4)
24
(35)
(6)
6
(222)
(1)
(223)
Hyperinflation
\u2014
189
\u2014
\u2014
\u2014
\u2014
\u2014
189
\u2014
189
Net sales
6,095
3,212
2,884
1,525
1,682
2,010
(2,010)
15,398
54
15,452
Operating profit/(loss)
At budgeted exchange rates(1)
2,388
1,086
703
528
346
(22)
\u2014
5,029
(256)
4,773
Acquisitions and disposals
(28)
11
\u2014
\u2014
(10)
\u2014
\u2014
(27)
\u2014
(27)
SC&P allocation
(1)
(18)
(2)
\u2014
(1)
22
\u2014
\u2014
\u2014
\u2014
Fair value remeasurements
32
36
\u2014
(8)
\u2014
\u2014
\u2014
60
\u2014
60
Retranslation to actual exchange rates
63
(108)
10
18
(20)
\u2014
\u2014
(37)
18
(19)
Hyperinflation
\u2014
10
\u2014
\u2014
\u2014
\u2014
\u2014
10
\u2014
10
Operating profit/(loss) before exceptional items
2,454
1,017
711
538
315
\u2014
\u2014
5,035
(238)
4,797
Exceptional operating items
(1)
(146)
(241)
\u2014
\u2014
\u2014
\u2014
(388)
\u2014
(388)
Operating profit/(loss)
2,453
871
470
538
315
\u2014
\u2014
4,647
(238)
4,409
Non-operating items
(17)
Net finance charges
(422)
Share of after tax results of associates and joint
ventures
417
Profit before taxation
4,387
North
America
Europe
Asia
Pacific
Latin
America
and
Caribbean
Africa
SC&P
Eliminate
inter-
segment
sales
Total
operating
segments
Corporate
and other
Total
2021
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
\u00a3 million
Sales
5,803
4,795
5,146
1,369
2,020
1,537
(1,537)
19,133
20
19,153
Net sales
At budgeted exchange rates(1)
5,527
2,579
2,561
1,176
1,541
1,627
(1,548)
13,463
20
13,483
Acquisitions and disposals
28
2
\u2014
\u2014
5
\u2014
\u2014
35
\u2014
35
SC&P allocation
9
45
9
13
3
(79)
\u2014
\u2014
\u2014
\u2014
Retranslation to actual exchange rates
(355)
(68)
(82)
(143)
(137)
(11)
11
(785)
\u2014
(785)
Net sales
5,209
2,558
2,488
1,046
1,412
1,537
(1,537)
12,713
20
12,733
Operating profit/(loss)
At budgeted exchange rates(1)
2,469
728
628
422
228
(97)
\u2014
4,378
(218)
4,160
Acquisitions and disposals
(18)
(3)
\u2014
\u2014
\u2014
\u2014
\u2014
(21)
\u2014
(21)
SC&P allocation
(30)
(32)
(5)
(27)
(3)
97
\u2014
\u2014
\u2014
\u2014
Fair value remeasurement of contingent consideration
(9)
(27)
\u2014
\u2014
\u2014
\u2014
\u2014
(36)
\u2014
(36)
Retranslation to actual exchange rates
(175)
(31)
(15)
(92)
(54)
\u2014
\u2014
(367)
10
(357)
Operating profit/(loss) before exceptional items
2,237
635
608
303
171
\u2014
\u2014
3,954
(208)
3,746
Exceptional operating items
\u2014
(15)
\u2014
\u2014
\u2014
\u2014
\u2014
(15)
\u2014
(15)
Operating profit/(loss)
2,237
620
608
303
171
\u2014
\u2014
3,939
(208)
3,731
Non-operating items
14
Net finance charges
(373)
Share of after tax results of associates and joint
ventures
334
Profit before taxation
3,706
(1)These items represent the IFRS 8 performance measures for the geographical and SC&P segments.
(i)The net sales figures for SC&P reported to the Executive Committee primarily comprise inter-segment sales and these are eliminated in a separate column in the above segmental
analysis. Apart from sales by the SC&P segment to the other operating segments, inter-segmental sales are not material.
(ii)The group\u2019s net finance charges are managed centrally and are not attributable to individual operating segments.
(iii)Approximately 38% of annual net sales occurred in the last four months of calendar year 2022.
(c) Category and geographical analysis
Category analysis
Geographic analysis
Spirits
\u00a3\u00a0million
Beer
\u00a3\u00a0million
Ready to
drink
\u00a3 million
Other
\u00a3 million
Total
\u00a3 million
United
States
\u00a3 million
India
\u00a3 million
Great
Britain
\u00a3 million
Rest of
World
\u00a3 million
Total
\u00a3 million
2023
Sales(1)
19,004
3,355
899
257
23,515
6,972
2,751
2,138
11,654
23,515
Non-current assets(2), (3)
5,816
1,798
2,909
11,204
21,727
2022
Sales(1)
18,164
3,128
882
274
22,448
6,327
3,219
2,142
10,760
22,448
Non-current assets(2), (3)
5,899
2,396
2,413
10,861
21,569
2021
Sales(1)
15,634
2,562
741
216
19,153
5,441
3,011
1,822
8,879
19,153
Non-current assets(2), (3)
4,320
2,561
2,119
10,063
19,063
(1)The geographical analysis of sales is based on the location of third-party customers.
(2)The geographical analysis of non-current assets is based on the geographical location of the assets and comprises intangible assets, property, plant and equipment, biological assets,
investments in associates and joint ventures, other investments and non-current other receivables.
(3)The management information provided to the chief operating decision-maker does not include an analysis of assets and liabilities by category and therefore is not disclosed.", "dimensions": { "concept": "ifrs-full:DisclosureOfRevenueExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-647": { "value": "328000000", "decimals": -6, "dimensions": { "concept": "deo:NonOperatingGainsLosses", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-648": { "value": "370000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:ShareOfProfitLossOfAssociatesAndJointVenturesAccountedForUsingEquityMethod", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-649": { "value": "4736000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:ProfitLossBeforeTax", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00", "unit": "iso4217:GBP" } }, "f-650": { "value": "
3. Operating costs
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Excise duties
6,402
6,996
6,420
Cost of sales
6,899
5,973
5,038
Marketing
3,051
2,721
2,163
Other operating items
2,531
2,349
1,801
18,883
18,039
15,422
Comprising:
Excise duties
India
1,625
2,182
2,127
Great Britain
1,095
1,172
1,018
United States
687
614
589
Other
2,995
3,028
2,686
Increase in inventories
(513)
(909)
(293)
Raw materials and consumables
4,328
4,017
3,126
Marketing
3,051
2,721
2,163
Other external charges
2,747
2,597
1,978
Staff costs
1,830
1,795
1,586
Depreciation, amortisation and impairment
1,066
828
447
Gains on disposal of properties
(4)
(2)
(1)
Net foreign exchange losses
10
10
22
Other operating income
(34)
(14)
(26)
18,883
18,039
15,422
(a) Other external charges\u00a0
Other external charges include research and development expenditure
in respect of new drinks products and package design of \u00a353 million
(2022 \u2013 \u00a343 million; 2021 \u2013 \u00a340 million) and maintenance and repairs of
\u00a3143 million (2022 \u2013 \u00a3136 million; 2021 \u2013 \u00a3107 million).
(b) Auditors fees
Other external charges include the fees of the principal auditors of the
group, PricewaterhouseCoopers LLP and its affiliates (PwC) and are
analysed below.
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Audit of these financial statements
5.2
4.2
3.8
Audit of financial statements of subsidiaries
5.7
6.1
4.4
Audit related assurance services(1)
2.7
2.5
2.6
Total audit fees (Audit fees)
13.6
12.8
10.8
Other assurance services (Audit related
fees)(2)
1.2
0.7
0.8
14.8
13.5
11.6
(1)Audit related assurance services are in respect of reporting under section 404 of the US
Sarbanes-Oxley Act and the review of the interim financial information.
(2)Other assurance services comprise the aggregate fees for assurance and related
services that are not reported under \u2018total audit fees\u2019.
(i) Disclosure requirements for auditors fees in the United States are different from those
required in the United Kingdom. The terminology by category required in the United
States is disclosed in brackets in the above table.
Audit services provided by firms other than PwC for the year ended 30
June 2023 were \u00a30.1 million (2022 \u2013 \u00a30.1 million; 2021 \u2013 \u00a30.1 million).
Further PwC fees for audit services in respect of post employment plans
were \u00a30.3 million for the year ended 30 June 2023 (2022 \u2013 \u00a30.2 million;
2021 \u2013 \u00a30.2 million).
(c) Staff costs and average number of employees
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Aggregate remuneration
Wages and salaries
1,548
1,557
1,336
Share-based incentive plans
48
59
50
Employer\u2019s social security
115
107
83
Employer\u2019s pension
Defined benefit plans
67
36
82
Defined contribution plans
44
33
25
Other post employment plans
8
3
10
1,830
1,795
1,586
The average number of employees on a full-time equivalent basis
(excluding employees of associates and joint ventures) was as follows:
2023
2022
2021
North America
2,884
2,811
2,562
Europe
2,789
3,014
3,237
Asia Pacific
6,856
6,500
6,474
Latin America and Caribbean
1,495
1,500
1,505
Africa
3,526
4,061
4,016
SC&P
6,934
5,025
5,085
Corporate and other
5,753
5,076
4,687
30,237
27,987
27,566
At 30 June 2023, on a full-time equivalent basis, the group had 30,269
(2022 \u2013 28,558; 2021 \u2013 27,783) employees. The average number of
employees of the group, including part-time employees, for the year
was 30,419 (2022 \u2013 28,137; 2021 \u2013 28,025).
(d) Exceptional operating items
Included in the table above are exceptional operating items as follows:
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Depreciation, amortisation and impairment
Brand and goodwill impairment
498
336
\u2014
Tangible asset impairment and accelerated
depreciation
72
\u2014
\u2014
Staff costs
10
\u2014
5
Other external charges
60
52
13
Other operating income
(18)
\u2014
(3)
Total exceptional operating items (note 4)
622
388
15
Cost of sales
67
\u2014
\u2014
Other operating expenses
555
388
15
", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingExpenseExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-651": { "value": "
3. Operating costs
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Excise duties
6,402
6,996
6,420
Cost of sales
6,899
5,973
5,038
Marketing
3,051
2,721
2,163
Other operating items
2,531
2,349
1,801
18,883
18,039
15,422
Comprising:
Excise duties
India
1,625
2,182
2,127
Great Britain
1,095
1,172
1,018
United States
687
614
589
Other
2,995
3,028
2,686
Increase in inventories
(513)
(909)
(293)
Raw materials and consumables
4,328
4,017
3,126
Marketing
3,051
2,721
2,163
Other external charges
2,747
2,597
1,978
Staff costs
1,830
1,795
1,586
Depreciation, amortisation and impairment
1,066
828
447
Gains on disposal of properties
(4)
(2)
(1)
Net foreign exchange losses
10
10
22
Other operating income
(34)
(14)
(26)
18,883
18,039
15,422
(a) Other external charges\u00a0
Other external charges include research and development expenditure
in respect of new drinks products and package design of \u00a353 million
(2022 \u2013 \u00a343 million; 2021 \u2013 \u00a340 million) and maintenance and repairs of
\u00a3143 million (2022 \u2013 \u00a3136 million; 2021 \u2013 \u00a3107 million).
(b) Auditors fees
Other external charges include the fees of the principal auditors of the
group, PricewaterhouseCoopers LLP and its affiliates (PwC) and are
analysed below.
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Audit of these financial statements
5.2
4.2
3.8
Audit of financial statements of subsidiaries
5.7
6.1
4.4
Audit related assurance services(1)
2.7
2.5
2.6
Total audit fees (Audit fees)
13.6
12.8
10.8
Other assurance services (Audit related
fees)(2)
1.2
0.7
0.8
14.8
13.5
11.6
(1)Audit related assurance services are in respect of reporting under section 404 of the US
Sarbanes-Oxley Act and the review of the interim financial information.
(2)Other assurance services comprise the aggregate fees for assurance and related
services that are not reported under \u2018total audit fees\u2019.
(i) Disclosure requirements for auditors fees in the United States are different from those
required in the United Kingdom. The terminology by category required in the United
States is disclosed in brackets in the above table.
Audit services provided by firms other than PwC for the year ended 30
June 2023 were \u00a30.1 million (2022 \u2013 \u00a30.1 million; 2021 \u2013 \u00a30.1 million).
Further PwC fees for audit services in respect of post employment plans
were \u00a30.3 million for the year ended 30 June 2023 (2022 \u2013 \u00a30.2 million;
2021 \u2013 \u00a30.2 million).
(c) Staff costs and average number of employees
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Aggregate remuneration
Wages and salaries
1,548
1,557
1,336
Share-based incentive plans
48
59
50
Employer\u2019s social security
115
107
83
Employer\u2019s pension
Defined benefit plans
67
36
82
Defined contribution plans
44
33
25
Other post employment plans
8
3
10
1,830
1,795
1,586
The average number of employees on a full-time equivalent basis
(excluding employees of associates and joint ventures) was as follows:
2023
2022
2021
North America
2,884
2,811
2,562
Europe
2,789
3,014
3,237
Asia Pacific
6,856
6,500
6,474
Latin America and Caribbean
1,495
1,500
1,505
Africa
3,526
4,061
4,016
SC&P
6,934
5,025
5,085
Corporate and other
5,753
5,076
4,687
30,237
27,987
27,566
At 30 June 2023, on a full-time equivalent basis, the group had 30,269
(2022 \u2013 28,558; 2021 \u2013 27,783) employees. The average number of
employees of the group, including part-time employees, for the year
was 30,419 (2022 \u2013 28,137; 2021 \u2013 28,025).
(d) Exceptional operating items
Included in the table above are exceptional operating items as follows:
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Depreciation, amortisation and impairment
Brand and goodwill impairment
498
336
\u2014
Tangible asset impairment and accelerated
depreciation
72
\u2014
\u2014
Staff costs
10
\u2014
5
Other external charges
60
52
13
Other operating income
(18)
\u2014
(3)
Total exceptional operating items (note 4)
622
388
15
Cost of sales
67
\u2014
\u2014
Other operating expenses
555
388
15
", "dimensions": { "concept": "ifrs-full:DisclosureOfProfitLossFromOperatingActivitiesExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-652": { "value": "
Other external charges include research and development expenditure
in respect of new drinks products and package design of \u00a353 million
(2022 \u2013 \u00a343 million; 2021 \u2013 \u00a340 million) and maintenance and repairs of
\u00a3143 million (2022 \u2013 \u00a3136 million; 2021 \u2013 \u00a3107 million).
", "dimensions": { "concept": "ifrs-full:DisclosureOfResearchAndDevelopmentExpenseExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-653": { "value": "
(b) Auditors fees
Other external charges include the fees of the principal auditors of the
group, PricewaterhouseCoopers LLP and its affiliates (PwC) and are
analysed below.
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Audit of these financial statements
5.2
4.2
3.8
Audit of financial statements of subsidiaries
5.7
6.1
4.4
Audit related assurance services(1)
2.7
2.5
2.6
Total audit fees (Audit fees)
13.6
12.8
10.8
Other assurance services (Audit related
fees)(2)
1.2
0.7
0.8
14.8
13.5
11.6
(1)Audit related assurance services are in respect of reporting under section 404 of the US
Sarbanes-Oxley Act and the review of the interim financial information.
(2)Other assurance services comprise the aggregate fees for assurance and related
services that are not reported under \u2018total audit fees\u2019.
(i) Disclosure requirements for auditors fees in the United States are different from those
required in the United Kingdom. The terminology by category required in the United
States is disclosed in brackets in the above table.
Audit services provided by firms other than PwC for the year ended 30
June 2023 were \u00a30.1 million (2022 \u2013 \u00a30.1 million; 2021 \u2013 \u00a30.1 million).
Further PwC fees for audit services in respect of post employment plans
were \u00a30.3 million for the year ended 30 June 2023 (2022 \u2013 \u00a30.2 million;
2021 \u2013 \u00a30.2 million).
", "dimensions": { "concept": "ifrs-full:DisclosureOfAuditorsRemunerationExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-654": { "value": "
(c) Staff costs and average number of employees
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Aggregate remuneration
Wages and salaries
1,548
1,557
1,336
Share-based incentive plans
48
59
50
Employer\u2019s social security
115
107
83
Employer\u2019s pension
Defined benefit plans
67
36
82
Defined contribution plans
44
33
25
Other post employment plans
8
3
10
1,830
1,795
1,586
The average number of employees on a full-time equivalent basis
(excluding employees of associates and joint ventures) was as follows:
2023
2022
2021
North America
2,884
2,811
2,562
Europe
2,789
3,014
3,237
Asia Pacific
6,856
6,500
6,474
Latin America and Caribbean
1,495
1,500
1,505
Africa
3,526
4,061
4,016
SC&P
6,934
5,025
5,085
Corporate and other
5,753
5,076
4,687
30,237
27,987
27,566
At 30 June 2023, on a full-time equivalent basis, the group had 30,269
(2022 \u2013 28,558; 2021 \u2013 27,783) employees. The average number of
employees of the group, including part-time employees, for the year
was 30,419 (2022 \u2013 28,137; 2021 \u2013 28,025).
14. Post employment benefits \u00a0
Accounting policies
The group\u2019s principal post employment funds are defined benefit
plans. In addition, the group has defined contribution plans,
unfunded post employment medical benefit liabilities and other
unfunded defined benefit post employment liabilities. For post
employment plans other than defined contribution plans, the
amount charged to operating profit is the cost of accruing
pension benefits promised to employees over the year, plus any
changes arising on benefits granted to members by the group
during the year. Net finance charges comprise the net deficit/
surplus on the plans at the beginning of the year, adjusted for
cash flows in the year, multiplied by the discount rate for plan
liabilities. The differences between the fair value of the plans\u2019
assets and the present value of the plans\u2019 liabilities are disclosed
as an asset or liability on the consolidated balance sheet. Any
differences due to changes in assumptions or experience are
recognised in other comprehensive income. The amount of any
pension fund asset recognised on the balance sheet is limited to
any future refunds from the plan or the present value of
reductions in future contributions to the plan.
Contributions payable by the group in respect of defined
contribution plans are charged to operating profit as incurred.
Critical accounting estimates and judgements
Application of IAS 19 requires the exercise of estimate and
judgement in relation to various assumptions.
Diageo determines the assumptions on a country by country
basis in conjunction with its actuaries. Estimates are required in
respect of uncertain future events, including the life expectancy
of members of the funds, salary and pension increases, future
inflation rates, discount rates and employee and pensioner
demographics. The application of different assumptions could
have a significant effect on the amounts reflected in the income
statement, other comprehensive income and the balance sheet.
There may be interdependencies between the assumptions.
Where there is an accounting surplus on a defined benefit
plan, management judgement is necessary to determine
whether the group can obtain economic benefits through a
refund of the surplus or by reducing future contributions to the
plan.
(a) Post employment benefit plans
The group operates a number of pension plans throughout the world,
devised in accordance with local conditions and practices. Diageo's
most significant plans are defined benefit plans and are funded by
payments to separately administered trusts or insurance companies. The
group also operates a number of plans that are generally unfunded,
primarily in the United States, which provide to employees post
employment medical benefits.
The principal plans are in the United Kingdom, Ireland and the
United States where benefits are based on employees\u2019 length of service
and salary at retirement. All valuations were performed by independent
actuaries using the projected unit credit method to determine pension
costs.
The most recent funding valuations of the significant defined benefit
plans were carried out as follows:
Principal plans
Date of valuation
United Kingdom(1)
1 April 2021
Ireland(2)
31 December 2021
United States
1 January 2022
(i)\u00a0 The year ended 30 June 2022 includes settlement gains of \u00a327\u00a0million in respect of the
Enhanced Transfer Values (ETV) exercise carried out in the Irish Schemes and past
service gains of \u00a328\u00a0million as a result of the changes of the benefits in the Irish
Scheme. In the year ended 30 June 2021, the exceptional past service loss of \u00a35\u00a0million
is in respect of the equalisation of Guaranteed Minimum Pension (GMP) benefits for
men and women.
(1) The (charge)/income before taxation is in respect of the following countries:
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
United Kingdom
15
(27)
(46)
Ireland
1
45
4
United States
(32)
(31)
(28)
Other
(15)
(16)
(17)
(31)
(29)
(87)
In addition to the charge in respect of defined benefit post employment
plans, contributions to the group\u2019s defined contribution plans were \u00a344
million (2022 \u2013 \u00a333 million; 2021 \u2013 \u00a325\u00a0million).
The movements in the net surplus for the two years ended 30 June
2023 is set out below:
Plan
assets
\u00a3 million
Plan
liabilities
\u00a3 million
Net
surplus
\u00a3 million
At 30 June 2021
9,892
(9,445)
447
Exchange differences
93
(100)
(7)
Income/(charge) before taxation
176
(205)
(29)
Other comprehensive (loss)/income(1)
(1,432)
2,058
626
Contributions by the group
128
\u2014
128
Settlements paid(2)
(52)
52
\u2014
Employee contributions
5
(5)
\u2014
Benefits paid
(411)
411
\u2014
At 30 June 2022
8,399
(7,234)
1,165
Exchange differences
(49)
55
6
Disposals
\u2014
4
4
Income/(charge) before taxation
298
(329)
(31)
Other comprehensive (loss)/income(1)
(1,435)
785
(650)
Contributions by the group
100
\u2014
100
Employee contributions
5
(5)
\u2014
Benefits paid
(472)
472
\u2014
At 30 June 2023
6,846
(6,252)
594
(1)Excludes surplus restriction.
(2)Includes settlement payment of \u00a352\u00a0million on ETV exercise in Ireland.
The plan assets and liabilities by type of post employment benefit and
country are as follows:
2023
2022
Plan
assets
\u00a3 million
Plan
liabilities
\u00a3 million
Plan
assets
\u00a3 million
Plan
liabilities
\u00a3 million
Pensions
United Kingdom
4,578
(4,041)
6,041
(4,897)
Ireland
1,588
(1,310)
1,645
(1,409)
United States
441
(411)
453
(408)
Other
180
(194)
191
(212)
Post employment medical
2
(227)
2
(225)
Other post employment
57
(69)
67
(83)
6,846
(6,252)
8,399
(7,234)
The balance sheet analysis of the post employment plans is as follows:
2023
2022
Non-
current
assets(1)
\u00a3 million
Non-
current
liabilities
\u00a3 million
Non-
current
assets(1)
\u00a3 million
Non-
current
liabilities
\u00a3 million
Funded plans
960
(132)
1,553
(144)
Unfunded plans
\u2014
(241)
\u2014
(258)
960
(373)
1,553
(402)
(1)Includes surplus restriction of \u00a37 million (2022 \u2013 \u00a314 million).
The disclosures have been prepared in accordance with IFRIC 14. In
particular, where the calculation for a plan results in a surplus, the
recognised asset is limited to the present value of any available future
refunds from the plan or reductions in future contributions to the plan,
and any additional liabilities are recognised as required. At 30 June
2023, the DPS had a net surplus of \u00a3589 million (2022 \u2013 \u00a31,174\u00a0million;
2021 \u2013 \u00a3840 million) and the GIGPS had a net surplus of \u00a3260 million
(2022 a surplus of \u00a3221\u00a0million; 2021 a deficit of \u00a379\u00a0million) and other
schemes in a surplus totalled of \u00a3111\u00a0million (2022 \u2013 \u00a3158\u00a0million; 2021 \u2013
\u00a3178\u00a0million). Both of these surpluses have been recognised, with no
provision made against them, as they are expected to be recoverable
through a combination of a reduction in future cash contributions or
ultimately via a cash refund when the last member\u2019s obligations have
been met.\u00a0
(b) Principal risks and assumptions
The material post employment plans are not exposed to any unusual,
entity-specific or scheme-specific risks but there are general risks:
Inflation \u2013 The majority of the plans\u2019 obligations are linked to inflation.
Higher inflation will lead to increased liabilities which is partially offset
by the plans holding inflation linked gilts, swaps and caps against the
level of inflationary increases.
Interest rate \u2013 The plan liabilities are determined using discount rates
derived from yields on AA-rated corporate bonds. A decrease in
corporate bond yields will increase plan liabilities though this will be
partially offset by an increase in the value of the bonds held by the post
employment plans.
Mortality \u2013 The majority of the obligations are to provide benefits for the
life of the members and their partners, so any increase in life
expectancy will result in an increase in the plans\u2019 liabilities.
Asset returns \u2013 Assets held by the pension plans are invested in a
diversified portfolio of equities, bonds and other assets. Volatility in asset
values will lead to movements in the net deficit/surplus reported in the
consolidated balance sheet for post employment plans which in
addition will also impact the post employment expense in the
consolidated income statement.
The following weighted average assumptions were used to
determine the group\u2019s deficit/surplus in the main post employment
plans at 30 June in the relevant year. The assumptions used to calculate
the charge/credit in the consolidated income statement for the year
ending 30 June are based on the assumptions disclosed as at the
previous 30 June.
United Kingdom
Ireland
United States(1)
2023
%
2022
%
2021
%
2023
%
2022
%
2021
%
2023
%
2022
%
2021
%
Rate of general increase in salaries(2)
3.7
3.6
3.4
3.9
3.8
3.0
\u2014
\u2014
\u2014
Rate of increase to pensions in payment
2.9
2.9
3.1
2.3
2.2
1.7
\u2014
\u2014
\u2014
Rate of increase to deferred pensions
2.7
2.6
2.5
2.4
2.3
1.6
\u2014
\u2014
\u2014
Discount rate for plan liabilities
5.2
3.8
1.9
3.6
3.2
1.0
4.9
4.4
2.7
Inflation \u2013 CPI
2.7
2.6
2.5
2.5
2.4
1.6
2.2
2.3
2.3
Inflation - RPI
3.2
3.1
3.0
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(1)The salary increase assumption in the United States is not a significant assumption as only a minimal amount of members\u2019 pension entitlement is dependent on a member\u2019s projected
final salary.
(2)The salary increase assumptions include an allowance for age-related promotional salary increases.
For the principal UK and Irish pension funds, the table below illustrates the expected age at death of an average worker who retires currently at the
age of 65, and one who is currently aged 45 and subsequently retires at the age of 65:
United Kingdom(1)
Ireland(2)
United States
2023
Age
2022
Age
2021
Age
2023
Age
2022
Age
2021
Age
2023
Age
2022
Age
2021
Age
Retiring currently at age 65
Male
86.8
87.1
87.2
87.2
87.7
86.9
85.6
85.5
85.4
Female
88.4
88.7
88.7
89.6
90.0
89.3
87.2
87.2
87.1
Currently aged 45, retiring at age 65
Male
88.1
88.5
88.6
88.8
89.3
88.6
87.1
87.0
86.9
Female
90.4
90.7
90.8
91.3
91.7
91.1
88.7
88.6
88.5
(1)Based on the CMI\u2019s S3 mortality tables with scaling factors based on the experience of the plan and where people live, with suitable future improvements.
(2)Based on the CMI's S3 mortality tables with scaling factors based on the experience of the plan, with suitable future improvements.
For the significant assumptions, the following sensitivity analyses estimate the potential impacts on the consolidated income statement for the year
ending 30 June 2024 and on the plan liabilities at 30 June 2023:
United Kingdom
Ireland
United States
Benefit/(cost)
Operating
profit
\u00a3 million
Profit after
taxation
\u00a3 million
Plan
liabilities(1)
\u00a3 million
Operating
profit
\u00a3 million
Profit after
taxation
\u00a3 million
Plan
liabilities(1)
\u00a3 million
Operating
profit
\u00a3 million
Profit after
taxation
\u00a3 million
Plan
liabilities(1)
\u00a3 million
Effect of 0.5% increase in discount rate
2
15
259
1
5
85
2
2
22
Effect of 0.5% decrease in discount rate
(2)
(14)
(267)
(1)
(4)
(95)
(2)
(2)
(24)
Effect of 0.5% increase in inflation
(1)
(8)
(156)
\u2014
(2)
(49)
\u2014
(1)
(9)
Effect of 0.5% decrease in inflation
2
8
173
\u2014
2
50
\u2014
1
8
Effect of one year increase in life expectancy
\u2014
(6)
(131)
\u2014
(2)
(55)
\u2014
(1)
(15)
(1)The estimated effect on the liabilities excludes the impact of any interest rate and inflation swaps held by the pension plans.
(i)The sensitivity analyses above have been determined based on reasonably possible changes of the respective assumptions and may not be representative of the actual change. Each
sensitivity is calculated on a change in the key assumption while holding all other assumptions constant. The sensitivity to inflation includes the impact on all inflation linked assumptions
(e.g. pension increases and salary increases where appropriate).
(c) Investment and hedging strategy
The investment strategy for the group\u2019s funded post employment plans is determined locally by the trustees of the plan and/or Diageo, as
appropriate, and takes account of the relevant statutory requirements. The objective of the investment strategy is to achieve a target rate of return in
excess of the movement on the liabilities, whilst taking an acceptable level of investment risk relative to the liabilities. This objective is implemented
by using the funds of the plans to invest in a variety of asset classes that are expected over the long-term to deliver a target rate of return. The
majority of the investment strategies have significant amounts allocated to bonds, in order to provide a natural hedge against movements in the
liabilities of the plans. At 30 June 2023, approximately 97% and 98% (2022 \u2013 100% and 103%) of the UK plans\u2019 liabilities measured on the Trustee's
funding basis (gilts+50bp) were hedged against future movements in interest rates and inflation, respectively, through the combined effect of bonds
and swaps. At 30 June 2023, approximately 92% and 112% (2022 \u2013 70% and 76%) of the Irish plans\u2019 liabilities measured on the Trustee's funding
basis (euro-swaps+50bp) were hedged against future movements in interest rates and inflation, respectively, through the combined effect of bonds
and swaps.
The discount rates used are based on the yields of high-quality fixed income investments. For the UK plans, which represent approximately 65%
of total plan liabilities, the discount rate is determined by reference to the yield curves of AA-rated corporate bonds for which the timing and amount
of cash outflows are similar to those of the plans. A similar process is used to determine the discount rates used for the non-UK plans.
An analysis of the fair value of the plan assets is as follows:
2023
United Kingdom
\u00a3 million
Ireland
\u00a3 million
United States and other
\u00a3 million
Total
\u00a3 million
Quoted
Unquoted
Quoted
Unquoted
Quoted
Unquoted
Quoted
Unquoted
Total
Equities
12
916
\u2014
291
64
98
76
1,305
1,381
Bonds
\u00a0 \u00a0 Fixed-interest government
18
24
\u2014
6
48
8
66
38
104
\u00a0 \u00a0 Inflation-linked government
\u2014
\u2014
\u2014
96
2
2
2
98
100
\u00a0 \u00a0 Investment grade corporate
\u2014
29
\u2014
328
21
227
21
584
605
\u00a0 \u00a0 Non-investment grade
22
289
6
186
2
133
30
608
638
\u00a0 \u00a0 Loan securities
13
526
\u2014
84
\u2014
\u2014
13
610
623
\u00a0 \u00a0 Repurchase agreements
2,351
826
\u2014
\u2014
\u2014
\u2014
2,351
826
3,177
\u00a0 \u00a0 Liability Driven Investment (LDI)
\u2014
\u2014
\u2014
81
\u2014
\u2014
\u2014
81
81
Property
29
462
\u2014
62
\u2014
1
29
525
554
Hedge funds
\u2014
\u2014
\u2014
12
\u2014
5
\u2014
17
17
Interest rate and inflation swaps
\u2014
(971)
102
(18)
\u2014
\u2014
102
(989)
(887)
Cash and other
46
(14)
5
347
\u2014
69
51
402
453
Total bid value of assets
2,491
2,087
113
1,475
137
543
2,741
4,105
6,846
terminate the contingent arrangements comprising mortgages over certain land and buildings and fixed and floating charges over certain
receivables of the group up to a value of \u20ac200 million (\u00a3171 million). The company has agreed with the Trustee conditional contributions of up to
\u20ac35 million (\u00a330 million) by 31 December 2024, \u20ac39 million (\u00a333 million) by 31 December 2027 and \u20ac39 million (\u00a333 million) by 31 December 2030
if a deficit is identified at those valuations.
(e) Timing of benefit payments
The following table provides information on the timing of the benefit payments and the average duration of the defined benefit obligations and the
distribution of the timing of benefit payments:
United Kingdom
Ireland
United States
2023
\u00a3 million
2022
\u00a3 million
2023
\u00a3 million
2022
\u00a3 million
2023
\u00a3 million
2022
\u00a3 million
Maturity analysis of benefits expected to be paid
Within one year
303
295
73
70
57
58
Between 1 to 5 years
1,090
1,082
367
353
174
187
Between 6 to 15 years
2,439
2,556
727
704
331
310
Between 16 to 25 years
2,244
2,252
645
634
206
183
Beyond 25 years
2,664
2,787
747
768
187
174
Total
8,740
8,972
2,559
2,529
955
912
years
years
years
years
years
years
Average duration of the defined benefit obligation
14
15
14
15
9
9
The projected benefit payments are based on the assumptions underlying the assessment of the obligations, including inflation. They are disclosed
undiscounted and therefore appear large relative to the discounted value of the plan liabilities recognised on the consolidated balance sheet. They
are in respect of benefits that have accrued at the balance sheet date and make no allowance for any benefits to be accrued subsequently.
(f) Related party disclosures
Information on transactions between the group and its pension plans is given in note 21.", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutEmployeesExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-655": { "value": "
Accounting policies
Critical accounting judgements
Exceptional items are those that in management\u2019s judgement
need to be disclosed separately. Such items are included within
the income statement caption to which they relate. Management
believes that separate disclosure of exceptional items and the
classification between operating and non-operating further helps
investors to understand the performance of the group.
Changes in estimates and reversals in relation to items
previously recognised as exceptional are presented consistently
as exceptional in the current year.
Operating items
Exceptional operating items are those that are considered to be
material and unusual or non-recurring in nature and are part of
the operating activities of the group, such as one-off global
restructuring programmes which can be multi-year, impairment
of intangible assets and fixed assets, indirect tax settlements,
property disposals and changes in post employment plans.
Non-operating items
Gains and losses on the sale or directly attributable to a
prospective sale of businesses, brands or distribution rights, step
up gains and losses that arise when an investment becomes an
associate or an associate becomes a subsidiary and other
material, unusual non-recurring items, that are not in respect of
the production, marketing and distribution of premium drinks,
are disclosed as exceptional non-operating items below
operating profit in the income statement.
Taxation items
Exceptional current and deferred tax items comprise material
and unusual or non-recurring items that impact taxation.
Examples include direct tax provisions and settlements in respect
of prior years and the remeasurement of deferred tax assets and
liabilities following tax rate changes.\u00a0
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForExceptionalItemsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-656": { "value": "
5. Finance income and charges
Accounting policies
Net interest includes interest income and charges in respect of
financial instruments and the results of hedging transactions
used to manage interest rate risk.\u00a0
Finance charges directly attributable to the acquisition,
construction or production of a qualifying asset, being an asset
that necessarily takes a substantial period of time to get ready
for its intended use or sale, are added to the cost of that asset.
Borrowing costs which are not capitalised are recognised in the
income statement using the effective interest method. All other
finance charges are recognised primarily in the income
statement in the year in which they are incurred.\u00a0
Net other finance charges include items in respect of post
employment plans, the discount unwind of long-term obligations
and hyperinflation charges. The results of operations in
hyperinflationary economies are adjusted to reflect the changes
in the purchasing power of the local currency of the entity before
being translated to sterling.\u00a0
The impact of derivatives, excluding cash flow hedges that
are in respect of commodity price risk management or those that
are used to hedge the currency risk of highly probable future
currency cash flows, is included in interest income or interest
charge.\u00a0
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Interest income
160
127
119
Fair value gain on financial instruments
103
341
124
Total interest income(1)
263
468
243
Interest charge on bank loans, bonds and
overdrafts
(470)
(371)
(365)
Interest charge on leases
(15)
(12)
(16)
Interest charge on other borrowings
(271)
(92)
(84)
Fair value loss on financial instruments
(102)
(346)
(126)
Total interest charges(1)
(858)
(821)
(591)
Net interest charges
(595)
(353)
(348)
Net finance income in respect of post
employment plans in surplus (note 14)
59
22
18
Hyperinflation adjustment in respect of
Turkey (note 1 (f))
10
\u2014
\u2014
Hyperinflation adjustment in respect of
Venezuela (note 1 (f))
\u2014
1
2
Interest income in respect of direct and
indirect tax
8
2
15
Unwinding of discounts
\u2014
4
\u2014
Total other finance income
77
29
35
Net finance charge in respect of post
employment plans in deficit (note 14)
(15)
(12)
(13)
Hyperinflation adjustment in respect of
Turkey (note 1 (f))
\u2014
(34)
\u2014
Hyperinflation adjustment in respect of
Venezuela (note 1 (f))
(2)
\u2014
\u2014
Hyperinflation adjustment and foreign
exchange revaluation of monetary items
in respect of Lebanon (note 1 (f))
\u2014
(3)
(8)
Unwinding of discounts
(13)
(11)
(20)
Interest charge in respect of direct and
indirect tax
(25)
(16)
(11)
Change in financial liability (Level 3)
(8)
(20)
(7)
Guarantee fees
(1)
(1)
(1)
Other finance charges
(12)
(1)
\u2014
Total other finance charges
(76)
(98)
(60)
Net other finance income/(charges)
1
(69)
(25)
(1)Includes \u00a381 million interest income and \u00a3(522)\u00a0million interest charge in respect of
financial assets and liabilities that are not measured at fair value through income
statement (2022 \u2013 \u00a327 million income and \u00a3(417) million charge; 2021 \u2013 \u00a328 million
income and \u00a3(429) million charge).
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceIncomeExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-657": { "value": "
5. Finance income and charges
Accounting policies
Net interest includes interest income and charges in respect of
financial instruments and the results of hedging transactions
used to manage interest rate risk.\u00a0
Finance charges directly attributable to the acquisition,
construction or production of a qualifying asset, being an asset
that necessarily takes a substantial period of time to get ready
for its intended use or sale, are added to the cost of that asset.
Borrowing costs which are not capitalised are recognised in the
income statement using the effective interest method. All other
finance charges are recognised primarily in the income
statement in the year in which they are incurred.\u00a0
Net other finance charges include items in respect of post
employment plans, the discount unwind of long-term obligations
and hyperinflation charges. The results of operations in
hyperinflationary economies are adjusted to reflect the changes
in the purchasing power of the local currency of the entity before
being translated to sterling.\u00a0
The impact of derivatives, excluding cash flow hedges that
are in respect of commodity price risk management or those that
are used to hedge the currency risk of highly probable future
currency cash flows, is included in interest income or interest
charge.\u00a0
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Interest income
160
127
119
Fair value gain on financial instruments
103
341
124
Total interest income(1)
263
468
243
Interest charge on bank loans, bonds and
overdrafts
(470)
(371)
(365)
Interest charge on leases
(15)
(12)
(16)
Interest charge on other borrowings
(271)
(92)
(84)
Fair value loss on financial instruments
(102)
(346)
(126)
Total interest charges(1)
(858)
(821)
(591)
Net interest charges
(595)
(353)
(348)
Net finance income in respect of post
employment plans in surplus (note 14)
59
22
18
Hyperinflation adjustment in respect of
Turkey (note 1 (f))
10
\u2014
\u2014
Hyperinflation adjustment in respect of
Venezuela (note 1 (f))
\u2014
1
2
Interest income in respect of direct and
indirect tax
8
2
15
Unwinding of discounts
\u2014
4
\u2014
Total other finance income
77
29
35
Net finance charge in respect of post
employment plans in deficit (note 14)
(15)
(12)
(13)
Hyperinflation adjustment in respect of
Turkey (note 1 (f))
\u2014
(34)
\u2014
Hyperinflation adjustment in respect of
Venezuela (note 1 (f))
(2)
\u2014
\u2014
Hyperinflation adjustment and foreign
exchange revaluation of monetary items
in respect of Lebanon (note 1 (f))
\u2014
(3)
(8)
Unwinding of discounts
(13)
(11)
(20)
Interest charge in respect of direct and
indirect tax
(25)
(16)
(11)
Change in financial liability (Level 3)
(8)
(20)
(7)
Guarantee fees
(1)
(1)
(1)
Other finance charges
(12)
(1)
\u2014
Total other finance charges
(76)
(98)
(60)
Net other finance income/(charges)
1
(69)
(25)
(1)Includes \u00a381 million interest income and \u00a3(522)\u00a0million interest charge in respect of
financial assets and liabilities that are not measured at fair value through income
statement (2022 \u2013 \u00a327 million income and \u00a3(417) million charge; 2021 \u2013 \u00a328 million
income and \u00a3(429) million charge).
", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestIncomeExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-658": { "value": "
5. Finance income and charges
Accounting policies
Net interest includes interest income and charges in respect of
financial instruments and the results of hedging transactions
used to manage interest rate risk.\u00a0
Finance charges directly attributable to the acquisition,
construction or production of a qualifying asset, being an asset
that necessarily takes a substantial period of time to get ready
for its intended use or sale, are added to the cost of that asset.
Borrowing costs which are not capitalised are recognised in the
income statement using the effective interest method. All other
finance charges are recognised primarily in the income
statement in the year in which they are incurred.\u00a0
Net other finance charges include items in respect of post
employment plans, the discount unwind of long-term obligations
and hyperinflation charges. The results of operations in
hyperinflationary economies are adjusted to reflect the changes
in the purchasing power of the local currency of the entity before
being translated to sterling.\u00a0
The impact of derivatives, excluding cash flow hedges that
are in respect of commodity price risk management or those that
are used to hedge the currency risk of highly probable future
currency cash flows, is included in interest income or interest
charge.\u00a0
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Interest income
160
127
119
Fair value gain on financial instruments
103
341
124
Total interest income(1)
263
468
243
Interest charge on bank loans, bonds and
overdrafts
(470)
(371)
(365)
Interest charge on leases
(15)
(12)
(16)
Interest charge on other borrowings
(271)
(92)
(84)
Fair value loss on financial instruments
(102)
(346)
(126)
Total interest charges(1)
(858)
(821)
(591)
Net interest charges
(595)
(353)
(348)
Net finance income in respect of post
employment plans in surplus (note 14)
59
22
18
Hyperinflation adjustment in respect of
Turkey (note 1 (f))
10
\u2014
\u2014
Hyperinflation adjustment in respect of
Venezuela (note 1 (f))
\u2014
1
2
Interest income in respect of direct and
indirect tax
8
2
15
Unwinding of discounts
\u2014
4
\u2014
Total other finance income
77
29
35
Net finance charge in respect of post
employment plans in deficit (note 14)
(15)
(12)
(13)
Hyperinflation adjustment in respect of
Turkey (note 1 (f))
\u2014
(34)
\u2014
Hyperinflation adjustment in respect of
Venezuela (note 1 (f))
(2)
\u2014
\u2014
Hyperinflation adjustment and foreign
exchange revaluation of monetary items
in respect of Lebanon (note 1 (f))
\u2014
(3)
(8)
Unwinding of discounts
(13)
(11)
(20)
Interest charge in respect of direct and
indirect tax
(25)
(16)
(11)
Change in financial liability (Level 3)
(8)
(20)
(7)
Guarantee fees
(1)
(1)
(1)
Other finance charges
(12)
(1)
\u2014
Total other finance charges
(76)
(98)
(60)
Net other finance income/(charges)
1
(69)
(25)
(1)Includes \u00a381 million interest income and \u00a3(522)\u00a0million interest charge in respect of
financial assets and liabilities that are not measured at fair value through income
statement (2022 \u2013 \u00a327 million income and \u00a3(417) million charge; 2021 \u2013 \u00a328 million
income and \u00a3(429) million charge).
", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestExpenseExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-659": { "value": "
5. Finance income and charges
Accounting policies
Net interest includes interest income and charges in respect of
financial instruments and the results of hedging transactions
used to manage interest rate risk.\u00a0
Finance charges directly attributable to the acquisition,
construction or production of a qualifying asset, being an asset
that necessarily takes a substantial period of time to get ready
for its intended use or sale, are added to the cost of that asset.
Borrowing costs which are not capitalised are recognised in the
income statement using the effective interest method. All other
finance charges are recognised primarily in the income
statement in the year in which they are incurred.\u00a0
Net other finance charges include items in respect of post
employment plans, the discount unwind of long-term obligations
and hyperinflation charges. The results of operations in
hyperinflationary economies are adjusted to reflect the changes
in the purchasing power of the local currency of the entity before
being translated to sterling.\u00a0
The impact of derivatives, excluding cash flow hedges that
are in respect of commodity price risk management or those that
are used to hedge the currency risk of highly probable future
currency cash flows, is included in interest income or interest
charge.\u00a0
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Interest income
160
127
119
Fair value gain on financial instruments
103
341
124
Total interest income(1)
263
468
243
Interest charge on bank loans, bonds and
overdrafts
(470)
(371)
(365)
Interest charge on leases
(15)
(12)
(16)
Interest charge on other borrowings
(271)
(92)
(84)
Fair value loss on financial instruments
(102)
(346)
(126)
Total interest charges(1)
(858)
(821)
(591)
Net interest charges
(595)
(353)
(348)
Net finance income in respect of post
employment plans in surplus (note 14)
59
22
18
Hyperinflation adjustment in respect of
Turkey (note 1 (f))
10
\u2014
\u2014
Hyperinflation adjustment in respect of
Venezuela (note 1 (f))
\u2014
1
2
Interest income in respect of direct and
indirect tax
8
2
15
Unwinding of discounts
\u2014
4
\u2014
Total other finance income
77
29
35
Net finance charge in respect of post
employment plans in deficit (note 14)
(15)
(12)
(13)
Hyperinflation adjustment in respect of
Turkey (note 1 (f))
\u2014
(34)
\u2014
Hyperinflation adjustment in respect of
Venezuela (note 1 (f))
(2)
\u2014
\u2014
Hyperinflation adjustment and foreign
exchange revaluation of monetary items
in respect of Lebanon (note 1 (f))
\u2014
(3)
(8)
Unwinding of discounts
(13)
(11)
(20)
Interest charge in respect of direct and
indirect tax
(25)
(16)
(11)
Change in financial liability (Level 3)
(8)
(20)
(7)
Guarantee fees
(1)
(1)
(1)
Other finance charges
(12)
(1)
\u2014
Total other finance charges
(76)
(98)
(60)
Net other finance income/(charges)
1
(69)
(25)
(1)Includes \u00a381 million interest income and \u00a3(522)\u00a0million interest charge in respect of
financial assets and liabilities that are not measured at fair value through income
statement (2022 \u2013 \u00a327 million income and \u00a3(417) million charge; 2021 \u2013 \u00a328 million
income and \u00a3(429) million charge).
", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestIncomeExpenseExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-660": { "value": "
5. Finance income and charges
Accounting policies
Net interest includes interest income and charges in respect of
financial instruments and the results of hedging transactions
used to manage interest rate risk.\u00a0
Finance charges directly attributable to the acquisition,
construction or production of a qualifying asset, being an asset
that necessarily takes a substantial period of time to get ready
for its intended use or sale, are added to the cost of that asset.
Borrowing costs which are not capitalised are recognised in the
income statement using the effective interest method. All other
finance charges are recognised primarily in the income
statement in the year in which they are incurred.\u00a0
Net other finance charges include items in respect of post
employment plans, the discount unwind of long-term obligations
and hyperinflation charges. The results of operations in
hyperinflationary economies are adjusted to reflect the changes
in the purchasing power of the local currency of the entity before
being translated to sterling.\u00a0
The impact of derivatives, excluding cash flow hedges that
are in respect of commodity price risk management or those that
are used to hedge the currency risk of highly probable future
currency cash flows, is included in interest income or interest
charge.\u00a0
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Interest income
160
127
119
Fair value gain on financial instruments
103
341
124
Total interest income(1)
263
468
243
Interest charge on bank loans, bonds and
overdrafts
(470)
(371)
(365)
Interest charge on leases
(15)
(12)
(16)
Interest charge on other borrowings
(271)
(92)
(84)
Fair value loss on financial instruments
(102)
(346)
(126)
Total interest charges(1)
(858)
(821)
(591)
Net interest charges
(595)
(353)
(348)
Net finance income in respect of post
employment plans in surplus (note 14)
59
22
18
Hyperinflation adjustment in respect of
Turkey (note 1 (f))
10
\u2014
\u2014
Hyperinflation adjustment in respect of
Venezuela (note 1 (f))
\u2014
1
2
Interest income in respect of direct and
indirect tax
8
2
15
Unwinding of discounts
\u2014
4
\u2014
Total other finance income
77
29
35
Net finance charge in respect of post
employment plans in deficit (note 14)
(15)
(12)
(13)
Hyperinflation adjustment in respect of
Turkey (note 1 (f))
\u2014
(34)
\u2014
Hyperinflation adjustment in respect of
Venezuela (note 1 (f))
(2)
\u2014
\u2014
Hyperinflation adjustment and foreign
exchange revaluation of monetary items
in respect of Lebanon (note 1 (f))
\u2014
(3)
(8)
Unwinding of discounts
(13)
(11)
(20)
Interest charge in respect of direct and
indirect tax
(25)
(16)
(11)
Change in financial liability (Level 3)
(8)
(20)
(7)
Guarantee fees
(1)
(1)
(1)
Other finance charges
(12)
(1)
\u2014
Total other finance charges
(76)
(98)
(60)
Net other finance income/(charges)
1
(69)
(25)
(1)Includes \u00a381 million interest income and \u00a3(522)\u00a0million interest charge in respect of
financial assets and liabilities that are not measured at fair value through income
statement (2022 \u2013 \u00a327 million income and \u00a3(417) million charge; 2021 \u2013 \u00a328 million
income and \u00a3(429) million charge).
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceIncomeExpenseExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-661": { "value": "
5. Finance income and charges
Accounting policies
Net interest includes interest income and charges in respect of
financial instruments and the results of hedging transactions
used to manage interest rate risk.\u00a0
Finance charges directly attributable to the acquisition,
construction or production of a qualifying asset, being an asset
that necessarily takes a substantial period of time to get ready
for its intended use or sale, are added to the cost of that asset.
Borrowing costs which are not capitalised are recognised in the
income statement using the effective interest method. All other
finance charges are recognised primarily in the income
statement in the year in which they are incurred.\u00a0
Net other finance charges include items in respect of post
employment plans, the discount unwind of long-term obligations
and hyperinflation charges. The results of operations in
hyperinflationary economies are adjusted to reflect the changes
in the purchasing power of the local currency of the entity before
being translated to sterling.\u00a0
The impact of derivatives, excluding cash flow hedges that
are in respect of commodity price risk management or those that
are used to hedge the currency risk of highly probable future
currency cash flows, is included in interest income or interest
charge.\u00a0
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Interest income
160
127
119
Fair value gain on financial instruments
103
341
124
Total interest income(1)
263
468
243
Interest charge on bank loans, bonds and
overdrafts
(470)
(371)
(365)
Interest charge on leases
(15)
(12)
(16)
Interest charge on other borrowings
(271)
(92)
(84)
Fair value loss on financial instruments
(102)
(346)
(126)
Total interest charges(1)
(858)
(821)
(591)
Net interest charges
(595)
(353)
(348)
Net finance income in respect of post
employment plans in surplus (note 14)
59
22
18
Hyperinflation adjustment in respect of
Turkey (note 1 (f))
10
\u2014
\u2014
Hyperinflation adjustment in respect of
Venezuela (note 1 (f))
\u2014
1
2
Interest income in respect of direct and
indirect tax
8
2
15
Unwinding of discounts
\u2014
4
\u2014
Total other finance income
77
29
35
Net finance charge in respect of post
employment plans in deficit (note 14)
(15)
(12)
(13)
Hyperinflation adjustment in respect of
Turkey (note 1 (f))
\u2014
(34)
\u2014
Hyperinflation adjustment in respect of
Venezuela (note 1 (f))
(2)
\u2014
\u2014
Hyperinflation adjustment and foreign
exchange revaluation of monetary items
in respect of Lebanon (note 1 (f))
\u2014
(3)
(8)
Unwinding of discounts
(13)
(11)
(20)
Interest charge in respect of direct and
indirect tax
(25)
(16)
(11)
Change in financial liability (Level 3)
(8)
(20)
(7)
Guarantee fees
(1)
(1)
(1)
Other finance charges
(12)
(1)
\u2014
Total other finance charges
(76)
(98)
(60)
Net other finance income/(charges)
1
(69)
(25)
(1)Includes \u00a381 million interest income and \u00a3(522)\u00a0million interest charge in respect of
financial assets and liabilities that are not measured at fair value through income
statement (2022 \u2013 \u00a327 million income and \u00a3(417) million charge; 2021 \u2013 \u00a328 million
income and \u00a3(429) million charge).
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceCostExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-662": { "value": "
Accounting policies
Net interest includes interest income and charges in respect of
financial instruments and the results of hedging transactions
used to manage interest rate risk.\u00a0
Finance charges directly attributable to the acquisition,
construction or production of a qualifying asset, being an asset
that necessarily takes a substantial period of time to get ready
for its intended use or sale, are added to the cost of that asset.
Borrowing costs which are not capitalised are recognised in the
income statement using the effective interest method. All other
finance charges are recognised primarily in the income
statement in the year in which they are incurred.\u00a0
Net other finance charges include items in respect of post
employment plans, the discount unwind of long-term obligations
and hyperinflation charges. The results of operations in
hyperinflationary economies are adjusted to reflect the changes
in the purchasing power of the local currency of the entity before
being translated to sterling.\u00a0
The impact of derivatives, excluding cash flow hedges that
are in respect of commodity price risk management or those that
are used to hedge the currency risk of highly probable future
currency cash flows, is included in interest income or interest
charge.\u00a0
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinanceIncomeAndCostsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-663": { "value": "
Accounting policies
Net interest includes interest income and charges in respect of
financial instruments and the results of hedging transactions
used to manage interest rate risk.\u00a0
Finance charges directly attributable to the acquisition,
construction or production of a qualifying asset, being an asset
that necessarily takes a substantial period of time to get ready
for its intended use or sale, are added to the cost of that asset.
Borrowing costs which are not capitalised are recognised in the
income statement using the effective interest method. All other
finance charges are recognised primarily in the income
statement in the year in which they are incurred.\u00a0
Net other finance charges include items in respect of post
employment plans, the discount unwind of long-term obligations
and hyperinflation charges. The results of operations in
hyperinflationary economies are adjusted to reflect the changes
in the purchasing power of the local currency of the entity before
being translated to sterling.\u00a0
The impact of derivatives, excluding cash flow hedges that
are in respect of commodity price risk management or those that
are used to hedge the currency risk of highly probable future
currency cash flows, is included in interest income or interest
charge.\u00a0
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInterestIncomeAndExpenseExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-664": { "value": "
Accounting policies
Net interest includes interest income and charges in respect of
financial instruments and the results of hedging transactions
used to manage interest rate risk.\u00a0
Finance charges directly attributable to the acquisition,
construction or production of a qualifying asset, being an asset
that necessarily takes a substantial period of time to get ready
for its intended use or sale, are added to the cost of that asset.
Borrowing costs which are not capitalised are recognised in the
income statement using the effective interest method. All other
finance charges are recognised primarily in the income
statement in the year in which they are incurred.\u00a0
Net other finance charges include items in respect of post
employment plans, the discount unwind of long-term obligations
and hyperinflation charges. The results of operations in
hyperinflationary economies are adjusted to reflect the changes
in the purchasing power of the local currency of the entity before
being translated to sterling.\u00a0
The impact of derivatives, excluding cash flow hedges that
are in respect of commodity price risk management or those that
are used to hedge the currency risk of highly probable future
currency cash flows, is included in interest income or interest
charge.\u00a0
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinanceCostsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-666": { "value": "
6. Investments in associates and joint ventures
Accounting policies
An associate is an undertaking in which the group has a long-term
equity interest and over which it has the power to exercise significant
influence. A joint venture is a joint arrangement whereby the parties
that have joint control of the arrangement have rights to the net
assets of the arrangement. The group\u2019s interest in the net assets of
associates and joint ventures is reported in investments in the
consolidated balance sheet and its interest in their results (net of tax)
is included in the consolidated income statement below the group\u2019s
operating profit. Associates and joint ventures are initially recorded at
cost including transaction costs. Investments in associates and joint
ventures are reviewed for impairment whenever events or
circumstances indicate that the carrying amount may not be
recoverable. The impairment review compares the net carrying value
with the recoverable amount, where the recoverable amount is the
higher of the value in use calculated as the present value of the
group\u2019s share of the associate\u2019s future cash flows and its fair value
less costs of disposal.
Diageo\u2019s principal associate is Mo\u00ebt Hennessy of which Diageo owns
34%. Mo\u00ebt Hennessy is the wines and spirits division of LVMH Mo\u00ebt
Hennessy Louis Vuitton SA (LVMH). LVMH is based in France and is
listed on the Paris Stock Exchange. Mo\u00ebt Hennessy is also based in
France and is a producer and exporter of champagne and cognac
brands.
A number of joint distribution arrangements have been established
with LVMH in Asia Pacific and France, principally covering distribution of
Diageo\u2019s Scotch whisky and gin premium brands and Mo\u00ebt Hennessy\u2019s
champagne and cognac premium brands. Diageo and LVMH have
each undertaken not to engage in any champagne or cognac activities
competing with those of Mo\u00ebt Hennessy. The arrangements also contain
certain provisions for the protection of Diageo as a non-controlling
shareholder in Mo\u00ebt Hennessy.
(a) An analysis of the movement in the group\u2019s investments in
associates and joint ventures is as follows:
Mo\u00ebt
Hennessy
\u00a3 million
Others
\u00a3 million
Total
\u00a3 million
Cost less provisions
At 30 June 2021
3,128
180
3,308
Exchange differences
48
12
60
Additions
\u2014
65
65
Share of profit/(loss) after tax
425
(8)
417
Dividends
(186)
(4)
(190)
Share of movements in other
comprehensive income and equity
(6)
\u2014
(6)
Impairment charged during the year
\u2014
(2)
(2)
At 30 June 2022
3,409
243
3,652
Exchange differences
(51)
(8)
(59)
Additions
\u2014
93
93
Share of profit/(loss) after tax
379
(9)
370
Step acquisition
\u2014
(17)
(17)
Dividends
(214)
(5)
(219)
Share of movements in other
comprehensive income and equity
36
\u2014
36
Transfer
\u2014
1
1
Impairment charged during the year
\u2014
(28)
(28)
At 30 June 2023
3,559
270
3,829
(i)Including acquisition fair value adjustments principally in respect of Mo\u00ebt Hennessy\u2019s
brands and translated at \u00a31 = \u20ac1.17 (2022 \u2013 \u00a31 = \u20ac1.16).
(c) Information on transactions between the group and its associates
and joint ventures is disclosed in note 21.
(d) Investments in associates and joint ventures comprise the cost of
shares less goodwill written off on acquisitions prior to 1 July 1998 of
\u00a31,384\u00a0million (2022 \u2013 \u00a31,340\u00a0million), plus the group\u2019s share of post
acquisition reserves of \u00a32,445\u00a0million (2022 \u2013 \u00a32,312\u00a0million).
(e) The associates and joint ventures have not reported any material
contingent liabilities in their latest financial statements.
22. Principal group companies
The companies listed below include those which principally affect the profits and assets of the group. The operating companies listed below may
carry on the business described in the countries listed in conjunction with their subsidiaries and other group companies.
Country of
incorporation
Country of operation
Percentage of
equity owned(1)
Business description
Subsidiaries
Diageo Ireland Unlimited Company
Ireland
Worldwide
100%
Production, marketing and distribution of premium drinks
Diageo Great Britain Limited
England
Great Britain
100%
Marketing and distribution of premium drinks
Diageo Scotland Limited
Scotland
Worldwide
100%
Production, marketing and distribution of premium drinks
Diageo Brands B.V.
Netherlands
Worldwide
100%
Marketing and distribution of premium drinks
Diageo North America, Inc.
United States
Worldwide
100%
Production, importing, marketing and distribution of premium drinks
United Spirits Limited(2)
India
India
55.88%
Production, importing, marketing and distribution of premium drinks
Diageo Capital plc(3)
Scotland
United Kingdom
100%
Financing company for the group
Diageo Capital B.V.(3)
Netherlands
Netherlands
100%
Financing company for the group
Diageo Finance plc(3)
England
United Kingdom
100%
Financing company for the group
Diageo Investment Corporation
United States
United States
100%
Financing company for the US group
Mey \u0130\u00e7ki Sanayi ve Ticaret A.\u015e.
Turkey
Turkey
100%
Production, marketing and distribution of premium drinks
Associates
Mo\u00ebt Hennessy, SAS(4)
France
France
34%
Production, marketing and distribution of premium drinks
(1)All percentages, unless otherwise stated, are in respect of holdings of ordinary share capital and are equivalent to the percentages of voting rights held by the group.
(2)Percentage ownership excludes 2.38% owned by the USL Benefit Trust.
(3)Directly owned by Diageo plc.
(4)French limited liability company.", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestsInOtherEntitiesExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-665": { "value": "
6. Investments in associates and joint ventures
Accounting policies
An associate is an undertaking in which the group has a long-term
equity interest and over which it has the power to exercise significant
influence. A joint venture is a joint arrangement whereby the parties
that have joint control of the arrangement have rights to the net
assets of the arrangement. The group\u2019s interest in the net assets of
associates and joint ventures is reported in investments in the
consolidated balance sheet and its interest in their results (net of tax)
is included in the consolidated income statement below the group\u2019s
operating profit. Associates and joint ventures are initially recorded at
cost including transaction costs. Investments in associates and joint
ventures are reviewed for impairment whenever events or
circumstances indicate that the carrying amount may not be
recoverable. The impairment review compares the net carrying value
with the recoverable amount, where the recoverable amount is the
higher of the value in use calculated as the present value of the
group\u2019s share of the associate\u2019s future cash flows and its fair value
less costs of disposal.
Diageo\u2019s principal associate is Mo\u00ebt Hennessy of which Diageo owns
34%. Mo\u00ebt Hennessy is the wines and spirits division of LVMH Mo\u00ebt
Hennessy Louis Vuitton SA (LVMH). LVMH is based in France and is
listed on the Paris Stock Exchange. Mo\u00ebt Hennessy is also based in
France and is a producer and exporter of champagne and cognac
brands.
A number of joint distribution arrangements have been established
with LVMH in Asia Pacific and France, principally covering distribution of
Diageo\u2019s Scotch whisky and gin premium brands and Mo\u00ebt Hennessy\u2019s
champagne and cognac premium brands. Diageo and LVMH have
each undertaken not to engage in any champagne or cognac activities
competing with those of Mo\u00ebt Hennessy. The arrangements also contain
certain provisions for the protection of Diageo as a non-controlling
shareholder in Mo\u00ebt Hennessy.
(a) An analysis of the movement in the group\u2019s investments in
associates and joint ventures is as follows:
Mo\u00ebt
Hennessy
\u00a3 million
Others
\u00a3 million
Total
\u00a3 million
Cost less provisions
At 30 June 2021
3,128
180
3,308
Exchange differences
48
12
60
Additions
\u2014
65
65
Share of profit/(loss) after tax
425
(8)
417
Dividends
(186)
(4)
(190)
Share of movements in other
comprehensive income and equity
(6)
\u2014
(6)
Impairment charged during the year
\u2014
(2)
(2)
At 30 June 2022
3,409
243
3,652
Exchange differences
(51)
(8)
(59)
Additions
\u2014
93
93
Share of profit/(loss) after tax
379
(9)
370
Step acquisition
\u2014
(17)
(17)
Dividends
(214)
(5)
(219)
Share of movements in other
comprehensive income and equity
36
\u2014
36
Transfer
\u2014
1
1
Impairment charged during the year
\u2014
(28)
(28)
At 30 June 2023
3,559
270
3,829
(i)Including acquisition fair value adjustments principally in respect of Mo\u00ebt Hennessy\u2019s
brands and translated at \u00a31 = \u20ac1.17 (2022 \u2013 \u00a31 = \u20ac1.16).
(c) Information on transactions between the group and its associates
and joint ventures is disclosed in note 21.
(d) Investments in associates and joint ventures comprise the cost of
shares less goodwill written off on acquisitions prior to 1 July 1998 of
\u00a31,384\u00a0million (2022 \u2013 \u00a31,340\u00a0million), plus the group\u2019s share of post
acquisition reserves of \u00a32,445\u00a0million (2022 \u2013 \u00a32,312\u00a0million).
(e) The associates and joint ventures have not reported any material
contingent liabilities in their latest financial statements.", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-667": { "value": "
6. Investments in associates and joint ventures
Accounting policies
An associate is an undertaking in which the group has a long-term
equity interest and over which it has the power to exercise significant
influence. A joint venture is a joint arrangement whereby the parties
that have joint control of the arrangement have rights to the net
assets of the arrangement. The group\u2019s interest in the net assets of
associates and joint ventures is reported in investments in the
consolidated balance sheet and its interest in their results (net of tax)
is included in the consolidated income statement below the group\u2019s
operating profit. Associates and joint ventures are initially recorded at
cost including transaction costs. Investments in associates and joint
ventures are reviewed for impairment whenever events or
circumstances indicate that the carrying amount may not be
recoverable. The impairment review compares the net carrying value
with the recoverable amount, where the recoverable amount is the
higher of the value in use calculated as the present value of the
group\u2019s share of the associate\u2019s future cash flows and its fair value
less costs of disposal.
Diageo\u2019s principal associate is Mo\u00ebt Hennessy of which Diageo owns
34%. Mo\u00ebt Hennessy is the wines and spirits division of LVMH Mo\u00ebt
Hennessy Louis Vuitton SA (LVMH). LVMH is based in France and is
listed on the Paris Stock Exchange. Mo\u00ebt Hennessy is also based in
France and is a producer and exporter of champagne and cognac
brands.
A number of joint distribution arrangements have been established
with LVMH in Asia Pacific and France, principally covering distribution of
Diageo\u2019s Scotch whisky and gin premium brands and Mo\u00ebt Hennessy\u2019s
champagne and cognac premium brands. Diageo and LVMH have
each undertaken not to engage in any champagne or cognac activities
competing with those of Mo\u00ebt Hennessy. The arrangements also contain
certain provisions for the protection of Diageo as a non-controlling
shareholder in Mo\u00ebt Hennessy.
(a) An analysis of the movement in the group\u2019s investments in
associates and joint ventures is as follows:
Mo\u00ebt
Hennessy
\u00a3 million
Others
\u00a3 million
Total
\u00a3 million
Cost less provisions
At 30 June 2021
3,128
180
3,308
Exchange differences
48
12
60
Additions
\u2014
65
65
Share of profit/(loss) after tax
425
(8)
417
Dividends
(186)
(4)
(190)
Share of movements in other
comprehensive income and equity
(6)
\u2014
(6)
Impairment charged during the year
\u2014
(2)
(2)
At 30 June 2022
3,409
243
3,652
Exchange differences
(51)
(8)
(59)
Additions
\u2014
93
93
Share of profit/(loss) after tax
379
(9)
370
Step acquisition
\u2014
(17)
(17)
Dividends
(214)
(5)
(219)
Share of movements in other
comprehensive income and equity
36
\u2014
36
Transfer
\u2014
1
1
Impairment charged during the year
\u2014
(28)
(28)
At 30 June 2023
3,559
270
3,829
(i)Including acquisition fair value adjustments principally in respect of Mo\u00ebt Hennessy\u2019s
brands and translated at \u00a31 = \u20ac1.17 (2022 \u2013 \u00a31 = \u20ac1.16).
(c) Information on transactions between the group and its associates
and joint ventures is disclosed in note 21.
(d) Investments in associates and joint ventures comprise the cost of
shares less goodwill written off on acquisitions prior to 1 July 1998 of
\u00a31,384\u00a0million (2022 \u2013 \u00a31,340\u00a0million), plus the group\u2019s share of post
acquisition reserves of \u00a32,445\u00a0million (2022 \u2013 \u00a32,312\u00a0million).
(e) The associates and joint ventures have not reported any material
contingent liabilities in their latest financial statements.", "dimensions": { "concept": "ifrs-full:DisclosureOfJointVenturesExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-668": { "value": "
6. Investments in associates and joint ventures
Accounting policies
An associate is an undertaking in which the group has a long-term
equity interest and over which it has the power to exercise significant
influence. A joint venture is a joint arrangement whereby the parties
that have joint control of the arrangement have rights to the net
assets of the arrangement. The group\u2019s interest in the net assets of
associates and joint ventures is reported in investments in the
consolidated balance sheet and its interest in their results (net of tax)
is included in the consolidated income statement below the group\u2019s
operating profit. Associates and joint ventures are initially recorded at
cost including transaction costs. Investments in associates and joint
ventures are reviewed for impairment whenever events or
circumstances indicate that the carrying amount may not be
recoverable. The impairment review compares the net carrying value
with the recoverable amount, where the recoverable amount is the
higher of the value in use calculated as the present value of the
group\u2019s share of the associate\u2019s future cash flows and its fair value
less costs of disposal.
Diageo\u2019s principal associate is Mo\u00ebt Hennessy of which Diageo owns
34%. Mo\u00ebt Hennessy is the wines and spirits division of LVMH Mo\u00ebt
Hennessy Louis Vuitton SA (LVMH). LVMH is based in France and is
listed on the Paris Stock Exchange. Mo\u00ebt Hennessy is also based in
France and is a producer and exporter of champagne and cognac
brands.
A number of joint distribution arrangements have been established
with LVMH in Asia Pacific and France, principally covering distribution of
Diageo\u2019s Scotch whisky and gin premium brands and Mo\u00ebt Hennessy\u2019s
champagne and cognac premium brands. Diageo and LVMH have
each undertaken not to engage in any champagne or cognac activities
competing with those of Mo\u00ebt Hennessy. The arrangements also contain
certain provisions for the protection of Diageo as a non-controlling
shareholder in Mo\u00ebt Hennessy.
(a) An analysis of the movement in the group\u2019s investments in
associates and joint ventures is as follows:
Mo\u00ebt
Hennessy
\u00a3 million
Others
\u00a3 million
Total
\u00a3 million
Cost less provisions
At 30 June 2021
3,128
180
3,308
Exchange differences
48
12
60
Additions
\u2014
65
65
Share of profit/(loss) after tax
425
(8)
417
Dividends
(186)
(4)
(190)
Share of movements in other
comprehensive income and equity
(6)
\u2014
(6)
Impairment charged during the year
\u2014
(2)
(2)
At 30 June 2022
3,409
243
3,652
Exchange differences
(51)
(8)
(59)
Additions
\u2014
93
93
Share of profit/(loss) after tax
379
(9)
370
Step acquisition
\u2014
(17)
(17)
Dividends
(214)
(5)
(219)
Share of movements in other
comprehensive income and equity
36
\u2014
36
Transfer
\u2014
1
1
Impairment charged during the year
\u2014
(28)
(28)
At 30 June 2023
3,559
270
3,829
(i)Including acquisition fair value adjustments principally in respect of Mo\u00ebt Hennessy\u2019s
brands and translated at \u00a31 = \u20ac1.17 (2022 \u2013 \u00a31 = \u20ac1.16).
(c) Information on transactions between the group and its associates
and joint ventures is disclosed in note 21.
(d) Investments in associates and joint ventures comprise the cost of
shares less goodwill written off on acquisitions prior to 1 July 1998 of
\u00a31,384\u00a0million (2022 \u2013 \u00a31,340\u00a0million), plus the group\u2019s share of post
acquisition reserves of \u00a32,445\u00a0million (2022 \u2013 \u00a32,312\u00a0million).
(e) The associates and joint ventures have not reported any material
contingent liabilities in their latest financial statements.", "dimensions": { "concept": "ifrs-full:DisclosureOfSignificantInvestmentsInAssociatesExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-669": { "value": "
Accounting policies
An associate is an undertaking in which the group has a long-term
equity interest and over which it has the power to exercise significant
influence. A joint venture is a joint arrangement whereby the parties
that have joint control of the arrangement have rights to the net
assets of the arrangement. The group\u2019s interest in the net assets of
associates and joint ventures is reported in investments in the
consolidated balance sheet and its interest in their results (net of tax)
is included in the consolidated income statement below the group\u2019s
operating profit. Associates and joint ventures are initially recorded at
cost including transaction costs. Investments in associates and joint
ventures are reviewed for impairment whenever events or
circumstances indicate that the carrying amount may not be
recoverable. The impairment review compares the net carrying value
with the recoverable amount, where the recoverable amount is the
higher of the value in use calculated as the present value of the
group\u2019s share of the associate\u2019s future cash flows and its fair value
less costs of disposal.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentsInJointVentures", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-670": { "value": "
Accounting policies
An associate is an undertaking in which the group has a long-term
equity interest and over which it has the power to exercise significant
influence. A joint venture is a joint arrangement whereby the parties
that have joint control of the arrangement have rights to the net
assets of the arrangement. The group\u2019s interest in the net assets of
associates and joint ventures is reported in investments in the
consolidated balance sheet and its interest in their results (net of tax)
is included in the consolidated income statement below the group\u2019s
operating profit. Associates and joint ventures are initially recorded at
cost including transaction costs. Investments in associates and joint
ventures are reviewed for impairment whenever events or
circumstances indicate that the carrying amount may not be
recoverable. The impairment review compares the net carrying value
with the recoverable amount, where the recoverable amount is the
higher of the value in use calculated as the present value of the
group\u2019s share of the associate\u2019s future cash flows and its fair value
less costs of disposal.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-671": { "value": "
Accounting policies
An associate is an undertaking in which the group has a long-term
equity interest and over which it has the power to exercise significant
influence. A joint venture is a joint arrangement whereby the parties
that have joint control of the arrangement have rights to the net
assets of the arrangement. The group\u2019s interest in the net assets of
associates and joint ventures is reported in investments in the
consolidated balance sheet and its interest in their results (net of tax)
is included in the consolidated income statement below the group\u2019s
operating profit. Associates and joint ventures are initially recorded at
cost including transaction costs. Investments in associates and joint
ventures are reviewed for impairment whenever events or
circumstances indicate that the carrying amount may not be
recoverable. The impairment review compares the net carrying value
with the recoverable amount, where the recoverable amount is the
higher of the value in use calculated as the present value of the
group\u2019s share of the associate\u2019s future cash flows and its fair value
less costs of disposal.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociates", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-672": { "value": "
7. Taxation
Accounting policies
Current tax is based on taxable profit for the year. Taxable profit is different from accounting profit due to temporary differences between
accounting and tax treatments, and due to items that are never taxable or tax deductible. Tax treatments are not recognised unless it is
probable that a tax authority will accept the treatment. Once considered to be probable, tax treatments are reviewed each year to assess
whether a provision should be taken against full recognition of the treatment on the basis of potential settlement through negotiation and/or
litigation with the relevant tax authorities. Tax provisions are included in current liabilities. Penalties and interest on tax liabilities are included
in operating profit and finance charges, respectively.
Full provision for deferred tax is made for temporary differences between the carrying value of assets and liabilities for financial reporting
purposes and their value for tax purposes, except for deferred tax provision arising on goodwill from business combinations. The amount of
deferred tax reflects the expected recoverable amount and is based on the expected manner of recovery or settlement of the carrying
amount of assets and liabilities, using the basis of taxation enacted or substantively enacted by the balance sheet date. Deferred tax assets
are not recognised where it is more likely than not that the assets will not be realised in the future. No deferred tax liability is provided in
respect of any future remittance of earnings of foreign subsidiaries where the group is able to control the remittance of earnings and it is
probable that such earnings will not be remitted in the foreseeable future, or where no liability would arise on the remittance.
Critical accounting estimates and judgements
The group is required to estimate the corporate tax in each of the jurisdictions in which it operates. Management is required to estimate the
amount that should be recognised as a tax liability or tax asset in many countries which are subject to tax audits which by their nature are
often complex and can take several years to resolve; current tax balances are based on such estimations. Tax provisions are based on
management\u2019s judgement and interpretation of country specific tax law and the likelihood of settlement. However, the actual tax liabilities
could differ from the provision and in such event the group would be required to make an adjustment in a subsequent period which could
have a material impact on the group\u2019s profit for the year.
The evaluation of deferred tax asset recoverability requires estimates to be made regarding the availability of future taxable income. For
brands with an indefinite life, management\u2019s intention is to recover the book value through a potential sale in the future, and therefore the
deferred tax on the brand value is generally recognised using the appropriate country capital gains tax rate. To the extent brands with an
indefinite life have been impaired, management considers this to be an indication of recovery through use and in such a case deferred tax
on the brand value is recognised using the appropriate country corporate income tax rate.
(a) Analysis of taxation charge for the year
United Kingdom
Rest of world
Total
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Current tax
Current year
160
174
100
879
867
684
1,039
1,041
784
Adjustments in respect of prior years
33
10
1
(39)
16
28
(6)
26
29
193
184
101
840
883
712
1,033
1,067
813
Deferred tax
Origination and reversal of temporary differences
25
\u2014
13
(70)
21
18
(45)
21
31
Changes in tax rates
\u2014
2
46
11
1
32
11
3
78
Adjustments in respect of prior years
6
\u2014
8
(35)
(42)
(23)
(29)
(42)
(15)
31
2
67
(94)
(20)
27
(63)
(18)
94
Taxation on profit
224
186
168
746
863
739
970
1,049
907
(b) Exceptional tax (credits)/charges
The taxation charge includes the following exceptional items:
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Brand impairment(1)
(124)
(55)
\u2014
US guarantee fee claim(2)
(57)
\u2014
\u2014
Supply chain agility programme
(23)
\u2014
\u2014
Distribution termination fee
(11)
\u2014
\u2014
Disposal of businesses and brands(3)
29
23
\u2014
Winding down Russian operations
\u2014
3
\u2014
Tax rate change in the United Kingdom(4)
\u2014
\u2014
46
Tax rate change in the Netherlands(5)
\u2014
\u2014
42
Other items
\u2014
(2)
(4)
(186)
(31)
84
(1)In the year ended 30 June 2023, an exceptional tax credit of \u00a3124 million was recognised mainly in respect of the impairment of the McDowell's brand. In the year ended 30 June 2022,
the exceptional tax credit of \u00a355\u00a0million consists of tax impact on the impairment of the McDowell's and Bell's brands for \u00a335\u00a0million and \u00a320\u00a0million, respectively.
(2)In the year ended 30 June 2023, an exceptional tax credit of \u00a357\u00a0million was recognised in respect of the deductibility of fees paid to Diageo plc for guaranteeing externally issued debt
of US group entities. Following engagement with the tax authorities, guarantee fees for the periods ended 30 June 2012 to 30 June 2022 are fully deductible.
(3)In the year ended 30 June 2023, the exceptional net tax charge of \u00a329\u00a0million mainly comprised of a tax charge of \u00a342\u00a0million in respect of the sale of Guinness Cameroun S.A., partly
offset by a tax credit of \u00a310\u00a0million in respect of the sale of certain USL businesses. In the year ended 30 June 2022, a \u00a323\u00a0million exceptional tax charge was recognised in respect of the
gain on the sale of the Picon brand.
(4) On 24 May 2021, legislation was substantively enacted in the UK to increase the corporate tax rate to 25% with effect from 1 April 2023. As a result of the change, an exceptional tax
charge of \u00a346\u00a0million was recognised for the year ended 30 June 2021 in relation to the remeasurement of deferred tax assets and liabilities. In addition, there was a one-off charge of
\u00a348\u00a0million to other comprehensive income and equity, mainly in respect of the remeasurement of the deferred tax liabilities on the post employment assets.
(5)On 15 December 2020, legislation was substantively enacted in the Netherlands to maintain the headline corporate tax rate at 25%, reversing a previously enacted reduction in the
corporate tax rate to 21.7% from 2021. As a result of the change, an exceptional tax charge of \u00a342\u00a0million was recognised for the year ended 30 June 2021 in relation to the
remeasurement of deferred tax liabilities. In the year ended 30 June 2022, the Dutch Senate enacted an increased tax rate of 25.8%. The remeasurement of deferred tax liabilities was
recognised as an underlying tax charge.
(c) Taxation rate reconciliation and factors that may affect future tax charges
2023
\u00a3 million
2023
%
2022
\u00a3 million
2022
%
2021
\u00a3 million
2021
%
Profit before taxation
4,736
4,387
3,706
Notional charge at UK corporation tax rate
971
20.5
833
19.0
704
19.0
Elimination of notional tax on share of after tax results of associates and joint
ventures
(76)
(1.6)
(79)
(1.8)
(63)
(1.7)
Differences in overseas tax rates
95
2.0
161
3.7
128
3.5
Disposal of businesses and brands
(42)
(0.9)
21
0.5
(2)
(0.1)
Other items not chargeable
(63)
(1.3)
(49)
(1.1)
(52)
(1.4)
Impairment
(2)
\u2014
36
0.8
\u2014
\u2014
Other items not deductible
71
1.5
58
1.3
67
1.8
Irrecoverable withholding taxes
38
0.8
39
0.9
25
0.7
Movement in provision in respect of uncertain tax positions(1)
27
0.6
42
0.9
1
\u2014
Changes in tax rates(2)
11
0.2
3
0.1
78
2.1
Adjustments in respect of prior years(3)
(60)
(1.3)
(16)
(0.4)
21
0.6
Taxation on profit
970
20.5
1,049
23.9
907
24.5
Tax rate before exceptional items
\u2014
23.0
\u2014
22.5
\u2014
22.2
(1)Movement in provision in respect of uncertain tax positions includes both current and prior year uncertain tax position movements.
(2)Changes in tax rates for the year ended 30 June 2021 are mainly due to the tax rate change in the Netherlands and the United Kingdom.
(3)Excludes prior year movement in provisions. Also included an exceptional tax credit of \u00a357\u00a0million in respect of the deductibility of fees paid to Diageo plc for guaranteeing externally
issued debt of its US group entities.
The table above reconciles the notional taxation charge calculated at the UK tax rate, to the actual total tax charge. As a group operating in
multiple countries, the actual tax rates applicable to profits in those countries are different from the UK tax rate. The impact is shown in the table
above as differences in overseas tax rates. The group\u2019s worldwide business leads to the consideration of a number of important factors which may
affect future tax charges, such as the levels and mix of profitability in different jurisdictions, transfer pricing regulations, tax rates imposed and tax
regime reforms, acquisitions, disposals, restructuring activities, and settlements or agreements with tax authorities.
Significant ongoing changes in the international tax environment and an increase in global tax audit activity means that tax uncertainties and
associated risks have been gradually increasing. In the medium term, these risks could result in an increase in tax liabilities or adjustments to the
carrying value of deferred tax assets and liabilities. See note 19 (f).
The group has a number of ongoing tax audits worldwide for which provisions are recognised in line with the relevant accounting standard,
taking into account best estimates and management\u2019s judgements concerning the ultimate outcome of the tax audits. For the year ended 30 June
2023, ongoing audits that are provided for individually are not expected to result in a material tax liability. The current tax asset of \u00a3232 million (30
June 2022 \u2013 \u00a3149 million) and tax liability of \u00a3135 million (30 June 2022 \u2013 \u00a3252 million) include \u00a3173 million (30 June 2022 \u2013 \u00a3156 million) of
provisions for tax uncertainties.
The cash tax paid in the year ended 30 June 2023 amounts to \u00a31,201\u00a0million (30 June 2022 \u2013 \u00a3949\u00a0million) and is \u00a3231\u00a0million higher than the
current tax charge (30 June 2022 \u2013 \u00a3100\u00a0million lower). This arises as a result of timing differences between the accrual of income taxes, the
movement in the provision for uncertain tax positions and the actual payment of cash.\u00a0
In December 2021, the OECD released a framework for Pillar Two Model Rules which will introduce a global minimum corporate tax rate of 15%
applicable to multinational enterprise groups with global revenue over \u20ac750 million. The legislation implementing the rules in the UK was
substantively enacted on 20 June 2023 and will apply to Diageo from the financial year ending 30 June 2025 onwards. Diageo is reviewing this
legislation and also monitoring the status of implementation of the model rules outside of the UK to understand the potential impact on the group.
Diageo has applied the temporary exception under IAS 12 in relation to the accounting for deferred taxes arising from the implementation of the
Pillar Two rules.
(d) Deferred tax assets and liabilities
Deferred tax recognised in the consolidated balance sheet comprise the following net deferred tax (liabilities)/assets:
Property,
plant and
equipment
\u00a3 million
Intangible
assets
\u00a3 million
Post
employment
plans
\u00a3 million
Tax losses
\u00a3 million
Other
temporary
differences(1)
\u00a3 million
Total
\u00a3 million
At 30 June 2021
(381)
(1,636)
(129)
57
244
(1,845)
Exchange differences
(21)
(155)
3
3
17
(153)
Recognised in income statement
(42)
(3)
(10)
2
74
21
Reclassification
2
40
\u2014
\u2014
(7)
35
Recognised in other comprehensive loss and equity
(20)
(104)
(103)
\u2014
20
(207)
Tax rate change \u2013 recognised in income statement
(1)
(3)
\u2014
1
\u2014
(3)
Tax rate change \u2013 recognised in other comprehensive loss and equity
\u2014
\u2014
(22)
\u2014
2
(20)
Acquisition of subsidiaries
\u2014
(31)
\u2014
\u2014
\u2014
(31)
Sale of businesses
(5)
\u2014
\u2014
\u2014
3
(2)
At 30 June 2022
(468)
(1,892)
(261)
63
353
(2,205)
Exchange differences
33
113
(3)
1
(10)
134
Recognised in income statement
(30)
93
2
(15)
24
74
Recognised in other comprehensive income and equity
(6)
(30)
152
\u2014
(50)
66
Tax rate change \u2013 recognised in income statement
(1)
(12)
(1)
\u2014
3
(11)
Acquisition of subsidiaries
\u2014
(71)
\u2014
\u2014
\u2014
(71)
Transfer from asset held for sale
(2)
(37)
\u2014
\u2014
5
(34)
Sale of businesses
10
\u2014
(1)
\u2014
(4)
5
At 30 June 2023
(464)
(1,836)
(112)
49
321
(2,042)
employment to determine if any contingent payments are for post-combination employee services, which are excluded from consideration.
On the acquisition of a business, or of an interest in an associate or joint venture, fair values, reflecting conditions at the date of
acquisition, are attributed to the net assets, including identifiable intangible assets and contingent liabilities acquired. Directly attributable
acquisition costs in respect of subsidiary companies acquired are recognised in other external charges as incurred.
The non-controlling interests on the date of acquisition can be measured either at the fair value or at the non-controlling shareholder\u2019s
proportion of the net fair value of the identifiable assets assumed. This choice is made separately for each acquisition.
Where the group has issued a put option over shares held by a non-controlling interest, the group derecognises the non-controlling
interests and instead recognises a contingent deferred consideration liability for the estimated amount likely to be paid to the non-controlling
interest on the exercise of those options. Movements in the estimated liability in respect of put options are recognised in retained earnings.
Transactions with non-controlling interests are recorded directly in retained earnings.
For all entities in which the company directly or indirectly owns equity,\u00a0a judgement is made to determine whether it controls and therefore
should fully consolidate the investee. An assessment is carried out to determine\u00a0whether the group has the exposure or rights to the variable
returns of the investee and has the ability to affect those returns through its power over the investee. To establish control, an analysis is carried
out of\u00a0the substantive and protective rights that the group and the other investors hold. This assessment\u00a0is dependent on the activities and
purpose of the investee and the rights of the other shareholders, such as which party controls the board, executive committee and material
policies of the investee. Determining whether the rights that the group holds are substantive, requires management\u00a0judgement.
Where less than 50% of the equity of an investee is held, and the group holds significantly more voting rights than any other vote holder
or organised group of vote holders, this may be an indicator of de facto control. An assessment is needed to determine all the factors
relevant to the relationship with the investee to ascertain whether control has been established and whether the investee should be
consolidated as a subsidiary. Where voting power and returns from an investment are split equally between two entities then the
arrangement is accounted for as a joint venture.
On an acquisition, fair values are attributed to the assets and liabilities acquired. This may involve material judgement to determine these
values.
(a) Acquisition of businesses
Fair value of net assets acquired and cash consideration paid in respect of the acquisition of subsidiaries in the three years ended 30\u00a0June 2023
were as follows:
Net assets acquired and consideration
Don Papa
\u00a3 million
Other
\u00a3 million
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Brands and other intangibles
293
45
338
120
334
Property, plant and equipment
1
24
25
\u2014
15
Inventories
6
21
27
6
12
Other working capital
(2)
(1)
(3)
3
(3)
Deferred tax
(67)
(4)
(71)
(31)
(15)
Borrowings
\u2014
\u2014
\u2014
\u2014
(8)
(Overdraft)/Cash
(1)
1
\u2014
1
4
Fair value of assets and liabilities
230
86
316
99
339
Goodwill arising on acquisition
64
28
92
70
274
Settlement of pre-existing relationship
\u2014
\u2014
\u2014
(1)
\u2014
Step acquisitions
\u2014
(11)
(11)
(6)
\u2014
Consideration payable
294
103
397
162
613
Satisfied by:
Cash consideration paid
(218)
(98)
(316)
(88)
(358)
Contingent consideration payable
(72)
(4)
(76)
(70)
(253)
Deferred consideration payable
(4)
(1)
(5)
(4)
(2)
(294)
(103)
(397)
(162)
(613)
Acquisitions in the year
On 10 March 2023, Diageo completed the acquisition of Kanlaon
Limited and Chat Noir Co. Inc., (the owner of Don Papa Rum) to
support Diageo\u2019s participation in the super-premium dark rum segment
for upfront cash consideration of \u20ac246\u00a0million (\u00a3218\u00a0million), deferred
consideration of \u20ac4\u00a0million (\u00a34\u00a0million) and contingent consideration of
up to \u20ac178\u00a0million (\u00a3158\u00a0million) through to 2028 subject to certain
financial performance targets, reflecting the brand\u2019s expected growth
potential. The fair value of the contingent consideration of \u20ac82\u00a0million
(\u00a372\u00a0million) was estimated by calculating the present value of the
future expected cash flows which is dependent on management\u2019s
estimates in respect of the forecasting of future cash flows and the
discount rates applicable to the future cash flows. The goodwill arising
on the acquisition of Don Papa Rum represents expected revenue
synergies and the acquired workforce. Don Papa Rum contributed
\u00a310\u00a0million to net sales and \u00a315\u00a0million operating loss to the period, out
of which \u00a315\u00a0million is related to acquisition transaction and integration
costs in the year ended 30 June 2023. The fair value measurement of
assets and liabilities acquired is in progress. The fair values of assets
and liabilities acquired are provisional and will be finalised in the year
ending 30 June 2024.
Diageo completed further acquisitions in the year ended 30 June
2023: (i) on 29 September 2022, the acquisition of the remaining issued
share capital of Mr Black Spirits Pty Ltd, owner of Mr Black, the
Australian premium cold brew coffee liqueur, that it did not already
own; and (ii) on 2 November 2022, the acquisition of the entire issued
share capital of Balcones Distilling, a Texas craft distiller and one of the
leading producers of American single malt whiskey in the United States.
The aggregate up-front cash consideration paid on completion of these
transactions in the year ended 30 June 2023 was \u00a398\u00a0million. \u00a0
Prior year acquisitions
On 31 March 2022, Diageo acquired 100% equity interest in 21Seeds, to
support Diageo's participation in the super premium flavoured tequila
segment, for a total consideration of \u00a362\u00a0million upfront in cash and a
contingent consideration of up to \u00a361\u00a0million linked to performance
targets.
Diageo completed further acquisitions in the year ended 30 June
2022, including (i) on 27 January 2022, the acquisition of Casa UM, to
expand Reserve portfolio with premium artisanal mezcal brand, Mezcal
Uni\u00f3n and (ii) on 29 June 2022, the acquisition of Vivanda, owner of the
technology behind 'What's your Whisky' platform and the Journey of
Flavour experience at Johnnie Walker Princes Street, to support
Diageo's ambition to provide customised brand experiences across all
channels. The aggregate upfront cash consideration paid on
completion of these transactions in the year ended 30 June 2022 was
\u00a326\u00a0million. In addition, these transactions included provision for further
contingent consideration of up to \u00a318\u00a0million in aggregate, linked to
performance targets and a further deferred consideration of \u00a34\u00a0million.
On 30 September 2020, Diageo completed the acquisition of
Aviation Gin LLC (Aviation Gin) and Davos Brands LLC (Davos Brands)
to support Diageo's participation in the super-premium gin segment for
a total consideration of $337 million (\u00a3263 million) upfront in cash and
contingent consideration of up to $275 million (\u00a3214 million) linked to
performance targets.
Diageo also completed a number of additional acquisitions in the year
ended 30 June 2021, comprising: (i) in February 2021, the acquisition of
Chase Distillery Limited, to further support Diageo's participation in the
premium-plus gin segment in the United Kingdom; (ii) in March 2021,
the acquisition of Far West Spirits LLC, owner of the Lone River Ranch
Water brand, to improve Diageo's participation in the ready to drink
category in the United States; and (iii) in April 2021, the acquisition of
Sons of Liberty Spirits Company, to expand Diageo's spirits-based ready
to drink portfolio with Loyal 9 Cocktails. The aggregate upfront cash
consideration paid on completion of these three transactions in the year
ended 30 June 2021 was \u00a395 million. In addition, two of these
transactions included provision for further contingent consideration of
up to \u00a386 million in aggregate, in each case linked to performance
targets, and one of the transactions provided for a further \u00a32\u00a0million of
deferred consideration, of which \u00a31\u00a0million was paid by 30 June 2021.
Purchase of shares of non-controlling interests
On 24 March 2023, Diageo completed the purchase of 14.97% of the
share capital of EABL for an aggregate consideration of KES 22,732
million (\u00a3142\u00a0million) in cash and transaction costs of \u00a34\u00a0million. This
took Diageo\u2019s shareholding in EABL from 50.03% to 65%. EABL was
already controlled and therefore consolidated prior to this transaction.
In the year ended 30 June 2021, EABL, a Diageo subsidiary
completed the acquisition of 30% of shares in Serengeti Breweries
Limited for a consideration of $55 million (\u00a342 million) in cash and
\u00a316\u00a0million in the form of shareholder loan from two Diageo subsidiaries
in 2021, increasing Diageo's effective economic interest from 40.2% to
47.0%.
All transactions were recognised in retained earnings.
(b) Sale of businesses and brands
Cash consideration received and net assets disposed of in respect of sale of businesses and brands in the three years ended 30 June 2023 were as
follows:
Guinness
Cameroun S.A.
\u00a3 million
Other
\u00a3 million
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Sale consideration
Cash received
384
115
499
106
14
(Cash)/overdraft disposed of
(13)
\u2014
(13)
2
\u2014
Transaction and other directly attributable costs paid
(17)
(7)
(24)
(26)
\u2014
Net cash received
354
108
462
82
14
Transaction costs payable
(8)
3
(5)
(16)
1
346
111
457
66
15
Net assets disposed of
Goodwill
\u2014
\u2014
\u2014
(14)
\u2014
Property, plant and equipment
(103)
(3)
(106)
(11)
(2)
Assets and liabilities held for sale
\u2014
(79)
(79)
\u2014
\u2014
Inventories
(24)
(4)
(28)
(4)
\u2014
Other working capital
69
\u2014
69
15
1
Other borrowings
2
\u2014
2
1
\u2014
Corporate tax
(3)
\u2014
(3)
(5)
\u2014
Deferred tax
5
\u2014
5
(2)
\u2014
Post employment benefit liabilities
4
\u2014
4
\u2014
\u2014
(50)
(86)
(136)
(20)
(1)
Impairment charge recognised up until the date of sale
(3)
\u2014
(3)
\u2014
\u2014
Exchange recycled from other comprehensive income
17
1
18
(63)
\u2014
Gain/(loss) on disposal before taxation
310
26
336
(17)
14
Taxation
(42)
13
(29)
(23)
\u2014
Gain/(loss) on disposal after taxation
268
39
307
(40)
14
employment to determine if any contingent payments are for post-combination employee services, which are excluded from consideration.
On the acquisition of a business, or of an interest in an associate or joint venture, fair values, reflecting conditions at the date of
acquisition, are attributed to the net assets, including identifiable intangible assets and contingent liabilities acquired. Directly attributable
acquisition costs in respect of subsidiary companies acquired are recognised in other external charges as incurred.
The non-controlling interests on the date of acquisition can be measured either at the fair value or at the non-controlling shareholder\u2019s
proportion of the net fair value of the identifiable assets assumed. This choice is made separately for each acquisition.
Where the group has issued a put option over shares held by a non-controlling interest, the group derecognises the non-controlling
interests and instead recognises a contingent deferred consideration liability for the estimated amount likely to be paid to the non-controlling
interest on the exercise of those options. Movements in the estimated liability in respect of put options are recognised in retained earnings.
Transactions with non-controlling interests are recorded directly in retained earnings.
For all entities in which the company directly or indirectly owns equity,\u00a0a judgement is made to determine whether it controls and therefore
should fully consolidate the investee. An assessment is carried out to determine\u00a0whether the group has the exposure or rights to the variable
returns of the investee and has the ability to affect those returns through its power over the investee. To establish control, an analysis is carried
out of\u00a0the substantive and protective rights that the group and the other investors hold. This assessment\u00a0is dependent on the activities and
purpose of the investee and the rights of the other shareholders, such as which party controls the board, executive committee and material
policies of the investee. Determining whether the rights that the group holds are substantive, requires management\u00a0judgement.
Where less than 50% of the equity of an investee is held, and the group holds significantly more voting rights than any other vote holder
or organised group of vote holders, this may be an indicator of de facto control. An assessment is needed to determine all the factors
relevant to the relationship with the investee to ascertain whether control has been established and whether the investee should be
consolidated as a subsidiary. Where voting power and returns from an investment are split equally between two entities then the
arrangement is accounted for as a joint venture.
On an acquisition, fair values are attributed to the assets and liabilities acquired. This may involve material judgement to determine these
values.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSubsidiariesExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-678": { "value": "
Accounting policies
The consolidated financial statements include the results of the company and its subsidiaries together with the group\u2019s attributable share of
the results of associates and joint ventures. The results of subsidiaries acquired or sold are included in the income statement from, or up to,
the date that control passes.
Business combinations are accounted for using the acquisition method. Identifiable assets, liabilities and contingent liabilities acquired are
measured at fair value at acquisition date. The consideration payable is measured at fair value and includes the fair value of any contingent
consideration. Among other factors, the group considers the nature of, and compensation for the selling shareholders' continuing
employment to determine if any contingent payments are for post-combination employee services, which are excluded from consideration.
On the acquisition of a business, or of an interest in an associate or joint venture, fair values, reflecting conditions at the date of
acquisition, are attributed to the net assets, including identifiable intangible assets and contingent liabilities acquired. Directly attributable
acquisition costs in respect of subsidiary companies acquired are recognised in other external charges as incurred.
The non-controlling interests on the date of acquisition can be measured either at the fair value or at the non-controlling shareholder\u2019s
proportion of the net fair value of the identifiable assets assumed. This choice is made separately for each acquisition.
Where the group has issued a put option over shares held by a non-controlling interest, the group derecognises the non-controlling
interests and instead recognises a contingent deferred consideration liability for the estimated amount likely to be paid to the non-controlling
interest on the exercise of those options. Movements in the estimated liability in respect of put options are recognised in retained earnings.
Transactions with non-controlling interests are recorded directly in retained earnings.
For all entities in which the company directly or indirectly owns equity,\u00a0a judgement is made to determine whether it controls and therefore
should fully consolidate the investee. An assessment is carried out to determine\u00a0whether the group has the exposure or rights to the variable
returns of the investee and has the ability to affect those returns through its power over the investee. To establish control, an analysis is carried
out of\u00a0the substantive and protective rights that the group and the other investors hold. This assessment\u00a0is dependent on the activities and
purpose of the investee and the rights of the other shareholders, such as which party controls the board, executive committee and material
policies of the investee. Determining whether the rights that the group holds are substantive, requires management\u00a0judgement.
Where less than 50% of the equity of an investee is held, and the group holds significantly more voting rights than any other vote holder
or organised group of vote holders, this may be an indicator of de facto control. An assessment is needed to determine all the factors
relevant to the relationship with the investee to ascertain whether control has been established and whether the investee should be
consolidated as a subsidiary. Where voting power and returns from an investment are split equally between two entities then the
arrangement is accounted for as a joint venture.
On an acquisition, fair values are attributed to the assets and liabilities acquired. This may involve material judgement to determine these
values.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-679": { "value": "
Accounting policies
The consolidated financial statements include the results of the company and its subsidiaries together with the group\u2019s attributable share of
the results of associates and joint ventures. The results of subsidiaries acquired or sold are included in the income statement from, or up to,
the date that control passes.
Business combinations are accounted for using the acquisition method. Identifiable assets, liabilities and contingent liabilities acquired are
measured at fair value at acquisition date. The consideration payable is measured at fair value and includes the fair value of any contingent
consideration. Among other factors, the group considers the nature of, and compensation for the selling shareholders' continuing
employment to determine if any contingent payments are for post-combination employee services, which are excluded from consideration.
On the acquisition of a business, or of an interest in an associate or joint venture, fair values, reflecting conditions at the date of
acquisition, are attributed to the net assets, including identifiable intangible assets and contingent liabilities acquired. Directly attributable
acquisition costs in respect of subsidiary companies acquired are recognised in other external charges as incurred.
The non-controlling interests on the date of acquisition can be measured either at the fair value or at the non-controlling shareholder\u2019s
proportion of the net fair value of the identifiable assets assumed. This choice is made separately for each acquisition.
Where the group has issued a put option over shares held by a non-controlling interest, the group derecognises the non-controlling
interests and instead recognises a contingent deferred consideration liability for the estimated amount likely to be paid to the non-controlling
interest on the exercise of those options. Movements in the estimated liability in respect of put options are recognised in retained earnings.
Transactions with non-controlling interests are recorded directly in retained earnings.
For all entities in which the company directly or indirectly owns equity,\u00a0a judgement is made to determine whether it controls and therefore
should fully consolidate the investee. An assessment is carried out to determine\u00a0whether the group has the exposure or rights to the variable
returns of the investee and has the ability to affect those returns through its power over the investee. To establish control, an analysis is carried
out of\u00a0the substantive and protective rights that the group and the other investors hold. This assessment\u00a0is dependent on the activities and
purpose of the investee and the rights of the other shareholders, such as which party controls the board, executive committee and material
policies of the investee. Determining whether the rights that the group holds are substantive, requires management\u00a0judgement.
Where less than 50% of the equity of an investee is held, and the group holds significantly more voting rights than any other vote holder
or organised group of vote holders, this may be an indicator of de facto control. An assessment is needed to determine all the factors
relevant to the relationship with the investee to ascertain whether control has been established and whether the investee should be
consolidated as a subsidiary. Where voting power and returns from an investment are split equally between two entities then the
arrangement is accounted for as a joint venture.
On an acquisition, fair values are attributed to the assets and liabilities acquired. This may involve material judgement to determine these
values.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsAndGoodwillExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-680": { "value": "
(b) Sale of businesses and brands
Cash consideration received and net assets disposed of in respect of sale of businesses and brands in the three years ended 30 June 2023 were as
follows:
Guinness
Cameroun S.A.
\u00a3 million
Other
\u00a3 million
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Sale consideration
Cash received
384
115
499
106
14
(Cash)/overdraft disposed of
(13)
\u2014
(13)
2
\u2014
Transaction and other directly attributable costs paid
(17)
(7)
(24)
(26)
\u2014
Net cash received
354
108
462
82
14
Transaction costs payable
(8)
3
(5)
(16)
1
346
111
457
66
15
Net assets disposed of
Goodwill
\u2014
\u2014
\u2014
(14)
\u2014
Property, plant and equipment
(103)
(3)
(106)
(11)
(2)
Assets and liabilities held for sale
\u2014
(79)
(79)
\u2014
\u2014
Inventories
(24)
(4)
(28)
(4)
\u2014
Other working capital
69
\u2014
69
15
1
Other borrowings
2
\u2014
2
1
\u2014
Corporate tax
(3)
\u2014
(3)
(5)
\u2014
Deferred tax
5
\u2014
5
(2)
\u2014
Post employment benefit liabilities
4
\u2014
4
\u2014
\u2014
(50)
(86)
(136)
(20)
(1)
Impairment charge recognised up until the date of sale
(3)
\u2014
(3)
\u2014
\u2014
Exchange recycled from other comprehensive income
17
1
18
(63)
\u2014
Gain/(loss) on disposal before taxation
310
26
336
(17)
14
Taxation
(42)
13
(29)
(23)
\u2014
Gain/(loss) on disposal after taxation
268
39
307
(40)
14
Impairment reviews are carried out to ensure that intangible assets, including brands, are not carried at above their recoverable amounts.
Value in use and fair value less costs of disposal are both considered for these reviews and any impairment charge is based on these. The
tests are dependent on management\u2019s estimates in respect of the forecasting of future cash flows, the discount rates applicable to the future
cash flows and what expected growth rates are reasonable. Judgement is required in determining the cash-generating units. Such estimates
and judgements are subject to change as a result of changing economic conditions and actual cash flows may differ from forecasts.
The below additional considerations have been applied by management regarding the potential financial impacts of increasing
inflationary pressures, recently observable worldwide:
\u2022changes in the interest rate environment are taken into consideration when determining the discount rates;
\u2022terminal growth rates do not exceed the long-term annual inflation rate of the country or region, thus excluding any increased inflation
growth experienced in the short-term;
\u2022additional sensitivity scenarios are applied for those markets or regions where the inflation and/or the exchange devaluation is
considered significant based on management\u2019s judgement.
Consideration of climate risk impact
The impact of climate risk on the future cash flows has also been considered for scenarios analysed in line with the climate change risk
assessment. The climate change scenario analyses performed in 2023 \u2013 conducted in line with TCFD recommendations (\u2018Transition
Scenario\u2019 (RCP 2.6), a \u2018Moderate Warming\u2019 Scenario (RCP 4.5) and a \u2018Severe Warming Scenario (RCP 8.5)) \u2013 identified no material financial
impact to the current year impairment assessments.
Brands
\u00a3 million
Goodwill
\u00a3 million
Other
intangibles
\u00a3 million
Computer
software
\u00a3 million
Total
\u00a3 million
Cost
At 30 June 2021
8,458
2,627
1,421
673
13,179
Hyperinflation adjustment in respect of Turkey
315
208
\u2014
1
524
Exchange differences
639
145
194
28
1,006
Additions
109
70
55
67
301
Disposals
(23)
(42)
\u2014
(23)
(88)
Reclassification to asset held for sale
(560)
\u2014
\u2014
(8)
(568)
At 30 June 2022
8,938
3,008
1,670
738
14,354
Hyperinflation adjustment in respect of Turkey
81
60
\u2014
\u2014
141
Exchange differences
(531)
(257)
(64)
(16)
(868)
Additions
338
92
13
155
598
Disposals
\u2014
\u2014
\u2014
(26)
(26)
Reclassification from/(to) asset held for sale
453
(29)
\u2014
\u2014
424
At 30 June 2023
9,279
2,874
1,619
851
14,623
Amortisation and impairment
At 30 June 2021
1,097
670
80
568
2,415
Exchange differences
51
60
(1)
25
135
Amortisation for the year
\u2014
\u2014
7
38
45
Impairment
317
19
\u2014
\u2014
336
Disposals
(23)
(28)
\u2014
(20)
(71)
Reclassification to asset held for sale
(400)
\u2014
\u2014
(8)
(408)
At 30 June 2022
1,042
721
86
603
2,452
Exchange differences
(96)
(61)
(1)
(15)
(173)
Amortisation for the year
\u2014
\u2014
16
40
56
Impairment
498
\u2014
\u2014
\u2014
498
Disposals
\u2014
\u2014
\u2014
(24)
(24)
Reclassification from/(to) asset held for sale
315
(13)
\u2014
\u2014
302
At 30 June 2023
1,759
647
101
604
3,111
Carrying amount
At 30 June 2023
7,520
2,227
1,518
247
11,512
At 30 June 2022
7,896
2,287
1,584
135
11,902
At 30 June 2021
7,361
1,957
1,341
105
10,764
(a) Brands
The principal acquired brands, all of which are regarded as having indefinite useful economic lives, are as follows:
Principal markets
2023
\u00a3 million
2022
\u00a3 million
Crown Royal whisky
United States
1,162
1,210
Captain Morgan rum
Global
954
993
Smirnoff vodka
Global
654
681
Johnnie Walker whisky
Global
625
625
Casamigos tequila
United States
479
499
McDowell's No.1 whisky, rum and brandy
India
308
778
Don Papa rum
Europe
282
\u2014
Yen\u00ec raki
Turkey
249
294
Shui Jing Fang Chinese white spirit
Greater China
246
279
Don Julio tequila
United States
235
207
Aviation American gin
United States
209
218
Seagram's 7 Crown whiskey
United States
177
184
Signature whisky
India
176
191
Zacapa rum
Global
152
158
Black Dog whisky
India
149
162
Antiquity whisky
India
145
158
Windsor Premier whisky
Korea
137
\u2014
Gordon's gin
Europe
119
119
Bell's whisky
Europe
102
102
Other brands
960
1,038
7,520
7,896
The brands are protected by trademarks which are renewable indefinitely
in all of the major markets where they are sold. There are not believed
to be any legal, regulatory or contractual provisions that limit the useful
lives of these brands. The nature of the premium drinks industry is that
obsolescence is not a common issue, with indefinite brand lives being
commonplace, and Diageo has a number of brands that were originally
created more than 100 years ago. Accordingly, the Directors believe
that it is appropriate that the brands are treated as having indefinite
lives for accounting purposes and are therefore not amortised.
(b) Goodwill
For the purposes of impairment testing, goodwill has been attributed to
the following cash-generating units:
2023
\u00a3 million
2022
\u00a3 million
North America
767
773
Europe
Turkey
216
255
Asia Pacific
Greater China
124
141
India
673
747
Latin America and Caribbean \u2013 Mexico
161
142
Other cash-generating units
286
229
2,227
2,287
Goodwill has arisen on the acquisition of businesses and includes synergies
arising from cost savings, the opportunity to utilise Diageo\u2019s distribution
network to leverage marketing of the acquired products and the extension
of the group\u2019s portfolio of brands in new markets around the world.
(c) Other intangibles
Other intangibles principally comprise distribution rights. Diageo owns
the global distribution rights for Ketel One vodka products in perpetuity,
and the Directors believe that it is appropriate to treat these rights as
having an indefinite life for accounting purposes. The carrying value at
30 June 2023 was \u00a31,428 million (2022 \u2013 \u00a31,488 million).
(d) Impairment testing
Impairment tests are performed annually, or more frequently if events or
circumstances indicate that the carrying amount may not be
recoverable. Recoverable amounts are calculated based on the value
in use approach, also considering fair value less costs of disposal. The
value in use calculations are based on discounted forecast cash flows
using the assumption that cash flows continue in perpetuity at the
terminal growth rate of each country or region. The individual brands,
other intangibles with indefinite useful lives and the associated property,
plant and equipment are aggregated as separate cash-generating
units. Separate tests are carried out for each cash-generating unit and
for each of the markets. Goodwill is attributed to each of the markets.
The key assumptions used for the value in use calculations are as
follows:
Cash flows
Cash flows are forecasted for each cash-generating unit for the financial
years based on management's approved plans and reflect the
following assumptions:
\u2022Cash flows are projected based on the actual operating results and
a three-year strategic plan approved by management. Cash flows
are extrapolated up to five years using expected growth rates in line
with management\u2019s best estimates. Growth rates reflect expectations
of sales growth, operating costs and margin, based on past
experience and external sources of information. A simple average of
these projections serves as the estimation of the recoverable amount
of the cash-generating units. Management has no information which
would indicate that any of the scenarios are more likely than others;\u00a0
\u2022The five-year forecast period is extended by up to an additional ten
years at acquisition date for some intangible assets and goodwill
when management believes that this period is justified by the
maturity of the market and expects to achieve growth in excess of
the terminal growth rate driven by Diageo\u2019s sales, marketing and
distribution expertise. These cash flows beyond the five-year period
are projected using steady or progressively declining growth rates.
The main exception is India and the USL brands, where the forecast
period is extended by an additional one year of detailed forecasts;\u00a0 \u00a0
\u2022Cash flows for the subsequent years after the forecast period are
extrapolated based on a terminal growth rate which does not
exceed the long-term annual inflation rate of the country or region.
Discount rates
The discount rates used are the weighted average cost of capital which
reflect the returns on government bonds and an equity risk premium
adjusted for the drinks industry specific to the cash-generating units. The
group applies post-tax discount rates to post-tax cash flows as the
valuation calculated using this method closely approximates to
applying pre-tax discount rates to pre-tax cash flows.
For goodwill, these assumptions are based on the cash-generating
unit or group of units to which the goodwill is attributed. For brands,
they are based on a weighted average taking into account the country
or countries where sales are made.
The pre-tax discount rates, terminal and long-term growth rates used
for impairment testing are as follows:
2023
2022
Pre-tax discount
rate
%
Terminal growth
rate
%
Long-term growth
rate
%
Pre-tax discount
rate
%
Terminal growth
rate
%
Long-term growth
rate
%
North America \u2013 United States
9
2
4
8
2
4
Europe
United Kingdom
9
2
5
8
2
4
Turkey
28
16
28
31
15
25
Asia Pacific
Australia
10
3
5
7
2
5
Korea
11
(2)
4
7
2
5
India
14
4
15
14
4
11
Greater China
11
2
6
7
2
7
Latin America and Caribbean
Brazil
16
3
6
12
3
6
Mexico
13
3
6
14
3
6
Africa
Africa Emerging Markets
35
8
18
12
5
11
South Africa
20
5
6
16
\u2014
6
Nigeria
35
5
18
24
12
15
As a result of the impairment review, in the year ended 30 June 2023, an impairment charge of \u00a3420\u00a0million in respect of the McDowell's brand and
\u00a324\u00a0million in respect of the Director\u2019s Special brand were recognised in exceptional operating items. Value in use and fair value less costs of
disposal methodologies were both considered to assess the recoverable amount. The value in use that was calculated exceeded the fair value less
costs of disposal. The charge is mainly driven by the adverse inflationary environment and the reduction in forecast cash flow assumptions in Lower
Prestige and Popular segments in India. The brand impairment reduced the deferred tax liability by \u00a3111\u00a0million. The recoverable amount is
\u00a3379\u00a0million in respect of the McDowell's brand and \u00a311\u00a0million in respect of the Director\u2019s Special brand cash-generating units.
As a result of the impairment review, in the year ended 30 June 2023, an additional impairment charge of \u00a354\u00a0million was recognised in
exceptional operating items in respect of some brands where book value was not recoverable. The charge is mainly driven by strategic change in
some categories as a result of the challenging operating environment and premiumisation. Value in use and fair value less costs of disposal
methodologies were both considered to assess the recoverable amount. The value in use that was calculated exceeded the fair value less costs of
disposal. The brand impairment reduced the deferred tax liability by \u00a313\u00a0million.
In the year ended 30 June 2022, an impairment charge of \u00a3240 million in respect of the McDowell's brand was recognised in exceptional
operating items, based on its value in use. The brand impairment reduced the deferred tax liability by \u00a335 million.
Further, in the year ended 30 June 2022, an impairment charge of \u00a377 million in respect of the Bell\u2019s brand was recognised in exceptional
operating items, based on its value in use. The impairment reduced the deferred tax liability attributable to the brand by \u00a320 million.
In the year ended 30 June 2022, Diageo decided to wind down its operations in Russia. As a result, an impairment charge of \u00a319 million in
respect of the Smirnov goodwill was recognised in exceptional operating items.
The Turkish economy became hyperinflationary for the year ended 30 June 2022, and an impairment charge of TRY 3,760 million (\u00a3312 million)
on the opening carrying amount of the Turkey cash-generating unit was recognised in retained earnings. From this impairment charge, TRY 1,627
million (\u00a3135 million) was directly attributable to the Yen\u00ec Raki brand and the remaining TRY 2,133 million (\u00a3177 million) impairment charge was
recognised on the Turkey goodwill.
(e) Sensitivity to change in key assumptions
Impairment testing for the year ended 30 June 2023 has identified the following cash-generating units as being sensitive to reasonably possible
changes in assumptions.
The table below shows the headroom at 30 June 2023 and the impairment charge that would be required if the assumptions in the calculation
of their value in use were changed:
Increase in discount rate
Decrease in terminal growth rate
Decrease in annual growth rate in
forecast period 2024-2029
Decrease in cash flows(1)
Carrying value
of CGU
\u00a3 million
Headroom
\u00a3 million
Reasonably
possible change
Potential
impairment
charge
\u00a3 million
Reasonably
possible change
Potential
impairment
charge
\u00a3 million
Reasonably
possible change
Potential
impairment
charge
\u00a3 million
Reasonably
possible change
Potential
impairment
charge
\u00a3 million
McDowell's
379
\u2014
1ppt
(38)
1ppt
(26)
2ppt
(67)
10%
(76)
(1)Including reasonably possible changes in productivity saving assumptions", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-683": { "value": "
Accounting policies
Acquired intangible assets are held on the consolidated balance sheet at cost less accumulated amortisation and impairment losses.
Acquired brands and other intangible assets are initially recognised at fair value if they are controlled through contractual or other legal
rights, or are separable from the rest of the business, and the fair value can be reliably measured. Where these assets are regarded as
having indefinite useful economic lives, they are not amortised.
Goodwill represents the excess of the aggregate of the consideration transferred, the value of any non-controlling interests and the fair
value of any previously held equity interest in the subsidiary acquired over the fair value of the identifiable net assets. Goodwill arising on
acquisitions prior to 1 July 1998 was eliminated against reserves, and this goodwill has not been reinstated. Goodwill arising subsequent to 1
July 1998 has been capitalised.
Amortisation and impairment of intangible assets is based on their useful economic lives and they are amortised on a straight-line basis
and reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. Goodwill and
intangible assets that are regarded as having indefinite useful economic lives are not amortised and are reviewed for impairment at least
annually or when there is an indication that the assets may be impaired. Impairment reviews compare the net carrying value with the
recoverable amount (where recoverable amount is the higher of fair value less costs of disposal and value in use) and in case the net
carrying value exceeds the recoverable amount an impairment charge is recognised. Amortisation and any impairment write downs are
charged to other operating expenses in the income statement.
Computer software is amortised on a straight-line basis to estimated residual value over its expected useful life. Residual values and
useful lives are reviewed each year. Subject to these reviews, the estimated useful lives are up to eight years.\u00a0
Critical accounting estimates and judgements
Assessment of the recoverable amount of an intangible asset and the useful economic life of an asset are based on management's estimates.
Impairment reviews are carried out to ensure that intangible assets, including brands, are not carried at above their recoverable amounts.
Value in use and fair value less costs of disposal are both considered for these reviews and any impairment charge is based on these. The
tests are dependent on management\u2019s estimates in respect of the forecasting of future cash flows, the discount rates applicable to the future
cash flows and what expected growth rates are reasonable. Judgement is required in determining the cash-generating units. Such estimates
and judgements are subject to change as a result of changing economic conditions and actual cash flows may differ from forecasts.
The below additional considerations have been applied by management regarding the potential financial impacts of increasing
inflationary pressures, recently observable worldwide:
\u2022changes in the interest rate environment are taken into consideration when determining the discount rates;
\u2022terminal growth rates do not exceed the long-term annual inflation rate of the country or region, thus excluding any increased inflation
growth experienced in the short-term;
\u2022additional sensitivity scenarios are applied for those markets or regions where the inflation and/or the exchange devaluation is
considered significant based on management\u2019s judgement.
Consideration of climate risk impact
The impact of climate risk on the future cash flows has also been considered for scenarios analysed in line with the climate change risk
assessment. The climate change scenario analyses performed in 2023 \u2013 conducted in line with TCFD recommendations (\u2018Transition
Scenario\u2019 (RCP 2.6), a \u2018Moderate Warming\u2019 Scenario (RCP 4.5) and a \u2018Severe Warming Scenario (RCP 8.5)) \u2013 identified no material financial
impact to the current year impairment assessments.
Accounting policies
Land and buildings are stated at cost less accumulated depreciation. Freehold land is not depreciated. Leaseholds are generally depreciated
over the unexpired period of the lease. Other property, plant and equipment are depreciated on a straight-line basis to estimated residual
values over their expected useful lives, and these values and lives are reviewed each year. Subject to these reviews, the estimated useful lives
fall within the following ranges: buildings \u2013 10 to 50 years; within plant and equipment casks and containers \u2013 15 to 50 years; other plant and
equipment \u2013 5 to 40 years; fixtures and fittings \u2013 5 to 10 years; and returnable bottles and crates \u2013 5 to 10 years.
Reviews are carried out if there is an indication that assets may be impaired, to ensure that property, plant and equipment are not carried
at above their recoverable amounts.
Government grants
Government grants are not recognised until there is reasonable assurance that the group will comply with the conditions pursuant to which
they have been granted and that the grants will be received. Government grants in respect of property, plant and equipment are deducted
from the asset that they relate to, reducing the depreciation expense charged to the income statement.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfNonfinancialAssetsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-684": { "value": "
Accounting policies
Acquired intangible assets are held on the consolidated balance sheet at cost less accumulated amortisation and impairment losses.
Acquired brands and other intangible assets are initially recognised at fair value if they are controlled through contractual or other legal
rights, or are separable from the rest of the business, and the fair value can be reliably measured. Where these assets are regarded as
having indefinite useful economic lives, they are not amortised.
Goodwill represents the excess of the aggregate of the consideration transferred, the value of any non-controlling interests and the fair
value of any previously held equity interest in the subsidiary acquired over the fair value of the identifiable net assets. Goodwill arising on
acquisitions prior to 1 July 1998 was eliminated against reserves, and this goodwill has not been reinstated. Goodwill arising subsequent to 1
July 1998 has been capitalised.
Amortisation and impairment of intangible assets is based on their useful economic lives and they are amortised on a straight-line basis
and reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. Goodwill and
intangible assets that are regarded as having indefinite useful economic lives are not amortised and are reviewed for impairment at least
annually or when there is an indication that the assets may be impaired. Impairment reviews compare the net carrying value with the
recoverable amount (where recoverable amount is the higher of fair value less costs of disposal and value in use) and in case the net
carrying value exceeds the recoverable amount an impairment charge is recognised. Amortisation and any impairment write downs are
charged to other operating expenses in the income statement.
Computer software is amortised on a straight-line basis to estimated residual value over its expected useful life. Residual values and
useful lives are reviewed each year. Subject to these reviews, the estimated useful lives are up to eight years.\u00a0
Critical accounting estimates and judgements
Assessment of the recoverable amount of an intangible asset and the useful economic life of an asset are based on management's estimates.
Impairment reviews are carried out to ensure that intangible assets, including brands, are not carried at above their recoverable amounts.
Value in use and fair value less costs of disposal are both considered for these reviews and any impairment charge is based on these. The
tests are dependent on management\u2019s estimates in respect of the forecasting of future cash flows, the discount rates applicable to the future
cash flows and what expected growth rates are reasonable. Judgement is required in determining the cash-generating units. Such estimates
and judgements are subject to change as a result of changing economic conditions and actual cash flows may differ from forecasts.
The below additional considerations have been applied by management regarding the potential financial impacts of increasing
inflationary pressures, recently observable worldwide:
\u2022changes in the interest rate environment are taken into consideration when determining the discount rates;
\u2022terminal growth rates do not exceed the long-term annual inflation rate of the country or region, thus excluding any increased inflation
growth experienced in the short-term;
\u2022additional sensitivity scenarios are applied for those markets or regions where the inflation and/or the exchange devaluation is
considered significant based on management\u2019s judgement.
Consideration of climate risk impact
The impact of climate risk on the future cash flows has also been considered for scenarios analysed in line with the climate change risk
assessment. The climate change scenario analyses performed in 2023 \u2013 conducted in line with TCFD recommendations (\u2018Transition
Scenario\u2019 (RCP 2.6), a \u2018Moderate Warming\u2019 Scenario (RCP 4.5) and a \u2018Severe Warming Scenario (RCP 8.5)) \u2013 identified no material financial
impact to the current year impairment assessments.
Accounting policies
Land and buildings are stated at cost less accumulated depreciation. Freehold land is not depreciated. Leaseholds are generally depreciated
over the unexpired period of the lease. Other property, plant and equipment are depreciated on a straight-line basis to estimated residual
values over their expected useful lives, and these values and lives are reviewed each year. Subject to these reviews, the estimated useful lives
fall within the following ranges: buildings \u2013 10 to 50 years; within plant and equipment casks and containers \u2013 15 to 50 years; other plant and
equipment \u2013 5 to 40 years; fixtures and fittings \u2013 5 to 10 years; and returnable bottles and crates \u2013 5 to 10 years.
Reviews are carried out if there is an indication that assets may be impaired, to ensure that property, plant and equipment are not carried
at above their recoverable amounts.
Government grants
Government grants are not recognised until there is reasonable assurance that the group will comply with the conditions pursuant to which
they have been granted and that the grants will be received. Government grants in respect of property, plant and equipment are deducted
from the asset that they relate to, reducing the depreciation expense charged to the income statement.
Financial assets and liabilities are initially recorded at fair value including, where permitted by IFRS 9, any directly attributable transaction
costs. For those financial assets that are not subsequently held at fair value, the group assesses whether there is evidence of impairment at
each balance sheet date.
The group classifies its financial assets and liabilities into the following categories: financial assets and liabilities at amortised cost, financial
assets and liabilities at fair value through income statement and financial assets at fair value through other comprehensive income.
The accounting policies for other investments and loans are described in note 13, for trade and other receivables and payables in note 15
and for cash and cash equivalents in note 17.
Financial assets and liabilities at fair value through income statement include derivative assets and liabilities. Where financial assets or
liabilities are eligible to be carried at either amortised cost or fair value through other comprehensive income, the group does not apply the
fair value option.
Derivative financial instruments are carried at fair value using a discounted cash flow model based on market data applied consistently
for similar types of instruments. Gains and losses on derivatives that do not qualify for hedge accounting treatment are taken to the income
statement as they arise.
Other financial liabilities are carried at amortised cost unless they are part of a fair value hedge relationship. The difference between the
initial carrying amount of the financial liabilities and their redemption value is recognised in the income statement over the contractual terms
using the effective interest rate method. Financial liabilities in respect of the Zacapa acquisition are recognised at fair value.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfAssetsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-685": { "value": "
Accounting policies
Acquired intangible assets are held on the consolidated balance sheet at cost less accumulated amortisation and impairment losses.
Acquired brands and other intangible assets are initially recognised at fair value if they are controlled through contractual or other legal
rights, or are separable from the rest of the business, and the fair value can be reliably measured. Where these assets are regarded as
having indefinite useful economic lives, they are not amortised.
Goodwill represents the excess of the aggregate of the consideration transferred, the value of any non-controlling interests and the fair
value of any previously held equity interest in the subsidiary acquired over the fair value of the identifiable net assets. Goodwill arising on
acquisitions prior to 1 July 1998 was eliminated against reserves, and this goodwill has not been reinstated. Goodwill arising subsequent to 1
July 1998 has been capitalised.
Amortisation and impairment of intangible assets is based on their useful economic lives and they are amortised on a straight-line basis
and reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. Goodwill and
intangible assets that are regarded as having indefinite useful economic lives are not amortised and are reviewed for impairment at least
annually or when there is an indication that the assets may be impaired. Impairment reviews compare the net carrying value with the
recoverable amount (where recoverable amount is the higher of fair value less costs of disposal and value in use) and in case the net
carrying value exceeds the recoverable amount an impairment charge is recognised. Amortisation and any impairment write downs are
charged to other operating expenses in the income statement.
Computer software is amortised on a straight-line basis to estimated residual value over its expected useful life. Residual values and
useful lives are reviewed each year. Subject to these reviews, the estimated useful lives are up to eight years.\u00a0
Critical accounting estimates and judgements
Assessment of the recoverable amount of an intangible asset and the useful economic life of an asset are based on management's estimates.
Impairment reviews are carried out to ensure that intangible assets, including brands, are not carried at above their recoverable amounts.
Value in use and fair value less costs of disposal are both considered for these reviews and any impairment charge is based on these. The
tests are dependent on management\u2019s estimates in respect of the forecasting of future cash flows, the discount rates applicable to the future
cash flows and what expected growth rates are reasonable. Judgement is required in determining the cash-generating units. Such estimates
and judgements are subject to change as a result of changing economic conditions and actual cash flows may differ from forecasts.
The below additional considerations have been applied by management regarding the potential financial impacts of increasing
inflationary pressures, recently observable worldwide:
\u2022changes in the interest rate environment are taken into consideration when determining the discount rates;
\u2022terminal growth rates do not exceed the long-term annual inflation rate of the country or region, thus excluding any increased inflation
growth experienced in the short-term;
\u2022additional sensitivity scenarios are applied for those markets or regions where the inflation and/or the exchange devaluation is
considered significant based on management\u2019s judgement.
Consideration of climate risk impact
The impact of climate risk on the future cash flows has also been considered for scenarios analysed in line with the climate change risk
assessment. The climate change scenario analyses performed in 2023 \u2013 conducted in line with TCFD recommendations (\u2018Transition
Scenario\u2019 (RCP 2.6), a \u2018Moderate Warming\u2019 Scenario (RCP 4.5) and a \u2018Severe Warming Scenario (RCP 8.5)) \u2013 identified no material financial
impact to the current year impairment assessments.
Accounting policies
Land and buildings are stated at cost less accumulated depreciation. Freehold land is not depreciated. Leaseholds are generally depreciated
over the unexpired period of the lease. Other property, plant and equipment are depreciated on a straight-line basis to estimated residual
values over their expected useful lives, and these values and lives are reviewed each year. Subject to these reviews, the estimated useful lives
fall within the following ranges: buildings \u2013 10 to 50 years; within plant and equipment casks and containers \u2013 15 to 50 years; other plant and
equipment \u2013 5 to 40 years; fixtures and fittings \u2013 5 to 10 years; and returnable bottles and crates \u2013 5 to 10 years.
Reviews are carried out if there is an indication that assets may be impaired, to ensure that property, plant and equipment are not carried
at above their recoverable amounts.
Government grants
Government grants are not recognised until there is reasonable assurance that the group will comply with the conditions pursuant to which
they have been granted and that the grants will be received. Government grants in respect of property, plant and equipment are deducted
from the asset that they relate to, reducing the depreciation expense charged to the income statement.
Accounting policies
Where the group is the lessee, all leases are recognised on the
balance sheet as right-of-use assets and depreciated on a
straight-line basis with the charge recognised in cost of sales or
in other operating items depending on the nature of the costs.
The liability, recognised as part of net borrowings, is measured at
a discounted value and any interest is charged to finance
charges.
The group recognises services associated with a lease as
other operating expenses. Payments associated with leases
where the value of the asset when it is new is lower than $5,000
(leases of low value assets) and leases with a lease term of 12
months or less (short term leases) are recognised as other
operating expenses. A judgement in calculating the lease
liability at initial recognition includes determining the lease term
where extension or termination options exist. In such instances,
any economic incentive to retain or end a lease are considered
and extension periods are only included when it is considered
reasonably certain that an option to extend a lease will be
exercised.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDepreciationExpenseExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-686": { "value": "
Accounting policies
Acquired intangible assets are held on the consolidated balance sheet at cost less accumulated amortisation and impairment losses.
Acquired brands and other intangible assets are initially recognised at fair value if they are controlled through contractual or other legal
rights, or are separable from the rest of the business, and the fair value can be reliably measured. Where these assets are regarded as
having indefinite useful economic lives, they are not amortised.
Goodwill represents the excess of the aggregate of the consideration transferred, the value of any non-controlling interests and the fair
value of any previously held equity interest in the subsidiary acquired over the fair value of the identifiable net assets. Goodwill arising on
acquisitions prior to 1 July 1998 was eliminated against reserves, and this goodwill has not been reinstated. Goodwill arising subsequent to 1
July 1998 has been capitalised.
Amortisation and impairment of intangible assets is based on their useful economic lives and they are amortised on a straight-line basis
and reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. Goodwill and
intangible assets that are regarded as having indefinite useful economic lives are not amortised and are reviewed for impairment at least
annually or when there is an indication that the assets may be impaired. Impairment reviews compare the net carrying value with the
recoverable amount (where recoverable amount is the higher of fair value less costs of disposal and value in use) and in case the net
carrying value exceeds the recoverable amount an impairment charge is recognised. Amortisation and any impairment write downs are
charged to other operating expenses in the income statement.
Computer software is amortised on a straight-line basis to estimated residual value over its expected useful life. Residual values and
useful lives are reviewed each year. Subject to these reviews, the estimated useful lives are up to eight years.\u00a0
Critical accounting estimates and judgements
Assessment of the recoverable amount of an intangible asset and the useful economic life of an asset are based on management's estimates.
Impairment reviews are carried out to ensure that intangible assets, including brands, are not carried at above their recoverable amounts.
Value in use and fair value less costs of disposal are both considered for these reviews and any impairment charge is based on these. The
tests are dependent on management\u2019s estimates in respect of the forecasting of future cash flows, the discount rates applicable to the future
cash flows and what expected growth rates are reasonable. Judgement is required in determining the cash-generating units. Such estimates
and judgements are subject to change as a result of changing economic conditions and actual cash flows may differ from forecasts.
The below additional considerations have been applied by management regarding the potential financial impacts of increasing
inflationary pressures, recently observable worldwide:
\u2022changes in the interest rate environment are taken into consideration when determining the discount rates;
\u2022terminal growth rates do not exceed the long-term annual inflation rate of the country or region, thus excluding any increased inflation
growth experienced in the short-term;
\u2022additional sensitivity scenarios are applied for those markets or regions where the inflation and/or the exchange devaluation is
considered significant based on management\u2019s judgement.
Consideration of climate risk impact
The impact of climate risk on the future cash flows has also been considered for scenarios analysed in line with the climate change risk
assessment. The climate change scenario analyses performed in 2023 \u2013 conducted in line with TCFD recommendations (\u2018Transition
Scenario\u2019 (RCP 2.6), a \u2018Moderate Warming\u2019 Scenario (RCP 4.5) and a \u2018Severe Warming Scenario (RCP 8.5)) \u2013 identified no material financial
impact to the current year impairment assessments.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-687": { "value": "
Accounting policies
Acquired intangible assets are held on the consolidated balance sheet at cost less accumulated amortisation and impairment losses.
Acquired brands and other intangible assets are initially recognised at fair value if they are controlled through contractual or other legal
rights, or are separable from the rest of the business, and the fair value can be reliably measured. Where these assets are regarded as
having indefinite useful economic lives, they are not amortised.
Goodwill represents the excess of the aggregate of the consideration transferred, the value of any non-controlling interests and the fair
value of any previously held equity interest in the subsidiary acquired over the fair value of the identifiable net assets. Goodwill arising on
acquisitions prior to 1 July 1998 was eliminated against reserves, and this goodwill has not been reinstated. Goodwill arising subsequent to 1
July 1998 has been capitalised.
Amortisation and impairment of intangible assets is based on their useful economic lives and they are amortised on a straight-line basis
and reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. Goodwill and
intangible assets that are regarded as having indefinite useful economic lives are not amortised and are reviewed for impairment at least
annually or when there is an indication that the assets may be impaired. Impairment reviews compare the net carrying value with the
recoverable amount (where recoverable amount is the higher of fair value less costs of disposal and value in use) and in case the net
carrying value exceeds the recoverable amount an impairment charge is recognised. Amortisation and any impairment write downs are
charged to other operating expenses in the income statement.
Computer software is amortised on a straight-line basis to estimated residual value over its expected useful life. Residual values and
useful lives are reviewed each year. Subject to these reviews, the estimated useful lives are up to eight years.\u00a0
Critical accounting estimates and judgements
Assessment of the recoverable amount of an intangible asset and the useful economic life of an asset are based on management's estimates.
Impairment reviews are carried out to ensure that intangible assets, including brands, are not carried at above their recoverable amounts.
Value in use and fair value less costs of disposal are both considered for these reviews and any impairment charge is based on these. The
tests are dependent on management\u2019s estimates in respect of the forecasting of future cash flows, the discount rates applicable to the future
cash flows and what expected growth rates are reasonable. Judgement is required in determining the cash-generating units. Such estimates
and judgements are subject to change as a result of changing economic conditions and actual cash flows may differ from forecasts.
The below additional considerations have been applied by management regarding the potential financial impacts of increasing
inflationary pressures, recently observable worldwide:
\u2022changes in the interest rate environment are taken into consideration when determining the discount rates;
\u2022terminal growth rates do not exceed the long-term annual inflation rate of the country or region, thus excluding any increased inflation
growth experienced in the short-term;
\u2022additional sensitivity scenarios are applied for those markets or regions where the inflation and/or the exchange devaluation is
considered significant based on management\u2019s judgement.
Consideration of climate risk impact
The impact of climate risk on the future cash flows has also been considered for scenarios analysed in line with the climate change risk
assessment. The climate change scenario analyses performed in 2023 \u2013 conducted in line with TCFD recommendations (\u2018Transition
Scenario\u2019 (RCP 2.6), a \u2018Moderate Warming\u2019 Scenario (RCP 4.5) and a \u2018Severe Warming Scenario (RCP 8.5)) \u2013 identified no material financial
impact to the current year impairment assessments.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-688": { "value": "
Accounting policies
Acquired intangible assets are held on the consolidated balance sheet at cost less accumulated amortisation and impairment losses.
Acquired brands and other intangible assets are initially recognised at fair value if they are controlled through contractual or other legal
rights, or are separable from the rest of the business, and the fair value can be reliably measured. Where these assets are regarded as
having indefinite useful economic lives, they are not amortised.
Goodwill represents the excess of the aggregate of the consideration transferred, the value of any non-controlling interests and the fair
value of any previously held equity interest in the subsidiary acquired over the fair value of the identifiable net assets. Goodwill arising on
acquisitions prior to 1 July 1998 was eliminated against reserves, and this goodwill has not been reinstated. Goodwill arising subsequent to 1
July 1998 has been capitalised.
Amortisation and impairment of intangible assets is based on their useful economic lives and they are amortised on a straight-line basis
and reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. Goodwill and
intangible assets that are regarded as having indefinite useful economic lives are not amortised and are reviewed for impairment at least
annually or when there is an indication that the assets may be impaired. Impairment reviews compare the net carrying value with the
recoverable amount (where recoverable amount is the higher of fair value less costs of disposal and value in use) and in case the net
carrying value exceeds the recoverable amount an impairment charge is recognised. Amortisation and any impairment write downs are
charged to other operating expenses in the income statement.
Computer software is amortised on a straight-line basis to estimated residual value over its expected useful life. Residual values and
useful lives are reviewed each year. Subject to these reviews, the estimated useful lives are up to eight years.\u00a0
Critical accounting estimates and judgements
Assessment of the recoverable amount of an intangible asset and the useful economic life of an asset are based on management's estimates.
Impairment reviews are carried out to ensure that intangible assets, including brands, are not carried at above their recoverable amounts.
Value in use and fair value less costs of disposal are both considered for these reviews and any impairment charge is based on these. The
tests are dependent on management\u2019s estimates in respect of the forecasting of future cash flows, the discount rates applicable to the future
cash flows and what expected growth rates are reasonable. Judgement is required in determining the cash-generating units. Such estimates
and judgements are subject to change as a result of changing economic conditions and actual cash flows may differ from forecasts.
The below additional considerations have been applied by management regarding the potential financial impacts of increasing
inflationary pressures, recently observable worldwide:
\u2022changes in the interest rate environment are taken into consideration when determining the discount rates;
\u2022terminal growth rates do not exceed the long-term annual inflation rate of the country or region, thus excluding any increased inflation
growth experienced in the short-term;
\u2022additional sensitivity scenarios are applied for those markets or regions where the inflation and/or the exchange devaluation is
considered significant based on management\u2019s judgement.
Consideration of climate risk impact
The impact of climate risk on the future cash flows has also been considered for scenarios analysed in line with the climate change risk
assessment. The climate change scenario analyses performed in 2023 \u2013 conducted in line with TCFD recommendations (\u2018Transition
Scenario\u2019 (RCP 2.6), a \u2018Moderate Warming\u2019 Scenario (RCP 4.5) and a \u2018Severe Warming Scenario (RCP 8.5)) \u2013 identified no material financial
impact to the current year impairment assessments.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForGoodwillExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-689": { "value": "
Brands
\u00a3 million
Goodwill
\u00a3 million
Other
intangibles
\u00a3 million
Computer
software
\u00a3 million
Total
\u00a3 million
Cost
At 30 June 2021
8,458
2,627
1,421
673
13,179
Hyperinflation adjustment in respect of Turkey
315
208
\u2014
1
524
Exchange differences
639
145
194
28
1,006
Additions
109
70
55
67
301
Disposals
(23)
(42)
\u2014
(23)
(88)
Reclassification to asset held for sale
(560)
\u2014
\u2014
(8)
(568)
At 30 June 2022
8,938
3,008
1,670
738
14,354
Hyperinflation adjustment in respect of Turkey
81
60
\u2014
\u2014
141
Exchange differences
(531)
(257)
(64)
(16)
(868)
Additions
338
92
13
155
598
Disposals
\u2014
\u2014
\u2014
(26)
(26)
Reclassification from/(to) asset held for sale
453
(29)
\u2014
\u2014
424
At 30 June 2023
9,279
2,874
1,619
851
14,623
Amortisation and impairment
At 30 June 2021
1,097
670
80
568
2,415
Exchange differences
51
60
(1)
25
135
Amortisation for the year
\u2014
\u2014
7
38
45
Impairment
317
19
\u2014
\u2014
336
Disposals
(23)
(28)
\u2014
(20)
(71)
Reclassification to asset held for sale
(400)
\u2014
\u2014
(8)
(408)
At 30 June 2022
1,042
721
86
603
2,452
Exchange differences
(96)
(61)
(1)
(15)
(173)
Amortisation for the year
\u2014
\u2014
16
40
56
Impairment
498
\u2014
\u2014
\u2014
498
Disposals
\u2014
\u2014
\u2014
(24)
(24)
Reclassification from/(to) asset held for sale
315
(13)
\u2014
\u2014
302
At 30 June 2023
1,759
647
101
604
3,111
Carrying amount
At 30 June 2023
7,520
2,227
1,518
247
11,512
At 30 June 2022
7,896
2,287
1,584
135
11,902
At 30 June 2021
7,361
1,957
1,341
105
10,764
Land and
buildings
\u00a3 million
Plant and
equipment
\u00a3 million
Fixtures
and
fittings
\u00a3 million
Returnable
bottles and
crates
\u00a3 million
Under
construction
\u00a3 million
Total
\u00a3 million
Cost
At 30 June 2021
2,160
4,714
121
528
659
8,182
Hyperinflation adjustment in respect of Turkey and Venezuela
56
32
2
\u2014
7
97
Exchange differences
107
226
1
11
45
390
Sale of businesses
(4)
(58)
(3)
(19)
(1)
(85)
Additions
230
245
8
41
612
1,136
Disposals
(65)
(122)
(15)
(32)
(3)
(237)
Transfers
177
249
10
13
(449)
\u2014
Reclassification to assets held for sale
(8)
(25)
\u2014
\u2014
\u2014
(33)
At 30 June 2022
2,653
5,261
124
542
870
9,450
Hyperinflation adjustment in respect of Turkey and Venezuela
5
10
1
\u2014
4
20
Exchange differences
(166)
(331)
(6)
(49)
(30)
(582)
Acquisitions
8
14
\u2014
3
\u2014
25
Sale of businesses
(35)
(147)
(3)
(55)
(3)
(243)
Additions
111
214
13
50
832
1,220
Disposals
(64)
(141)
(12)
(105)
(2)
(324)
Transfers
146
238
12
28
(424)
\u2014
Reclassification from assets held for sale
2
\u2014
1
\u2014
\u2014
3
At 30 June 2023
2,660
5,118
130
414
1,247
9,569
Depreciation
At 30 June 2021
658
2,218
86
371
\u2014
3,333
Exchange differences
31
94
1
9
\u2014
135
Depreciation charge for the year
125
276
14
29
\u2014
444
Exceptional impairment
2
1
\u2014
\u2014
\u2014
3
Sale of businesses
(4)
(50)
(2)
(18)
\u2014
(74)
Disposals
(62)
(113)
(13)
(30)
\u2014
(218)
Transfers
5
4
(9)
\u2014
\u2014
\u2014
Reclassification to assets held for sale
(5)
(16)
\u2014
\u2014
\u2014
(21)
At 30 June 2022
750
2,414
77
361
\u2014
3,602
Exchange differences
(38)
(176)
(3)
(27)
\u2014
(244)
Depreciation charge for the year
125
269
13
33
\u2014
440
Exceptional accelerated depreciation and impairment
31
41
\u2014
\u2014
\u2014
72
Sale of businesses
(21)
(80)
(2)
(34)
\u2014
(137)
Disposals
(63)
(130)
(11)
(103)
\u2014
(307)
Reclassification from assets held for sale
\u2014
\u2014
1
\u2014
\u2014
1
At 30 June 2023
784
2,338
75
230
\u2014
3,427
Carrying amount
At 30 June 2023
1,876
2,780
55
184
1,247
6,142
At 30 June 2022
1,903
2,847
47
181
870
5,848
At 30 June 2021
1,502
2,496
35
157
659
4,849
Land and
buildings
\u00a3 million
Plant and
equipment
\u00a3 million
Under
construction
\u00a3 million
Total
\u00a3 million
At 30 June 2021
230
184
29
443
Exchange differences
26
14
\u2014
40
Additions
129
56
\u2014
185
Transfers
29
\u2014
(29)
\u2014
Reclassification to
assets held for sale
(1)
(1)
\u2014
(2)
Disposals
(6)
\u2014
\u2014
(6)
Depreciation
(54)
(41)
\u2014
(95)
At 30 June 2022
353
212
\u2014
565
Exchange differences
(3)
(23)
\u2014
(26)
Additions
45
37
\u2014
82
Reclassification from
assets held for sale
1
1
\u2014
2
Derecognition due to
disposal of business
(1)
(1)
\u2014
(2)
Depreciation
(56)
(39)
\u2014
(95)
At 30 June 2023
339
187
\u2014
526
", "dimensions": { "concept": "ifrs-full:DisclosureOfDepreciationAndAmortisationExpenseExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-690": { "value": "
(b) Goodwill
For the purposes of impairment testing, goodwill has been attributed to
the following cash-generating units:
2023
\u00a3 million
2022
\u00a3 million
North America
767
773
Europe
Turkey
216
255
Asia Pacific
Greater China
124
141
India
673
747
Latin America and Caribbean \u2013 Mexico
161
142
Other cash-generating units
286
229
2,227
2,287
Goodwill has arisen on the acquisition of businesses and includes synergies
arising from cost savings, the opportunity to utilise Diageo\u2019s distribution
network to leverage marketing of the acquired products and the extension
of the group\u2019s portfolio of brands in new markets around the world.", "dimensions": { "concept": "ifrs-full:DisclosureOfGoodwillExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-691": { "value": "
(c) Other intangibles
Other intangibles principally comprise distribution rights. Diageo owns
the global distribution rights for Ketel One vodka products in perpetuity,
and the Directors believe that it is appropriate to treat these rights as
having an indefinite life for accounting purposes. The carrying value at
30 June 2023 was \u00a31,428 million (2022 \u2013 \u00a31,488 million).", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-692": { "value": "
(d) Impairment testing
Impairment tests are performed annually, or more frequently if events or
circumstances indicate that the carrying amount may not be
recoverable. Recoverable amounts are calculated based on the value
in use approach, also considering fair value less costs of disposal. The
value in use calculations are based on discounted forecast cash flows
using the assumption that cash flows continue in perpetuity at the
terminal growth rate of each country or region. The individual brands,
other intangibles with indefinite useful lives and the associated property,
plant and equipment are aggregated as separate cash-generating
units. Separate tests are carried out for each cash-generating unit and
for each of the markets. Goodwill is attributed to each of the markets.
The key assumptions used for the value in use calculations are as
follows:
Cash flows
Cash flows are forecasted for each cash-generating unit for the financial
years based on management's approved plans and reflect the
following assumptions:
\u2022Cash flows are projected based on the actual operating results and
a three-year strategic plan approved by management. Cash flows
are extrapolated up to five years using expected growth rates in line
with management\u2019s best estimates. Growth rates reflect expectations
of sales growth, operating costs and margin, based on past
experience and external sources of information. A simple average of
these projections serves as the estimation of the recoverable amount
of the cash-generating units. Management has no information which
would indicate that any of the scenarios are more likely than others;\u00a0
\u2022The five-year forecast period is extended by up to an additional ten
years at acquisition date for some intangible assets and goodwill
when management believes that this period is justified by the
maturity of the market and expects to achieve growth in excess of
the terminal growth rate driven by Diageo\u2019s sales, marketing and
distribution expertise. These cash flows beyond the five-year period
are projected using steady or progressively declining growth rates.
The main exception is India and the USL brands, where the forecast
period is extended by an additional one year of detailed forecasts;\u00a0 \u00a0
\u2022Cash flows for the subsequent years after the forecast period are
extrapolated based on a terminal growth rate which does not
exceed the long-term annual inflation rate of the country or region.
Discount rates
The discount rates used are the weighted average cost of capital which
reflect the returns on government bonds and an equity risk premium
adjusted for the drinks industry specific to the cash-generating units. The
group applies post-tax discount rates to post-tax cash flows as the
valuation calculated using this method closely approximates to
applying pre-tax discount rates to pre-tax cash flows.
For goodwill, these assumptions are based on the cash-generating
unit or group of units to which the goodwill is attributed. For brands,
they are based on a weighted average taking into account the country
or countries where sales are made.
The pre-tax discount rates, terminal and long-term growth rates used
for impairment testing are as follows:
2023
2022
Pre-tax discount
rate
%
Terminal growth
rate
%
Long-term growth
rate
%
Pre-tax discount
rate
%
Terminal growth
rate
%
Long-term growth
rate
%
North America \u2013 United States
9
2
4
8
2
4
Europe
United Kingdom
9
2
5
8
2
4
Turkey
28
16
28
31
15
25
Asia Pacific
Australia
10
3
5
7
2
5
Korea
11
(2)
4
7
2
5
India
14
4
15
14
4
11
Greater China
11
2
6
7
2
7
Latin America and Caribbean
Brazil
16
3
6
12
3
6
Mexico
13
3
6
14
3
6
Africa
Africa Emerging Markets
35
8
18
12
5
11
South Africa
20
5
6
16
\u2014
6
Nigeria
35
5
18
24
12
15
As a result of the impairment review, in the year ended 30 June 2023, an impairment charge of \u00a3420\u00a0million in respect of the McDowell's brand and
\u00a324\u00a0million in respect of the Director\u2019s Special brand were recognised in exceptional operating items. Value in use and fair value less costs of
disposal methodologies were both considered to assess the recoverable amount. The value in use that was calculated exceeded the fair value less
costs of disposal. The charge is mainly driven by the adverse inflationary environment and the reduction in forecast cash flow assumptions in Lower
Prestige and Popular segments in India. The brand impairment reduced the deferred tax liability by \u00a3111\u00a0million. The recoverable amount is
\u00a3379\u00a0million in respect of the McDowell's brand and \u00a311\u00a0million in respect of the Director\u2019s Special brand cash-generating units.
As a result of the impairment review, in the year ended 30 June 2023, an additional impairment charge of \u00a354\u00a0million was recognised in
exceptional operating items in respect of some brands where book value was not recoverable. The charge is mainly driven by strategic change in
some categories as a result of the challenging operating environment and premiumisation. Value in use and fair value less costs of disposal
methodologies were both considered to assess the recoverable amount. The value in use that was calculated exceeded the fair value less costs of
disposal. The brand impairment reduced the deferred tax liability by \u00a313\u00a0million.
In the year ended 30 June 2022, an impairment charge of \u00a3240 million in respect of the McDowell's brand was recognised in exceptional
operating items, based on its value in use. The brand impairment reduced the deferred tax liability by \u00a335 million.
Further, in the year ended 30 June 2022, an impairment charge of \u00a377 million in respect of the Bell\u2019s brand was recognised in exceptional
operating items, based on its value in use. The impairment reduced the deferred tax liability attributable to the brand by \u00a320 million.
In the year ended 30 June 2022, Diageo decided to wind down its operations in Russia. As a result, an impairment charge of \u00a319 million in
respect of the Smirnov goodwill was recognised in exceptional operating items.
The Turkish economy became hyperinflationary for the year ended 30 June 2022, and an impairment charge of TRY 3,760 million (\u00a3312 million)
on the opening carrying amount of the Turkey cash-generating unit was recognised in retained earnings. From this impairment charge, TRY 1,627
million (\u00a3135 million) was directly attributable to the Yen\u00ec Raki brand and the remaining TRY 2,133 million (\u00a3177 million) impairment charge was
recognised on the Turkey goodwill.", "dimensions": { "concept": "ifrs-full:DisclosureOfImpairmentOfAssetsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-693": { "value": "
10. Property, plant and equipment
Accounting policies
Land and buildings are stated at cost less accumulated depreciation. Freehold land is not depreciated. Leaseholds are generally depreciated
over the unexpired period of the lease. Other property, plant and equipment are depreciated on a straight-line basis to estimated residual
values over their expected useful lives, and these values and lives are reviewed each year. Subject to these reviews, the estimated useful lives
fall within the following ranges: buildings \u2013 10 to 50 years; within plant and equipment casks and containers \u2013 15 to 50 years; other plant and
equipment \u2013 5 to 40 years; fixtures and fittings \u2013 5 to 10 years; and returnable bottles and crates \u2013 5 to 10 years.
Reviews are carried out if there is an indication that assets may be impaired, to ensure that property, plant and equipment are not carried
at above their recoverable amounts.
Government grants
Government grants are not recognised until there is reasonable assurance that the group will comply with the conditions pursuant to which
they have been granted and that the grants will be received. Government grants in respect of property, plant and equipment are deducted
from the asset that they relate to, reducing the depreciation expense charged to the income statement.
Land and
buildings
\u00a3 million
Plant and
equipment
\u00a3 million
Fixtures
and
fittings
\u00a3 million
Returnable
bottles and
crates
\u00a3 million
Under
construction
\u00a3 million
Total
\u00a3 million
Cost
At 30 June 2021
2,160
4,714
121
528
659
8,182
Hyperinflation adjustment in respect of Turkey and Venezuela
56
32
2
\u2014
7
97
Exchange differences
107
226
1
11
45
390
Sale of businesses
(4)
(58)
(3)
(19)
(1)
(85)
Additions
230
245
8
41
612
1,136
Disposals
(65)
(122)
(15)
(32)
(3)
(237)
Transfers
177
249
10
13
(449)
\u2014
Reclassification to assets held for sale
(8)
(25)
\u2014
\u2014
\u2014
(33)
At 30 June 2022
2,653
5,261
124
542
870
9,450
Hyperinflation adjustment in respect of Turkey and Venezuela
5
10
1
\u2014
4
20
Exchange differences
(166)
(331)
(6)
(49)
(30)
(582)
Acquisitions
8
14
\u2014
3
\u2014
25
Sale of businesses
(35)
(147)
(3)
(55)
(3)
(243)
Additions
111
214
13
50
832
1,220
Disposals
(64)
(141)
(12)
(105)
(2)
(324)
Transfers
146
238
12
28
(424)
\u2014
Reclassification from assets held for sale
2
\u2014
1
\u2014
\u2014
3
At 30 June 2023
2,660
5,118
130
414
1,247
9,569
Depreciation
At 30 June 2021
658
2,218
86
371
\u2014
3,333
Exchange differences
31
94
1
9
\u2014
135
Depreciation charge for the year
125
276
14
29
\u2014
444
Exceptional impairment
2
1
\u2014
\u2014
\u2014
3
Sale of businesses
(4)
(50)
(2)
(18)
\u2014
(74)
Disposals
(62)
(113)
(13)
(30)
\u2014
(218)
Transfers
5
4
(9)
\u2014
\u2014
\u2014
Reclassification to assets held for sale
(5)
(16)
\u2014
\u2014
\u2014
(21)
At 30 June 2022
750
2,414
77
361
\u2014
3,602
Exchange differences
(38)
(176)
(3)
(27)
\u2014
(244)
Depreciation charge for the year
125
269
13
33
\u2014
440
Exceptional accelerated depreciation and impairment
31
41
\u2014
\u2014
\u2014
72
Sale of businesses
(21)
(80)
(2)
(34)
\u2014
(137)
Disposals
(63)
(130)
(11)
(103)
\u2014
(307)
Reclassification from assets held for sale
\u2014
\u2014
1
\u2014
\u2014
1
At 30 June 2023
784
2,338
75
230
\u2014
3,427
Carrying amount
At 30 June 2023
1,876
2,780
55
184
1,247
6,142
At 30 June 2022
1,903
2,847
47
181
870
5,848
At 30 June 2021
1,502
2,496
35
157
659
4,849
The net book value of land and buildings comprises freeholds of \u00a31,481 million (2022 \u2013 \u00a31,444 million), long leaseholds of \u00a33 million (2022 \u2013 \u00a33 million) and
short leaseholds of \u00a3389 million (2022 \u2013 \u00a3410 million). Depreciation was not charged on \u00a3141 million (2022 \u2013 \u00a3114 million) of land.\u00a0
Property, plant and equipment is net of a government grant of \u00a3147 million (2022 \u2013 \u00a3153 million) received in prior years in respect of the
construction of a rum distillery in the US Virgin Islands.", "dimensions": { "concept": "ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-694": { "value": "
Accounting policies
Land and buildings are stated at cost less accumulated depreciation. Freehold land is not depreciated. Leaseholds are generally depreciated
over the unexpired period of the lease. Other property, plant and equipment are depreciated on a straight-line basis to estimated residual
values over their expected useful lives, and these values and lives are reviewed each year. Subject to these reviews, the estimated useful lives
fall within the following ranges: buildings \u2013 10 to 50 years; within plant and equipment casks and containers \u2013 15 to 50 years; other plant and
equipment \u2013 5 to 40 years; fixtures and fittings \u2013 5 to 10 years; and returnable bottles and crates \u2013 5 to 10 years.
Reviews are carried out if there is an indication that assets may be impaired, to ensure that property, plant and equipment are not carried
at above their recoverable amounts.
Government grants
Government grants are not recognised until there is reasonable assurance that the group will comply with the conditions pursuant to which
they have been granted and that the grants will be received. Government grants in respect of property, plant and equipment are deducted
from the asset that they relate to, reducing the depreciation expense charged to the income statement.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-695": { "value": "
Government grants are not recognised until there is reasonable assurance that the group will comply with the conditions pursuant to which
they have been granted and that the grants will be received. Government grants in respect of property, plant and equipment are deducted
from the asset that they relate to, reducing the depreciation expense charged to the income statement.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForGovernmentGrants", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-696": { "value": "Property, plant and equipment is net of a government grant of \u00a3147 million (2022 \u2013 \u00a3153 million) received in prior years in respect of the construction of a rum distillery in the US Virgin Islands.", "dimensions": { "concept": "ifrs-full:DisclosureOfGovernmentGrantsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-697": { "value": "
11. Biological assets
Accounting policies
Biological assets held by the group consist of agave (Agave Azul
Tequilana Weber) plants. The harvested plants are used during
the production of tequila.
Biological assets are measured at fair value less costs to sell
on initial recognition and at the end of each reporting period
based on the present value of future cash flows discounted at an
appropriate rate for Mexico.
Agricultural produce is measured at fair value less costs to
sell at the point of harvest which is used as the cost of inventory
when the harvested agave is transferred.
Changes in biological assets were as follows:
Biological
assets
\u00a3 million
Fair value
At 30 June 2021
66
Exchange differences
10
Transferred to inventories
(11)
Fair value change
(5)
Farming cost capitalised
34
At 30 June 2022
94
Exchange differences
15
Transferred to inventories
(8)
Fair value change
\u2014
Farming cost capitalised
55
At 30 June 2023
156
At 30 June 2023, the number of agave plants was approximately
37\u00a0million (2022 \u2013 33\u00a0million), ranging from new plantations up to seven
year-old plants.
", "dimensions": { "concept": "ifrs-full:DisclosureOfBiologicalAssetsAndGovernmentGrantsForAgriculturalActivityExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-698": { "value": "
Accounting policies
Biological assets held by the group consist of agave (Agave Azul
Tequilana Weber) plants. The harvested plants are used during
the production of tequila.
Biological assets are measured at fair value less costs to sell
on initial recognition and at the end of each reporting period
based on the present value of future cash flows discounted at an
appropriate rate for Mexico.
Agricultural produce is measured at fair value less costs to
sell at the point of harvest which is used as the cost of inventory
when the harvested agave is transferred.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBiologicalAssetsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-699": { "value": "
12. Leases
Accounting policies
Where the group is the lessee, all leases are recognised on the
balance sheet as right-of-use assets and depreciated on a
straight-line basis with the charge recognised in cost of sales or
in other operating items depending on the nature of the costs.
The liability, recognised as part of net borrowings, is measured at
a discounted value and any interest is charged to finance
charges.
The group recognises services associated with a lease as
other operating expenses. Payments associated with leases
where the value of the asset when it is new is lower than $5,000
(leases of low value assets) and leases with a lease term of 12
months or less (short term leases) are recognised as other
operating expenses. A judgement in calculating the lease
liability at initial recognition includes determining the lease term
where extension or termination options exist. In such instances,
any economic incentive to retain or end a lease are considered
and extension periods are only included when it is considered
reasonably certain that an option to extend a lease will be
exercised.
(a) Movement in right-of-use assets
The company principally leases warehouses, office buildings, plant and
machinery, cars and distribution vehicles in the ordinary course of
business.
Land and
buildings
\u00a3 million
Plant and
equipment
\u00a3 million
Under
construction
\u00a3 million
Total
\u00a3 million
At 30 June 2021
230
184
29
443
Exchange differences
26
14
\u2014
40
Additions
129
56
\u2014
185
Transfers
29
\u2014
(29)
\u2014
Reclassification to
assets held for sale
(1)
(1)
\u2014
(2)
Disposals
(6)
\u2014
\u2014
(6)
Depreciation
(54)
(41)
\u2014
(95)
At 30 June 2022
353
212
\u2014
565
Exchange differences
(3)
(23)
\u2014
(26)
Additions
45
37
\u2014
82
Reclassification from
assets held for sale
1
1
\u2014
2
Derecognition due to
disposal of business
(1)
(1)
\u2014
(2)
Depreciation
(56)
(39)
\u2014
(95)
At 30 June 2023
339
187
\u2014
526
(b) Lease liabilities
2023
\u00a3 million
2022
\u00a3 million
Current lease liabilities
(75)
(85)
Non-current lease liabilities
(373)
(390)
(448)
(475)
The future cash outflows, which are not included in lease liabilities on
the balance sheet, in respect of extension and termination options
which are not reasonably expected to be exercised are estimated at
\u00a3261 million (2022 \u2013 \u00a3282\u00a0million).
(c) Amounts recognised in the consolidated income
statement
In the year ended 30 June 2023, other external charges (within other
operating items) included \u00a357 million (2022 \u2013 \u00a339 million) in respect
of\u00a0leases of low value assets and short term leases and \u00a34 million (2022
\u2013 \u00a39\u00a0million) in respect of variable lease payments. Refer to note 5 for
further information relating to the interest expenses on lease liabilities.
The total cash outflow for leases in the year ended 30 June 2023 was
\u00a3172 million (2022 \u2013 \u00a3154 million).
", "dimensions": { "concept": "ifrs-full:DisclosureOfLeasesExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-700": { "value": "
Accounting policies
Where the group is the lessee, all leases are recognised on the
balance sheet as right-of-use assets and depreciated on a
straight-line basis with the charge recognised in cost of sales or
in other operating items depending on the nature of the costs.
The liability, recognised as part of net borrowings, is measured at
a discounted value and any interest is charged to finance
charges.
The group recognises services associated with a lease as
other operating expenses. Payments associated with leases
where the value of the asset when it is new is lower than $5,000
(leases of low value assets) and leases with a lease term of 12
months or less (short term leases) are recognised as other
operating expenses. A judgement in calculating the lease
liability at initial recognition includes determining the lease term
where extension or termination options exist. In such instances,
any economic incentive to retain or end a lease are considered
and extension periods are only included when it is considered
reasonably certain that an option to extend a lease will be
exercised.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-701": { "value": "
13. Other investments
Accounting policies
Other investments are equity investments that are not classified
as investments in associates or joint arrangements nor
investments in subsidiaries. They are included in non-current
assets. Subsequent to initial measurement, other investments are
stated at fair value. Gains and losses arising from the changes in
fair value are recognised in the income statement or in other
comprehensive income on a case by case basis. Accumulated
gains and losses included in other comprehensive income are
not recycled to the income statement. Dividends from other
investments are recognised in the consolidated income
statement.
Loans receivable are non-derivative financial assets that are not
classified as equity investments. They are subsequently
measured either at amortised cost using the effective interest
method less allowance for impairment or at fair value with gains
and losses arising from changes in fair value recognised in the
income statement or in other comprehensive income that are
recycled to the income statement on the de-recognition of the
asset. Allowances for expected credit losses are made based on
the risk of non-payment taking into account ageing, previous
experience, economic conditions and forward-looking data.
Such allowances are measured as either 12-months expected
credit losses or lifetime expected credit losses depending on
changes in the credit quality of the counterparty.
Loans
\u00a3 million
Other
investments
\u00a3 million
Total
\u00a3 million
Cost less allowances or fair value
At 30 June 2021
10
30
40
Exchange differences
2
1
3
Additions
6
9
15
Repayments and disposals
(1)
(1)
(2)
Fair value adjustment
\u2014
(13)
(13)
Step acquisitions
\u2014
(6)
(6)
Capitalised interest
1
\u2014
1
Transfer
\u2014
(1)
(1)
At 30 June 2022
18
19
37
Exchange differences
(1)
\u2014
(1)
Additions
20
9
29
Repayments and disposals
(3)
\u2014
(3)
Fair value adjustment
\u2014
(4)
(4)
Capitalised interest
1
\u2014
1
Impairment charged during the year
\u2014
(2)
(2)
At 30 June 2023
35
22
57
At 30 June 2023, loans comprise \u00a36 million (2022 \u2013 \u00a36 million; 2021 \u2013
\u00a33 million) of loans to customers and other third parties, after
allowances of \u00a3121 million (2022 \u2013 \u00a3129 million; 2021 \u2013 \u00a3113 million), and
\u00a329 million (2022 \u2013 \u00a312 million; 2021 \u2013 \u00a37 million) of loans to associates.", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentsOtherThanInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-702": { "value": "
Accounting policies
Other investments are equity investments that are not classified
as investments in associates or joint arrangements nor
investments in subsidiaries. They are included in non-current
assets. Subsequent to initial measurement, other investments are
stated at fair value. Gains and losses arising from the changes in
fair value are recognised in the income statement or in other
comprehensive income on a case by case basis. Accumulated
gains and losses included in other comprehensive income are
not recycled to the income statement. Dividends from other
investments are recognised in the consolidated income
statement.
Loans receivable are non-derivative financial assets that are not
classified as equity investments. They are subsequently
measured either at amortised cost using the effective interest
method less allowance for impairment or at fair value with gains
and losses arising from changes in fair value recognised in the
income statement or in other comprehensive income that are
recycled to the income statement on the de-recognition of the
asset. Allowances for expected credit losses are made based on
the risk of non-payment taking into account ageing, previous
experience, economic conditions and forward-looking data.
Such allowances are measured as either 12-months expected
credit losses or lifetime expected credit losses depending on
changes in the credit quality of the counterparty.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentsOtherThanInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-703": { "value": "
14. Post employment benefits \u00a0
Accounting policies
The group\u2019s principal post employment funds are defined benefit
plans. In addition, the group has defined contribution plans,
unfunded post employment medical benefit liabilities and other
unfunded defined benefit post employment liabilities. For post
employment plans other than defined contribution plans, the
amount charged to operating profit is the cost of accruing
pension benefits promised to employees over the year, plus any
changes arising on benefits granted to members by the group
during the year. Net finance charges comprise the net deficit/
surplus on the plans at the beginning of the year, adjusted for
cash flows in the year, multiplied by the discount rate for plan
liabilities. The differences between the fair value of the plans\u2019
assets and the present value of the plans\u2019 liabilities are disclosed
as an asset or liability on the consolidated balance sheet. Any
differences due to changes in assumptions or experience are
recognised in other comprehensive income. The amount of any
pension fund asset recognised on the balance sheet is limited to
any future refunds from the plan or the present value of
reductions in future contributions to the plan.
Contributions payable by the group in respect of defined
contribution plans are charged to operating profit as incurred.
Critical accounting estimates and judgements
Application of IAS 19 requires the exercise of estimate and
judgement in relation to various assumptions.
Diageo determines the assumptions on a country by country
basis in conjunction with its actuaries. Estimates are required in
respect of uncertain future events, including the life expectancy
of members of the funds, salary and pension increases, future
inflation rates, discount rates and employee and pensioner
demographics. The application of different assumptions could
have a significant effect on the amounts reflected in the income
statement, other comprehensive income and the balance sheet.
There may be interdependencies between the assumptions.
Where there is an accounting surplus on a defined benefit
plan, management judgement is necessary to determine
whether the group can obtain economic benefits through a
refund of the surplus or by reducing future contributions to the
plan.
(a) Post employment benefit plans
The group operates a number of pension plans throughout the world,
devised in accordance with local conditions and practices. Diageo's
most significant plans are defined benefit plans and are funded by
payments to separately administered trusts or insurance companies. The
group also operates a number of plans that are generally unfunded,
primarily in the United States, which provide to employees post
employment medical benefits.
The principal plans are in the United Kingdom, Ireland and the
United States where benefits are based on employees\u2019 length of service
and salary at retirement. All valuations were performed by independent
actuaries using the projected unit credit method to determine pension
costs.
The most recent funding valuations of the significant defined benefit
plans were carried out as follows:
Principal plans
Date of valuation
United Kingdom(1)
1 April 2021
Ireland(2)
31 December 2021
United States
1 January 2022
(i)\u00a0 The year ended 30 June 2022 includes settlement gains of \u00a327\u00a0million in respect of the
Enhanced Transfer Values (ETV) exercise carried out in the Irish Schemes and past
service gains of \u00a328\u00a0million as a result of the changes of the benefits in the Irish
Scheme. In the year ended 30 June 2021, the exceptional past service loss of \u00a35\u00a0million
is in respect of the equalisation of Guaranteed Minimum Pension (GMP) benefits for
men and women.
(1) The (charge)/income before taxation is in respect of the following countries:
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
United Kingdom
15
(27)
(46)
Ireland
1
45
4
United States
(32)
(31)
(28)
Other
(15)
(16)
(17)
(31)
(29)
(87)
In addition to the charge in respect of defined benefit post employment
plans, contributions to the group\u2019s defined contribution plans were \u00a344
million (2022 \u2013 \u00a333 million; 2021 \u2013 \u00a325\u00a0million).
The movements in the net surplus for the two years ended 30 June
2023 is set out below:
Plan
assets
\u00a3 million
Plan
liabilities
\u00a3 million
Net
surplus
\u00a3 million
At 30 June 2021
9,892
(9,445)
447
Exchange differences
93
(100)
(7)
Income/(charge) before taxation
176
(205)
(29)
Other comprehensive (loss)/income(1)
(1,432)
2,058
626
Contributions by the group
128
\u2014
128
Settlements paid(2)
(52)
52
\u2014
Employee contributions
5
(5)
\u2014
Benefits paid
(411)
411
\u2014
At 30 June 2022
8,399
(7,234)
1,165
Exchange differences
(49)
55
6
Disposals
\u2014
4
4
Income/(charge) before taxation
298
(329)
(31)
Other comprehensive (loss)/income(1)
(1,435)
785
(650)
Contributions by the group
100
\u2014
100
Employee contributions
5
(5)
\u2014
Benefits paid
(472)
472
\u2014
At 30 June 2023
6,846
(6,252)
594
(1)Excludes surplus restriction.
(2)Includes settlement payment of \u00a352\u00a0million on ETV exercise in Ireland.
The plan assets and liabilities by type of post employment benefit and
country are as follows:
2023
2022
Plan
assets
\u00a3 million
Plan
liabilities
\u00a3 million
Plan
assets
\u00a3 million
Plan
liabilities
\u00a3 million
Pensions
United Kingdom
4,578
(4,041)
6,041
(4,897)
Ireland
1,588
(1,310)
1,645
(1,409)
United States
441
(411)
453
(408)
Other
180
(194)
191
(212)
Post employment medical
2
(227)
2
(225)
Other post employment
57
(69)
67
(83)
6,846
(6,252)
8,399
(7,234)
The balance sheet analysis of the post employment plans is as follows:
2023
2022
Non-
current
assets(1)
\u00a3 million
Non-
current
liabilities
\u00a3 million
Non-
current
assets(1)
\u00a3 million
Non-
current
liabilities
\u00a3 million
Funded plans
960
(132)
1,553
(144)
Unfunded plans
\u2014
(241)
\u2014
(258)
960
(373)
1,553
(402)
(1)Includes surplus restriction of \u00a37 million (2022 \u2013 \u00a314 million).
The disclosures have been prepared in accordance with IFRIC 14. In
particular, where the calculation for a plan results in a surplus, the
recognised asset is limited to the present value of any available future
refunds from the plan or reductions in future contributions to the plan,
and any additional liabilities are recognised as required. At 30 June
2023, the DPS had a net surplus of \u00a3589 million (2022 \u2013 \u00a31,174\u00a0million;
2021 \u2013 \u00a3840 million) and the GIGPS had a net surplus of \u00a3260 million
(2022 a surplus of \u00a3221\u00a0million; 2021 a deficit of \u00a379\u00a0million) and other
schemes in a surplus totalled of \u00a3111\u00a0million (2022 \u2013 \u00a3158\u00a0million; 2021 \u2013
\u00a3178\u00a0million). Both of these surpluses have been recognised, with no
provision made against them, as they are expected to be recoverable
through a combination of a reduction in future cash contributions or
ultimately via a cash refund when the last member\u2019s obligations have
been met.\u00a0
(b) Principal risks and assumptions
The material post employment plans are not exposed to any unusual,
entity-specific or scheme-specific risks but there are general risks:
Inflation \u2013 The majority of the plans\u2019 obligations are linked to inflation.
Higher inflation will lead to increased liabilities which is partially offset
by the plans holding inflation linked gilts, swaps and caps against the
level of inflationary increases.
Interest rate \u2013 The plan liabilities are determined using discount rates
derived from yields on AA-rated corporate bonds. A decrease in
corporate bond yields will increase plan liabilities though this will be
partially offset by an increase in the value of the bonds held by the post
employment plans.
Mortality \u2013 The majority of the obligations are to provide benefits for the
life of the members and their partners, so any increase in life
expectancy will result in an increase in the plans\u2019 liabilities.
Asset returns \u2013 Assets held by the pension plans are invested in a
diversified portfolio of equities, bonds and other assets. Volatility in asset
values will lead to movements in the net deficit/surplus reported in the
consolidated balance sheet for post employment plans which in
addition will also impact the post employment expense in the
consolidated income statement.
The following weighted average assumptions were used to
determine the group\u2019s deficit/surplus in the main post employment
plans at 30 June in the relevant year. The assumptions used to calculate
the charge/credit in the consolidated income statement for the year
ending 30 June are based on the assumptions disclosed as at the
previous 30 June.
United Kingdom
Ireland
United States(1)
2023
%
2022
%
2021
%
2023
%
2022
%
2021
%
2023
%
2022
%
2021
%
Rate of general increase in salaries(2)
3.7
3.6
3.4
3.9
3.8
3.0
\u2014
\u2014
\u2014
Rate of increase to pensions in payment
2.9
2.9
3.1
2.3
2.2
1.7
\u2014
\u2014
\u2014
Rate of increase to deferred pensions
2.7
2.6
2.5
2.4
2.3
1.6
\u2014
\u2014
\u2014
Discount rate for plan liabilities
5.2
3.8
1.9
3.6
3.2
1.0
4.9
4.4
2.7
Inflation \u2013 CPI
2.7
2.6
2.5
2.5
2.4
1.6
2.2
2.3
2.3
Inflation - RPI
3.2
3.1
3.0
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(1)The salary increase assumption in the United States is not a significant assumption as only a minimal amount of members\u2019 pension entitlement is dependent on a member\u2019s projected
final salary.
(2)The salary increase assumptions include an allowance for age-related promotional salary increases.
For the principal UK and Irish pension funds, the table below illustrates the expected age at death of an average worker who retires currently at the
age of 65, and one who is currently aged 45 and subsequently retires at the age of 65:
United Kingdom(1)
Ireland(2)
United States
2023
Age
2022
Age
2021
Age
2023
Age
2022
Age
2021
Age
2023
Age
2022
Age
2021
Age
Retiring currently at age 65
Male
86.8
87.1
87.2
87.2
87.7
86.9
85.6
85.5
85.4
Female
88.4
88.7
88.7
89.6
90.0
89.3
87.2
87.2
87.1
Currently aged 45, retiring at age 65
Male
88.1
88.5
88.6
88.8
89.3
88.6
87.1
87.0
86.9
Female
90.4
90.7
90.8
91.3
91.7
91.1
88.7
88.6
88.5
(1)Based on the CMI\u2019s S3 mortality tables with scaling factors based on the experience of the plan and where people live, with suitable future improvements.
(2)Based on the CMI's S3 mortality tables with scaling factors based on the experience of the plan, with suitable future improvements.
For the significant assumptions, the following sensitivity analyses estimate the potential impacts on the consolidated income statement for the year
ending 30 June 2024 and on the plan liabilities at 30 June 2023:
United Kingdom
Ireland
United States
Benefit/(cost)
Operating
profit
\u00a3 million
Profit after
taxation
\u00a3 million
Plan
liabilities(1)
\u00a3 million
Operating
profit
\u00a3 million
Profit after
taxation
\u00a3 million
Plan
liabilities(1)
\u00a3 million
Operating
profit
\u00a3 million
Profit after
taxation
\u00a3 million
Plan
liabilities(1)
\u00a3 million
Effect of 0.5% increase in discount rate
2
15
259
1
5
85
2
2
22
Effect of 0.5% decrease in discount rate
(2)
(14)
(267)
(1)
(4)
(95)
(2)
(2)
(24)
Effect of 0.5% increase in inflation
(1)
(8)
(156)
\u2014
(2)
(49)
\u2014
(1)
(9)
Effect of 0.5% decrease in inflation
2
8
173
\u2014
2
50
\u2014
1
8
Effect of one year increase in life expectancy
\u2014
(6)
(131)
\u2014
(2)
(55)
\u2014
(1)
(15)
(1)The estimated effect on the liabilities excludes the impact of any interest rate and inflation swaps held by the pension plans.
(i)The sensitivity analyses above have been determined based on reasonably possible changes of the respective assumptions and may not be representative of the actual change. Each
sensitivity is calculated on a change in the key assumption while holding all other assumptions constant. The sensitivity to inflation includes the impact on all inflation linked assumptions
(e.g. pension increases and salary increases where appropriate).
(c) Investment and hedging strategy
The investment strategy for the group\u2019s funded post employment plans is determined locally by the trustees of the plan and/or Diageo, as
appropriate, and takes account of the relevant statutory requirements. The objective of the investment strategy is to achieve a target rate of return in
excess of the movement on the liabilities, whilst taking an acceptable level of investment risk relative to the liabilities. This objective is implemented
by using the funds of the plans to invest in a variety of asset classes that are expected over the long-term to deliver a target rate of return. The
majority of the investment strategies have significant amounts allocated to bonds, in order to provide a natural hedge against movements in the
liabilities of the plans. At 30 June 2023, approximately 97% and 98% (2022 \u2013 100% and 103%) of the UK plans\u2019 liabilities measured on the Trustee's
funding basis (gilts+50bp) were hedged against future movements in interest rates and inflation, respectively, through the combined effect of bonds
and swaps. At 30 June 2023, approximately 92% and 112% (2022 \u2013 70% and 76%) of the Irish plans\u2019 liabilities measured on the Trustee's funding
basis (euro-swaps+50bp) were hedged against future movements in interest rates and inflation, respectively, through the combined effect of bonds
and swaps.
The discount rates used are based on the yields of high-quality fixed income investments. For the UK plans, which represent approximately 65%
of total plan liabilities, the discount rate is determined by reference to the yield curves of AA-rated corporate bonds for which the timing and amount
of cash outflows are similar to those of the plans. A similar process is used to determine the discount rates used for the non-UK plans.
An analysis of the fair value of the plan assets is as follows:
2023
United Kingdom
\u00a3 million
Ireland
\u00a3 million
United States and other
\u00a3 million
Total
\u00a3 million
Quoted
Unquoted
Quoted
Unquoted
Quoted
Unquoted
Quoted
Unquoted
Total
Equities
12
916
\u2014
291
64
98
76
1,305
1,381
Bonds
\u00a0 \u00a0 Fixed-interest government
18
24
\u2014
6
48
8
66
38
104
\u00a0 \u00a0 Inflation-linked government
\u2014
\u2014
\u2014
96
2
2
2
98
100
\u00a0 \u00a0 Investment grade corporate
\u2014
29
\u2014
328
21
227
21
584
605
\u00a0 \u00a0 Non-investment grade
22
289
6
186
2
133
30
608
638
\u00a0 \u00a0 Loan securities
13
526
\u2014
84
\u2014
\u2014
13
610
623
\u00a0 \u00a0 Repurchase agreements
2,351
826
\u2014
\u2014
\u2014
\u2014
2,351
826
3,177
\u00a0 \u00a0 Liability Driven Investment (LDI)
\u2014
\u2014
\u2014
81
\u2014
\u2014
\u2014
81
81
Property
29
462
\u2014
62
\u2014
1
29
525
554
Hedge funds
\u2014
\u2014
\u2014
12
\u2014
5
\u2014
17
17
Interest rate and inflation swaps
\u2014
(971)
102
(18)
\u2014
\u2014
102
(989)
(887)
Cash and other
46
(14)
5
347
\u2014
69
51
402
453
Total bid value of assets
2,491
2,087
113
1,475
137
543
2,741
4,105
6,846
terminate the contingent arrangements comprising mortgages over certain land and buildings and fixed and floating charges over certain
receivables of the group up to a value of \u20ac200 million (\u00a3171 million). The company has agreed with the Trustee conditional contributions of up to
\u20ac35 million (\u00a330 million) by 31 December 2024, \u20ac39 million (\u00a333 million) by 31 December 2027 and \u20ac39 million (\u00a333 million) by 31 December 2030
if a deficit is identified at those valuations.
(e) Timing of benefit payments
The following table provides information on the timing of the benefit payments and the average duration of the defined benefit obligations and the
distribution of the timing of benefit payments:
United Kingdom
Ireland
United States
2023
\u00a3 million
2022
\u00a3 million
2023
\u00a3 million
2022
\u00a3 million
2023
\u00a3 million
2022
\u00a3 million
Maturity analysis of benefits expected to be paid
Within one year
303
295
73
70
57
58
Between 1 to 5 years
1,090
1,082
367
353
174
187
Between 6 to 15 years
2,439
2,556
727
704
331
310
Between 16 to 25 years
2,244
2,252
645
634
206
183
Beyond 25 years
2,664
2,787
747
768
187
174
Total
8,740
8,972
2,559
2,529
955
912
years
years
years
years
years
years
Average duration of the defined benefit obligation
14
15
14
15
9
9
The projected benefit payments are based on the assumptions underlying the assessment of the obligations, including inflation. They are disclosed
undiscounted and therefore appear large relative to the discounted value of the plan liabilities recognised on the consolidated balance sheet. They
are in respect of benefits that have accrued at the balance sheet date and make no allowance for any benefits to be accrued subsequently.
(f) Related party disclosures
Information on transactions between the group and its pension plans is given in note 21.", "dimensions": { "concept": "ifrs-full:DisclosureOfEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-704": { "value": "
Accounting policies
The group\u2019s principal post employment funds are defined benefit
plans. In addition, the group has defined contribution plans,
unfunded post employment medical benefit liabilities and other
unfunded defined benefit post employment liabilities. For post
employment plans other than defined contribution plans, the
amount charged to operating profit is the cost of accruing
pension benefits promised to employees over the year, plus any
changes arising on benefits granted to members by the group
during the year. Net finance charges comprise the net deficit/
surplus on the plans at the beginning of the year, adjusted for
cash flows in the year, multiplied by the discount rate for plan
liabilities. The differences between the fair value of the plans\u2019
assets and the present value of the plans\u2019 liabilities are disclosed
as an asset or liability on the consolidated balance sheet. Any
differences due to changes in assumptions or experience are
recognised in other comprehensive income. The amount of any
pension fund asset recognised on the balance sheet is limited to
any future refunds from the plan or the present value of
reductions in future contributions to the plan.
Contributions payable by the group in respect of defined
contribution plans are charged to operating profit as incurred.
Critical accounting estimates and judgements
Application of IAS 19 requires the exercise of estimate and
judgement in relation to various assumptions.
Diageo determines the assumptions on a country by country
basis in conjunction with its actuaries. Estimates are required in
respect of uncertain future events, including the life expectancy
of members of the funds, salary and pension increases, future
inflation rates, discount rates and employee and pensioner
demographics. The application of different assumptions could
have a significant effect on the amounts reflected in the income
statement, other comprehensive income and the balance sheet.
There may be interdependencies between the assumptions.
Where there is an accounting surplus on a defined benefit
plan, management judgement is necessary to determine
whether the group can obtain economic benefits through a
refund of the surplus or by reducing future contributions to the
plan.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-705": { "value": "
Inventories are stated at the lower of cost and net realisable
value. Cost includes raw materials, direct labour and expenses,
an appropriate proportion of production and other overheads,
but not borrowing costs. Cost is calculated at the weighted
average cost incurred in acquiring inventories. Maturing
inventories and raw materials which are retained for more than
one year are classified as current assets, as they are expected to
be realised in the normal operating cycle.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForMeasuringInventories", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-706": { "value": "
Trade and other receivables are initially recognised at fair value
less transaction costs and subsequently carried at amortised cost
less any allowance for discounts and doubtful debts. Trade
receivables arise from contracts with customers, and are
recognised when performance obligations are satisfied, and the
consideration due is unconditional as only the passage of time is
required before the payment is received. Allowance losses are
calculated by reviewing lifetime expected credit losses using
historic and forward-looking data on credit risk.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherReceivablesExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-707": { "value": "
Trade and other payables are initially recognised at fair value
including transaction costs and subsequently carried at
amortised costs. Contingent considerations recognised in
business combinations are subsequently measured at fair value
through income statement. The group evaluates supplier
arrangements against a number of indicators to assess if the
liability has the characteristics of a trade payable or should be
classified as borrowings. This assessment considers the
commercial purpose of the facility, whether payment terms are
similar to customary payment terms, whether the group is legally
discharged from its obligation towards suppliers before the end
of the original payment term, and the group\u2019s involvement in
agreeing terms between banks and suppliers.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTradeAndOtherPayablesExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-708": { "value": "
Provisions are liabilities of uncertain timing or amount. A
provision is recognised if, as a result of a past event, the group
has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of
economic benefits will be required to settle the obligation.
Provisions are calculated on a discounted basis. The carrying
amounts of provisions are reviewed at each balance sheet date
and adjusted to reflect the current best estimate.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-709": { "value": "
(a) Inventories
2023
\u00a3 million
2022
\u00a3 million
Raw materials and consumables
543
489
Work in progress
132
86
Maturing inventories
5,794
5,229
Finished goods and goods for resale
1,192
1,290
7,661
7,094
Maturing inventories include whisk(e)y, rum, tequila and Chinese white
spirits. The following amounts of inventories are expected to be utilised
after more than one year:
2023
\u00a3 million
2022
\u00a3 million
Raw materials and consumables
23
15
Maturing inventories
4,063
3,713
4,086
3,728
", "dimensions": { "concept": "ifrs-full:DisclosureOfInventoriesExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-710": { "value": "
(b) Trade and other receivables
2023
2022
Current
assets
\u00a3 million
Non-current
assets
\u00a3 million
Current
assets
\u00a3 million
Non-current
assets
\u00a3 million
Trade receivables
2,011
\u2014
2,155
\u2014
Interest receivable
12
\u2014
18
\u2014
VAT recoverable and other
prepaid taxes
271
15
290
15
Other receivables
163
13
158
13
Prepayments
229
3
290
9
Accrued income
34
\u2014
22
\u2014
2,720
31
2,933
37
At 30 June 2023, approximately 26%, 14% and 11% of the group\u2019s
trade receivables of \u00a32,011 million are due from counterparties based in
the United States, United Kingdom and India, respectively. Accrued
income primarily represents amounts receivable from customers in
respect of performance obligations satisfied but not yet invoiced.
The aged analysis of trade receivables, net of expected credit loss
allowance, is as follows:
2023
\u00a3 million
2022
\u00a3 million
Not overdue
1,967
2,114
Overdue 1 \u2013 30 days
25
19
Overdue 31 \u2013 60 days
7
8
Overdue 61 \u2013 90 days
3
5
Overdue 91 \u2013 180 days
6
5
Overdue more than 180 days
3
4
2,011
2,155
", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherReceivablesExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-711": { "value": "
(c) Trade and other payables
2023
2022
Current
liabilities
\u00a3 million
Non-current
liabilities
\u00a3 million
Current
liabilities
\u00a3 million
Non-current
liabilities
\u00a3 million
Trade payables
2,659
\u2014
2,705
\u2014
Interest payable
237
\u2014
143
\u2014
Tax and social security excluding income tax
632
\u2014
696
\u2014
Other payables
432
368
600
380
Accruals
1,229
\u2014
1,635
\u2014
Deferred income
73
\u2014
90
\u2014
Dividend payable to non-controlling interests
38
\u2014
18
\u2014
5,300
368
5,887
380
Interest payable at 30 June 2023 includes interest on non-derivative financial instruments of \u00a3217 million (2022 \u2013 \u00a3141 million). Accruals at 30 June
2023 include \u00a3561\u00a0million (2022 \u2013 \u00a3613\u00a0million) accrued discounts attributed to sales recognised. Deferred income represents amounts paid by
customers in respect of performance obligations not yet satisfied. The amount of contract liabilities recognised as revenue in the current year is
\u00a390\u00a0million (2022 \u2013 \u00a372\u00a0million). Non-current liabilities include the net present value of contingent consideration in respect of prior acquisitions of
\u00a3293 million (2022 \u2013 \u00a3353\u00a0million). For further information on contingent consideration, please refer to note 16 (g).
Together with the group\u2019s partner banks, supply chain financing (SCF) facilities are provided to suppliers in certain countries. These arrangements
enable suppliers to receive funding earlier than the invoice due date at their discretion and at their own cost. Payment terms continue to be agreed
directly between the group and suppliers, independently from the availability of SCF facilities. Liabilities are settled in accordance with the original
due date of invoices. The group does not incur any fees or receive any rebates where the suppliers choose to utilise these facilities. The group has
determined that it is appropriate to present amounts outstanding subject to SCF arrangements as trade payables. Consistent with this classification,
cash flows are presented either as operating cash flows or cash flows from investing activities, when related to the acquisition of non-current assets.
At 30 June 2023, the amount that has been subject to SCF and accounted for as trade payables was \u00a3727\u00a0million (2022 \u2013 \u00a3789\u00a0million).
", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherPayablesExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-712": { "value": "
(d) Provisions
\u00a0
Thalidomide
\u00a3 million
Other
\u00a3 million
Total
\u00a3 million
At 30 June 2022
178
239
417
Exchange differences
(1)
(26)
(27)
Disposal of businesses
\u2014
(2)
(2)
Provisions charged during the year
\u2014
31
31
Provisions utilised during the year
(14)
(61)
(75)
Transfers from other payables
\u2014
12
12
Unwinding of discounts
5
1
6
At 30 June 2023
168
194
362
Current liabilities
13
106
119
Non-current liabilities
155
88
243
168
194
362
Provisions have been established in respect of the discounted value of the group\u2019s commitment to the UK and Australian Thalidomide Trusts. These
provisions will be utilised over the period of the commitments up to 2037.\u00a0
The largest item in other provisions at 30 June 2023 is \u00a351 million (2022 \u2013 \u00a349\u00a0million) in respect of employee deferred compensation plans which
will be utilised when employees leave the group.
", "dimensions": { "concept": "ifrs-full:DisclosureOfProvisionsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-713": { "value": "
16. Financial instruments and risk management
Accounting policies
Financial assets and liabilities are initially recorded at fair value including, where permitted by IFRS 9, any directly attributable transaction
costs. For those financial assets that are not subsequently held at fair value, the group assesses whether there is evidence of impairment at
each balance sheet date.
The group classifies its financial assets and liabilities into the following categories: financial assets and liabilities at amortised cost, financial
assets and liabilities at fair value through income statement and financial assets at fair value through other comprehensive income.
The accounting policies for other investments and loans are described in note 13, for trade and other receivables and payables in note 15
and for cash and cash equivalents in note 17.
Financial assets and liabilities at fair value through income statement include derivative assets and liabilities. Where financial assets or
liabilities are eligible to be carried at either amortised cost or fair value through other comprehensive income, the group does not apply the
fair value option.
Derivative financial instruments are carried at fair value using a discounted cash flow model based on market data applied consistently
for similar types of instruments. Gains and losses on derivatives that do not qualify for hedge accounting treatment are taken to the income
statement as they arise.
Other financial liabilities are carried at amortised cost unless they are part of a fair value hedge relationship. The difference between the
initial carrying amount of the financial liabilities and their redemption value is recognised in the income statement over the contractual terms
using the effective interest rate method. Financial liabilities in respect of the Zacapa acquisition are recognised at fair value.
Hedge accounting
The group designates and documents certain derivatives as hedging instruments against changes in fair value of recognised assets and
liabilities (fair value hedges), commodity price risk of highly probable forecast transactions, as well as the cash flow risk from a change in
exchange or interest rates (cash flow hedges) and hedges of net investments in foreign operations (net investment hedges). The designated
portion of the hedging instruments is included in other financial assets and liabilities on the consolidated balance sheet. The effectiveness of
such hedges is assessed at inception and at least on a quarterly basis, using prospective testing. Methods used for testing effectiveness
include dollar offset, critical terms, regression analysis and hypothetical models.
Fair value hedges are used to manage the currency and/or interest rate risks to which the fair value of certain assets and liabilities are
exposed. Changes in the fair value of the derivatives are recognised in the income statement, along with any changes in the relevant fair
value of the underlying hedged asset or liability. If such a hedge relationship no longer meets hedge accounting criteria, fair value
movements on the derivative continue to be taken to the income statement while any fair value adjustments made to the underlying hedged
item to that date are amortised through the income statement over its remaining life using the effective interest rate method.
Cash flow hedges are used to hedge the foreign currency risk of highly probable future foreign currency cash flows, the commodity price risk
of highly probable future transactions, as well as the cash flow risk from changes in exchange or interest rates. The effective portion of the
gain or loss on the hedges is recognised in other comprehensive income, while any ineffective part is recognised in the income statement.
Amounts recorded in other comprehensive income are recycled to the income statement in the same period in which the underlying foreign
currency, commodity or interest exposure affects the income statement.
Net investment hedges take the form of either foreign currency borrowings or derivatives. Foreign exchange differences arising on translation
of net investments are recorded in other comprehensive income and included in the exchange reserve. Liabilities used as hedging
instruments are revalued at closing exchange rates and the resulting gains or losses are also recognised in other comprehensive income to
the extent that they are effective, with any ineffectiveness taken to the income statement. Foreign currency contracts hedging net investments
are carried at fair value. Effective fair value movements are recognised in other comprehensive income, with any ineffectiveness taken to the
income statement.
The group\u2019s funding, liquidity and exposure to foreign currency and
interest rate risks are managed by the group\u2019s treasury department. The
treasury department uses a range of financial instruments to manage
these underlying risks.
Treasury operations are conducted within a framework of Board-
approved policies and guidelines, which are recommended and
monitored by the Finance Committee, chaired by the Chief Financial
Officer. The policies and guidelines include benchmark exposure and/
or hedge cover levels for key areas of treasury risk which are
periodically reviewed by the Board following, for example, significant
business, strategic or accounting changes. The framework provides for
limited defined levels of flexibility in execution to allow for the optimal
application of the Board-approved strategies. Transactions arising from
the application of this flexibility are carried at fair value, gains or losses
are taken to the income statement as they arise and are separately
monitored on a daily basis using Value at Risk analysis. In the years
ended 30 June 2023 and 30 June 2022, gains and losses on these
transactions were not material. The group does not use derivatives for
speculative purposes. All transactions in derivative financial instruments
are initially undertaken to manage the risks arising from underlying
business activities.
The group purchases insurance for commercial or, where required,
for legal or contractual reasons. In addition, the group retains insurable
risk where external insurance is not considered an economic means of
mitigating these risks.
The Finance Committee receives a quarterly report on the key
activities of the treasury department, however any exposures which
differ from the defined benchmarks are reported as they arise.\u00a0
(a) Currency risk
The group presents its consolidated financial statements in sterling and
conducts business in many currencies. As a result, it is subject to foreign
currency risk due to exchange rate movements, which will affect the
group\u2019s transactions and the translation of the results and underlying
net assets of its operations. To manage the currency risk, the group uses
certain financial instruments. Where hedge accounting is applied,
hedges are documented and tested for effectiveness on an ongoing
basis.
Hedge of net investment in foreign operations
The group hedges a certain portion of its exposure to fluctuations in the
sterling value of its foreign operations by designating borrowings held in
foreign currencies and\u00a0using foreign currency spots, forwards, swaps
and other financial derivatives. For the year ended 30 June 2023, the
group\u2019s intention was to maintain total net investment Value at Risk to
total net asset value below 20%, where Value at Risk is defined as the
maximum amount of loss over a one-year period with a 95%
probability confidence level.
At 30 June 2023, foreign currency borrowings designated in net
investment hedge relationships amounted to \u00a310,627 million (2022 \u2013
\u00a38,742 million), including financial derivatives.
Hedge of foreign currency debt
The group uses cross currency interest rate swaps to hedge the foreign
currency risk associated with certain foreign currency denominated
borrowings.
Transaction exposure hedging
The group\u2019s policy is to hedge forecast transactional foreign currency
risk on major currency pair exposures up to 24 months, targeting 75%
coverage for the current financial year, and on other currency
exposures up to 18 months. The group\u2019s exposure to foreign currency
risk arising principally on forecasted sales transactions is managed
using forward agreements and options.\u00a0 \u00a0
(b) Interest rate risk
The group has an exposure to interest rate risk, arising principally on
changes in US dollar, euro and sterling interest rates. To manage
interest rate risk, the group manages its proportion of fixed to floating
rate borrowings within limits approved by the Board, primarily through
issuing fixed and floating rate borrowings, and by utilising interest rate
swaps. These practices aim to minimise the group\u2019s net finance charges
with acceptable year-on-year volatility. To facilitate operational
efficiency and effective hedge accounting, for the year ended 30 June
2023 the group\u2019s policy was to maintain fixed rate borrowings within a
band of 40% to 90% of forecast net borrowings. For these calculations,
net borrowings exclude interest rate related fair value adjustments. The
majority of the group\u2019s existing interest rate derivatives are designated
as hedges and are expected to be effective. Fair value of these
derivatives is recognised in the income statement, along with any
changes in the relevant fair value of the underlying hedged asset or
liability. The interest rate profile of the group's net borrowings is as
follows:
2023
2022
\u00a3 million
%
\u00a3 million
%
Fixed rate
11,961
77
11,070
78
Floating rate(1)
3,225
21
2,612
19
Impact of financial derivatives
and fair value adjustments
(93)
(1)
(20)
\u2014
Lease liabilities
448
3
475
3
Net borrowings
15,541
100
14,137
100
(1)The impact on foreign currency borrowings and derivatives in net investment hedges is
largely offset by the foreign exchange difference arising on the translation of net
investments.\u00a0
(2)The impact on the consolidated statement of comprehensive income includes the
impact on the income statement.
(e) Credit risk\u00a0
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the group. Credit risk
arises on cash balances (including bank deposits and cash and cash
equivalents), derivative financial instruments and credit exposures to
customers, including outstanding loans, trade and other receivables,
financial guarantees and committed transactions.
The carrying amount of financial assets of \u00a34,637 million (2022 \u2013
\u00a35,445 million) represents the group\u2019s exposure to credit risk at the
balance sheet date as disclosed in section (i), excluding the impact of
any collateral held or other credit enhancements. A financial asset is in
default when the counterparty fails to pay its contractual obligations.
Financial assets are written off when there is no reasonable expectation
of recovery.
Credit risk is managed separately for financial and business related
credit exposures.
Financial credit risk\u00a0
Diageo aims to minimise its financial credit risk through the application
of risk management policies approved and monitored by the Board.
Counterparties are predominantly limited to investment grade banks
and financial institutions, and policy restricts the exposure to any one
counterparty by setting credit limits taking into account the credit quality
of the counterparty. The group\u2019s policy is designed to ensure that
individual counterparty limits are adhered to and that there are no
significant concentrations of credit risk. The Board also defines the types
of financial instruments which may be transacted. The credit risk arising
through the use of financial instruments for currency, interest rate and
commodity price risk management is estimated with reference to the
fair value of contracts with a positive value, rather than the notional
amount of the instruments themselves. Diageo annually reviews the
credit limits applied and regularly monitors the counterparties\u2019 credit
quality reflecting market credit conditions.
When derivative transactions are undertaken with bank
counterparties, the group may, where appropriate, enter into certain
agreements with such bank counterparties whereby the parties agree to
post cash collateral for the benefit of the other if the net valuations of
the derivatives are above a predetermined threshold. At 30 June 2023,
the collateral held under these agreements amounted to $(19) million
(\u00a3(15) million) (2022 \u2013 $23 million (\u00a319 million)).
Business related credit risk\u00a0
Exposures from loan, trade and other receivables are managed locally
in the operating units where they arise and active risk management is
applied, focusing on country risk, credit limits, ongoing credit evaluation
and monitoring procedures. There is no significant concentration of
credit risk with respect to loans, trade and other receivables as the
group has a large number of customers which are internationally
dispersed.
(f) Liquidity risk\u00a0
Liquidity risk is the risk of Diageo encountering difficulties in meeting its
obligations associated with financial liabilities that are settled by
delivering cash or other financial assets. The group uses short-term
commercial paper to finance its day-to-day operations. The group\u2019s
policy with regard to the expected maturity profile of borrowings is to
limit the amount of such borrowings maturing within 12 months to 50%
of gross borrowings less money market demand deposits, and the level
of commercial paper to 30% of gross borrowings less money market
demand deposits. In addition, the group\u2019s policy is to maintain
backstop facilities with relationship banks to support commercial paper
obligations.
The following tables provide an analysis of the anticipated
contractual cash flows including interest payable for the group\u2019s
financial liabilities and derivative instruments on an undiscounted basis.
Where interest payments are calculated at a floating rate, rates of each
cash flow until maturity of the instruments are calculated based on the
forward yield curve prevailing at the respective year ends. The gross
cash flows of cross currency swaps are presented for the purposes of
this table. All other derivative contracts are presented on a net basis.
Financial assets and liabilities are presented gross in the consolidated
balance sheet although, in practice, the group uses netting
arrangements to reduce its liquidity requirements on these instruments.
Contractual cash flows\u00a0
Due within
1 year
\u00a3 million
Due between
1 and 3 years
\u00a3 million
Due between
3 and 5 years
\u00a3 million
Due after
5 years
\u00a3 million
Total
\u00a3 million
Carrying
amount at
balance
sheet date
\u00a3 million
2023
Borrowings(1)
(1,707)
(3,615)
(2,980)
(8,652)
(16,954)
(16,502)
Interest on borrowings(1)(2)
(541)
(750)
(623)
(1,503)
(3,417)
(217)
Lease capital repayments
(75)
(104)
(69)
(200)
(448)
(448)
Lease future interest payments
(18)
(28)
(19)
(37)
(102)
\u2014
Trade and other financial liabilities(3)
(4,417)
(231)
(122)
(96)
(4,866)
(4,782)
Non-derivative financial liabilities
(6,758)
(4,728)
(3,813)
(10,488)
(25,787)
(21,949)
Cross currency swaps (gross)
Receivable
43
87
87
1,341
1,558
Payable
(28)
(56)
(56)
(930)
(1,070)
Other derivative instruments (net)
19
(88)
(79)
(54)
(202)
Derivative instruments(2)
34
(57)
(48)
357
286
134
2022
Borrowings(1)
(1,524)
(2,842)
(2,738)
(9,276)
(16,380)
(16,020)
Interest on borrowings(1)(2)
(427)
(626)
(560)
(1,622)
(3,235)
(141)
Lease capital repayments
(85)
(107)
(61)
(222)
(475)
(475)
Lease future interest payments
(13)
(20)
(16)
(44)
(93)
\u2014
Trade and other financial liabilities(3)
(4,765)
(123)
(142)
(126)
(5,156)
(5,145)
Non-derivative financial liabilities
(6,814)
(3,718)
(3,517)
(11,290)
(25,339)
(21,781)
Cross currency swaps (gross)
Receivable
851
90
90
1,442
2,473
Payable
(783)
(56)
(56)
(958)
(1,853)
Other derivative instruments (net)
(86)
(123)
(78)
(65)
(352)
Derivative instruments(2)
(18)
(89)
(44)
419
268
22
In the years ended 30 June 2023 and 30 June 2022, the increase in financial assets - other of \u00a38 million (2022 \u2013 \u00a346 million) is principally in respect
of acquisitions.
The movements in level 3 instruments, measured on a recurring basis, are as follows:
Zacapa
financial
liability
Contingent
consideration
recognised on
acquisition of
businesses
Zacapa
financial
liability
Contingent
consideration
recognised on
acquisition of
businesses
2023
\u00a3 million
2023
\u00a3 million
2022
\u00a3 million
2022
\u00a3 million
At the beginning of the year
(216)
(371)
(149)
(429)
Net (losses)/gains included in the income statement
(8)
117
(20)
62
Net gains/(losses) included in exchange in other comprehensive income
9
11
(26)
(39)
Net losses included in retained earnings
(16)
\u2014
(34)
\u2014
Acquisitions
\u2014
(76)
\u2014
(70)
Settlement of liabilities
13
8
13
105
At the end of the year
(218)
(311)
(216)
(371)
(h) Results of hedge relationships
The group targets a one-to-one hedge ratio. The strength of the economic relationship between the hedged items and the hedging instruments is
analysed on an ongoing basis. Ineffectiveness can arise from subsequent change in the forecast transactions as a result of differences in timing,
cash flows or value except when the critical terms of the hedging instrument and hedged item are closely aligned. The change in the credit risk of
the hedging instruments or the hedged items is not expected to be the primary factor in the economic relationship.
The notional amounts, contractual maturities and rates of the hedging instruments designated in hedging relationships by the main risk
categories are as follows:
Notional
amounts
\u00a3 million
Maturity
Range of hedged rates(1)
2023
Net investment hedges
Derivatives in net investment hedges of foreign operations
637
July 2023
US dollar 1.27
Cash flow hedges
Derivatives in cash flow hedge (foreign currency debt)
873
September 2036 - April 2043
US dollar 1.60 - 1.88
Derivatives in cash flow hedge (foreign currency risk)
1,734
September 2023 - December 2024
US dollar 1.05 - 1.33,
Mexican peso 14.76 - 18.38
Derivatives in cash flow hedge (commodity price risk)
217
July 2023 - September 2024
Feed Wheat: 183.75 - 240.00 USD/Bu
LME Aluminium: 2,248 - 3,399 USD/Mt
Fair value hedges
Derivatives in fair value hedge (interest rate risk)
3,999
September 2023 - April 2030
(0.01) - 3.09%
2022
Net investment hedges
Derivatives in net investment hedges of foreign operations
11
July 2022
Turkish lira 22.27
Cash flow hedges
Derivatives in cash flow hedge (foreign currency debt)
1,694
April 2023 - April 2043
US dollar 1.22 - 1.88
Derivatives in cash flow hedge (foreign currency risk)
1,874
September 2022 - June 2024
US dollar 1.22 - 1.42, euro 1.13 - 1.17
Derivatives in cash flow hedge (commodity price risk)
234
July 2022 - March 2024
Natural Gas: 1.67 - 3.57 GBP/therm(ec)
LME Aluminium: 2,009 - 3,399 USD/Mt
Fair value hedges
Derivatives in fair value hedge (interest rate risk)
4,444
September 2022 - April 2030
(0.01) - 3.09%
(1)In case of derivatives in cash flow hedges (commodity price risk and foreign currency risk), the range of the most significant contract\u2019s hedged rates are presented.
For hedges of the cash flow risk from a change in forward exchange rates using cross currency interest rate swaps, the retranslation of the related
bond principal to closing exchange rates and recognition of interest on the related bonds will affect the income statement in each year until the
related bonds mature in 2036 and 2043. Exchange retranslation and the interest on the hedged bonds in the income statement are expected to
offset those on the cross currency swaps in each of the years.\u00a0
In respect of cash flow hedging instruments, a gain of \u00a3247 million (2022 \u2013 \u00a3124 million gain; 2021 \u2013 \u00a3157 million loss) was recognised in other
comprehensive income due to changes in fair value. A gain of \u00a313 million was transferred out of other comprehensive income to other operating
expenses and a loss of \u00a354 million to other finance charges, respectively, (2022 \u2013 a loss of \u00a342 million and a gain of \u00a3239 million; 2021 \u2013 a loss of
\u00a310 million and a loss of \u00a3175 million) to offset the foreign exchange impact on the underlying transactions. A gain of \u00a333 million (2022 \u2013 \u00a346 million
gain, 2021 \u2013 \u00a32 million gain) was transferred out of other comprehensive income to operating profit in relation to commodity hedges. The carrying
amount of hedged items recognised in the consolidated balance sheet in relation to hedges of cash flow risk arising from foreign currency debts
equals the notional value of the hedging instruments at 30 June 2023 and are included within borrowings. The notional amount for cash flow
hedges of foreign currency debt at 30 June 2023 was \u00a3873 million (2022 \u2013 \u00a31,694 million).
For cash flow hedges of forecast transactions at 30 June 2023, based on year end interest and exchange rates, a gain to the income statement
of \u00a3143 million in the year ending 30 June 2024 and a gain of \u00a320 million in the year ending 30 June 2025 is expected to be recognised.
In respect of hedges of foreign currency borrowings that are no longer applicable at 30 June 2023, a loss of \u00a318 million (2022 \u2013 a loss of \u00a319
million) was reported in reserves. There was no significant ineffectiveness on net investment and cash flow hedges during the year ended 30 June
2023.
The \u00a33,999 million (2022 \u2013\u00a0\u00a34,444 million) notional value of hedged items in fair value hedges equals to the notional value of hedging
instruments designated in these relationships at 30 June 2023 and the carrying amount of hedged items are included within borrowings in the
consolidated balance sheet.\u00a0
For fair value hedges that are no longer applicable, the accumulated fair value changes shown on the consolidated balance sheet at 30 June
2023 was \u00a3nil (2022 \u2013 \u00a31 million).
The following table sets out information regarding the effectiveness of hedging relationships designated by the group, as well as the impacts on the
income statement and other comprehensive income:
At the beginning
of the year
\u00a3 million
Consolidated Income
statement
\u00a3 million
Consolidated
statement of
comprehensive
income
\u00a3 million
Other
\u00a3 million
At the end
of the year
\u00a3 million
2023
Net investment hedges
Derivatives in net investment hedges of foreign operations
(1)
\u2014
\u2014
1
\u2014
Cash flow hedges
Derivatives in cash flow hedge (foreign currency debt)
367
(54)
60
(25)
348
Derivatives in cash flow hedge (foreign currency risk)
(77)
(17)
260
17
183
Derivatives in cash flow hedge (commodity price risk)
50
33
(89)
(19)
(25)
Fair value hedges
Derivatives in fair value hedge (interest rate risk)
(283)
(94)
\u2014
\u2014
(377)
Fair value hedge hedged item
276
96
\u2014
\u2014
372
Instruments in fair value hedge relationship
(7)
2
\u2014
\u2014
(5)
2022
Net investment hedges
Derivatives in net investment hedges of foreign operations
\u2014
\u2014
5
(6)
(1)
Cash flow hedges
Derivatives in cash flow hedge (foreign currency debt)
154
239
(6)
(20)
367
Derivatives in cash flow hedge (foreign currency risk)
53
(11)
(130)
11
(77)
Derivatives in cash flow hedge (commodity price risk)
16
46
32
(44)
50
Fair value hedges
Derivatives in fair value hedge (interest rate risk)
63
(346)
\u2014
\u2014
(283)
Fair value hedge hedged item
(65)
341
\u2014
\u2014
276
Instruments in fair value hedge relationship
(2)
(5)
\u2014
\u2014
(7)
(i) Reconciliation of financial instruments\u00a0
The table below sets out the group\u2019s accounting classification of each class of financial assets and liabilities:
Fair value
through income
statement
\u00a3 million
Fair value
through other
comprehensive
income
\u00a3 million
Assets and
liabilities at
amortised cost
\u00a3 million
Not categorised
as a financial
instrument
\u00a3 million
Total
\u00a3 million
Current
\u00a3 million
Non-current
\u00a3 million
2023
Other investments and loans(1)
192
\u2014
31
2
225
\u2014
225
Trade and other receivables
\u2014
\u2014
2,234
517
2,751
2,720
31
Cash and cash equivalents
\u2014
\u2014
1,439
\u2014
1,439
1,439
\u2014
Derivatives in cash flow hedge (foreign currency debt)
348
\u2014
\u2014
\u2014
348
\u2014
348
Derivatives in cash flow hedge (foreign currency risk)
192
\u2014
\u2014
\u2014
192
147
45
Derivatives in cash flow hedge (commodity price risk)
2
\u2014
\u2014
\u2014
2
2
\u2014
Other instruments
198
\u2014
\u2014
\u2014
198
198
\u2014
Leases
\u2014
\u2014
1
\u2014
1
\u2014
1
Total other financial assets
740
\u2014
1
\u2014
741
347
394
Total financial assets
932
\u2014
3,705
519
5,156
4,506
650
Borrowings(2)
\u2014
\u2014
(16,502)
\u2014
(16,502)
(1,701)
(14,801)
Trade and other payables
(311)
\u2014
(4,472)
(885)
(5,668)
(5,300)
(368)
Derivatives in fair value hedge (interest rate risk)
(377)
\u2014
\u2014
\u2014
(377)
(6)
(371)
Derivatives in cash flow hedge (foreign currency risk)
(9)
\u2014
\u2014
\u2014
(9)
(7)
(2)
Derivatives in cash flow hedge (commodity price risk)
(27)
\u2014
\u2014
\u2014
(27)
(26)
(1)
Other instruments
(245)
\u2014
\u2014
\u2014
(245)
(245)
\u2014
Leases
\u2014
\u2014
(448)
\u2014
(448)
(75)
(373)
Total other financial liabilities
(658)
\u2014
(448)
\u2014
(1,106)
(359)
(747)
Total financial liabilities
(969)
\u2014
(21,422)
(885)
(23,276)
(7,360)
(15,916)
Total net financial (liabilities)/assets
(37)
\u2014
(17,717)
(366)
(18,120)
(2,854)
(15,266)
2022
Other investments and loans(1)
180
4
15
1
200
\u2014
200
Trade and other receivables
\u2014
\u2014
2,365
605
2,970
2,933
37
Cash and cash equivalents
\u2014
\u2014
2,285
\u2014
2,285
2,285
\u2014
Derivatives in fair value hedge (interest rate risk)
1
\u2014
\u2014
\u2014
1
\u2014
1
Derivatives in cash flow hedge (foreign currency debt)
367
\u2014
\u2014
\u2014
367
43
324
Derivatives in cash flow hedge (foreign currency risk)
32
\u2014
\u2014
\u2014
32
15
17
Derivatives in cash flow hedge (commodity price risk)
57
\u2014
\u2014
\u2014
57
57
\u2014
Other instruments
136
\u2014
\u2014
\u2014
136
136
\u2014
Leases
\u2014
\u2014
3
\u2014
3
\u2014
3
Total other financial assets
593
\u2014
3
\u2014
596
251
345
Total financial assets
773
4
4,668
606
6,051
5,469
582
Borrowings(2)
\u2014
\u2014
(16,020)
\u2014
(16,020)
(1,522)
(14,498)
Trade and other payables
(371)
\u2014
(4,774)
(1,122)
(6,267)
(5,887)
(380)
Derivatives in fair value hedge (interest rate risk)
(284)
\u2014
\u2014
\u2014
(284)
(1)
(283)
Derivatives in cash flow hedge (foreign currency risk)
(109)
\u2014
\u2014
\u2014
(109)
(81)
(28)
Derivatives in cash flow hedge (commodity price risk)
(7)
\u2014
\u2014
\u2014
(7)
(5)
(2)
Derivatives in net investment hedge
(1)
\u2014
\u2014
\u2014
(1)
(1)
\u2014
Other instruments
(271)
\u2014
(117)
\u2014
(388)
(388)
\u2014
Leases
\u2014
\u2014
(475)
\u2014
(475)
(85)
(390)
Total other financial liabilities
(672)
\u2014
(592)
\u2014
(1,264)
(561)
(703)
Total financial liabilities
(1,043)
\u2014
(21,386)
(1,122)
(23,551)
(7,970)
(15,581)
Total net financial (liabilities)/assets
(270)
4
(16,718)
(516)
(17,500)
(2,501)
(14,999)
is as
follows:
2023
2022
\u00a3 million
%
\u00a3 million
%
Fixed rate
11,961
77
11,070
78
Floating rate(1)
3,225
21
2,612
19
Impact of financial derivatives
and fair value adjustments
(93)
(1)
(20)
\u2014
Lease liabilities
448
3
475
3
Net borrowings
15,541
100
14,137
100
(1)The impact on foreign currency borrowings and derivatives in net investment hedges is
largely offset by the foreign exchange difference arising on the translation of net
investments.\u00a0
(2)The impact on the consolidated statement of comprehensive income includes the
impact on the income statement.
(e) Credit risk\u00a0
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the group. Credit risk
arises on cash balances (including bank deposits and cash and cash
equivalents), derivative financial instruments and credit exposures to
customers, including outstanding loans, trade and other receivables,
financial guarantees and committed transactions.
The carrying amount of financial assets of \u00a34,637 million (2022 \u2013
\u00a35,445 million) represents the group\u2019s exposure to credit risk at the
balance sheet date as disclosed in section (i), excluding the impact of
any collateral held or other credit enhancements. A financial asset is in
default when the counterparty fails to pay its contractual obligations.
Financial assets are written off when there is no reasonable expectation
of recovery.
Credit risk is managed separately for financial and business related
credit exposures.
Financial credit risk\u00a0
Diageo aims to minimise its financial credit risk through the application
of risk management policies approved and monitored by the Board.
Counterparties are predominantly limited to investment grade banks
and financial institutions, and policy restricts the exposure to any one
counterparty by setting credit limits taking into account the credit quality
of the counterparty. The group\u2019s policy is designed to ensure that
individual counterparty limits are adhered to and that there are no
significant concentrations of credit risk. The Board also defines the types
of financial instruments which may be transacted. The credit risk arising
through the use of financial instruments for currency, interest rate and
commodity price risk management is estimated with reference to the
fair value of contracts with a positive value, rather than the notional
amount of the instruments themselves. Diageo annually reviews the
credit limits applied and regularly monitors the counterparties\u2019 credit
quality reflecting market credit conditions.
When derivative transactions are undertaken with bank
counterparties, the group may, where appropriate, enter into certain
agreements with such bank counterparties whereby the parties agree to
post cash collateral for the benefit of the other if the net valuations of
the derivatives are above a predetermined threshold. At 30 June 2023,
the collateral held under these agreements amounted to $(19) million
(\u00a3(15) million) (2022 \u2013 $23 million (\u00a319 million)).
Business related credit risk\u00a0
Exposures from loan, trade and other receivables are managed locally
in the operating units where they arise and active risk management is
applied, focusing on country risk, credit limits, ongoing credit evaluation
and monitoring procedures. There is no significant concentration of
credit risk with respect to loans, trade and other receivables as the
group has a large number of customers which are internationally
dispersed.
(f) Liquidity risk\u00a0
Liquidity risk is the risk of Diageo encountering difficulties in meeting its
obligations associated with financial liabilities that are settled by
delivering cash or other financial assets. The group uses short-term
commercial paper to finance its day-to-day operations. The group\u2019s
policy with regard to the expected maturity profile of borrowings is to
limit the amount of such borrowings maturing within 12 months to 50%
of gross borrowings less money market demand deposits, and the level
of commercial paper to 30% of gross borrowings less money market
demand deposits. In addition, the group\u2019s policy is to maintain
backstop facilities with relationship banks to support commercial paper
obligations.
The following tables provide an analysis of the anticipated
contractual cash flows including interest payable for the group\u2019s
financial liabilities and derivative instruments on an undiscounted basis.
Where interest payments are calculated at a floating rate, rates of each
cash flow until maturity of the instruments are calculated based on the
forward yield curve prevailing at the respective year ends. The gross
cash flows of cross currency swaps are presented for the purposes of
this table. All other derivative contracts are presented on a net basis.
Financial assets and liabilities are presented gross in the consolidated
balance sheet although, in practice, the group uses netting
arrangements to reduce its liquidity requirements on these instruments.
Contractual cash flows\u00a0
Due within
1 year
\u00a3 million
Due between
1 and 3 years
\u00a3 million
Due between
3 and 5 years
\u00a3 million
Due after
5 years
\u00a3 million
Total
\u00a3 million
Carrying
amount at
balance
sheet date
\u00a3 million
2023
Borrowings(1)
(1,707)
(3,615)
(2,980)
(8,652)
(16,954)
(16,502)
Interest on borrowings(1)(2)
(541)
(750)
(623)
(1,503)
(3,417)
(217)
Lease capital repayments
(75)
(104)
(69)
(200)
(448)
(448)
Lease future interest payments
(18)
(28)
(19)
(37)
(102)
\u2014
Trade and other financial liabilities(3)
(4,417)
(231)
(122)
(96)
(4,866)
(4,782)
Non-derivative financial liabilities
(6,758)
(4,728)
(3,813)
(10,488)
(25,787)
(21,949)
Cross currency swaps (gross)
Receivable
43
87
87
1,341
1,558
Payable
(28)
(56)
(56)
(930)
(1,070)
Other derivative instruments (net)
19
(88)
(79)
(54)
(202)
Derivative instruments(2)
34
(57)
(48)
357
286
134
2022
Borrowings(1)
(1,524)
(2,842)
(2,738)
(9,276)
(16,380)
(16,020)
Interest on borrowings(1)(2)
(427)
(626)
(560)
(1,622)
(3,235)
(141)
Lease capital repayments
(85)
(107)
(61)
(222)
(475)
(475)
Lease future interest payments
(13)
(20)
(16)
(44)
(93)
\u2014
Trade and other financial liabilities(3)
(4,765)
(123)
(142)
(126)
(5,156)
(5,145)
Non-derivative financial liabilities
(6,814)
(3,718)
(3,517)
(11,290)
(25,339)
(21,781)
Cross currency swaps (gross)
Receivable
851
90
90
1,442
2,473
Payable
(783)
(56)
(56)
(958)
(1,853)
Other derivative instruments (net)
(86)
(123)
(78)
(65)
(352)
Derivative instruments(2)
(18)
(89)
(44)
419
268
22
is as
follows:
2023
2022
\u00a3 million
%
\u00a3 million
%
Fixed rate
11,961
77
11,070
78
Floating rate(1)
3,225
21
2,612
19
Impact of financial derivatives
and fair value adjustments
(93)
(1)
(20)
\u2014
Lease liabilities
448
3
475
3
Net borrowings
15,541
100
14,137
100
(1)The impact on foreign currency borrowings and derivatives in net investment hedges is
largely offset by the foreign exchange difference arising on the translation of net
investments.\u00a0
(2)The impact on the consolidated statement of comprehensive income includes the
impact on the income statement.
(e) Credit risk\u00a0
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the group. Credit risk
arises on cash balances (including bank deposits and cash and cash
equivalents), derivative financial instruments and credit exposures to
customers, including outstanding loans, trade and other receivables,
financial guarantees and committed transactions.
The carrying amount of financial assets of \u00a34,637 million (2022 \u2013
\u00a35,445 million) represents the group\u2019s exposure to credit risk at the
balance sheet date as disclosed in section (i), excluding the impact of
any collateral held or other credit enhancements. A financial asset is in
default when the counterparty fails to pay its contractual obligations.
Financial assets are written off when there is no reasonable expectation
of recovery.
Credit risk is managed separately for financial and business related
credit exposures.
Financial credit risk\u00a0
Diageo aims to minimise its financial credit risk through the application
of risk management policies approved and monitored by the Board.
Counterparties are predominantly limited to investment grade banks
and financial institutions, and policy restricts the exposure to any one
counterparty by setting credit limits taking into account the credit quality
of the counterparty. The group\u2019s policy is designed to ensure that
individual counterparty limits are adhered to and that there are no
significant concentrations of credit risk. The Board also defines the types
of financial instruments which may be transacted. The credit risk arising
through the use of financial instruments for currency, interest rate and
commodity price risk management is estimated with reference to the
fair value of contracts with a positive value, rather than the notional
amount of the instruments themselves. Diageo annually reviews the
credit limits applied and regularly monitors the counterparties\u2019 credit
quality reflecting market credit conditions.
When derivative transactions are undertaken with bank
counterparties, the group may, where appropriate, enter into certain
agreements with such bank counterparties whereby the parties agree to
post cash collateral for the benefit of the other if the net valuations of
the derivatives are above a predetermined threshold. At 30 June 2023,
the collateral held under these agreements amounted to $(19) million
(\u00a3(15) million) (2022 \u2013 $23 million (\u00a319 million)).
Business related credit risk\u00a0
Exposures from loan, trade and other receivables are managed locally
in the operating units where they arise and active risk management is
applied, focusing on country risk, credit limits, ongoing credit evaluation
and monitoring procedures. There is no significant concentration of
credit risk with respect to loans, trade and other receivables as the
group has a large number of customers which are internationally
dispersed.
(f) Liquidity risk\u00a0
Liquidity risk is the risk of Diageo encountering difficulties in meeting its
obligations associated with financial liabilities that are settled by
delivering cash or other financial assets. The group uses short-term
commercial paper to finance its day-to-day operations. The group\u2019s
policy with regard to the expected maturity profile of borrowings is to
limit the amount of such borrowings maturing within 12 months to 50%
of gross borrowings less money market demand deposits, and the level
of commercial paper to 30% of gross borrowings less money market
demand deposits. In addition, the group\u2019s policy is to maintain
backstop facilities with relationship banks to support commercial paper
obligations.
The following tables provide an analysis of the anticipated
contractual cash flows including interest payable for the group\u2019s
financial liabilities and derivative instruments on an undiscounted basis.
Where interest payments are calculated at a floating rate, rates of each
cash flow until maturity of the instruments are calculated based on the
forward yield curve prevailing at the respective year ends. The gross
cash flows of cross currency swaps are presented for the purposes of
this table. All other derivative contracts are presented on a net basis.
Financial assets and liabilities are presented gross in the consolidated
balance sheet although, in practice, the group uses netting
arrangements to reduce its liquidity requirements on these instruments.
Contractual cash flows\u00a0
Due within
1 year
\u00a3 million
Due between
1 and 3 years
\u00a3 million
Due between
3 and 5 years
\u00a3 million
Due after
5 years
\u00a3 million
Total
\u00a3 million
Carrying
amount at
balance
sheet date
\u00a3 million
2023
Borrowings(1)
(1,707)
(3,615)
(2,980)
(8,652)
(16,954)
(16,502)
Interest on borrowings(1)(2)
(541)
(750)
(623)
(1,503)
(3,417)
(217)
Lease capital repayments
(75)
(104)
(69)
(200)
(448)
(448)
Lease future interest payments
(18)
(28)
(19)
(37)
(102)
\u2014
Trade and other financial liabilities(3)
(4,417)
(231)
(122)
(96)
(4,866)
(4,782)
Non-derivative financial liabilities
(6,758)
(4,728)
(3,813)
(10,488)
(25,787)
(21,949)
Cross currency swaps (gross)
Receivable
43
87
87
1,341
1,558
Payable
(28)
(56)
(56)
(930)
(1,070)
Other derivative instruments (net)
19
(88)
(79)
(54)
(202)
Derivative instruments(2)
34
(57)
(48)
357
286
134
2022
Borrowings(1)
(1,524)
(2,842)
(2,738)
(9,276)
(16,380)
(16,020)
Interest on borrowings(1)(2)
(427)
(626)
(560)
(1,622)
(3,235)
(141)
Lease capital repayments
(85)
(107)
(61)
(222)
(475)
(475)
Lease future interest payments
(13)
(20)
(16)
(44)
(93)
\u2014
Trade and other financial liabilities(3)
(4,765)
(123)
(142)
(126)
(5,156)
(5,145)
Non-derivative financial liabilities
(6,814)
(3,718)
(3,517)
(11,290)
(25,339)
(21,781)
Cross currency swaps (gross)
Receivable
851
90
90
1,442
2,473
Payable
(783)
(56)
(56)
(958)
(1,853)
Other derivative instruments (net)
(86)
(123)
(78)
(65)
(352)
Derivative instruments(2)
(18)
(89)
(44)
419
268
22
(1)In case of derivatives in cash flow hedges (commodity price risk and foreign currency risk), the range of the most significant contract\u2019s hedged rates are presented.
For hedges of the cash flow risk from a change in forward exchange rates using cross currency interest rate swaps, the retranslation of the related
bond principal to closing exchange rates and recognition of interest on the related bonds will affect the income statement in each year until the
related bonds mature in 2036 and 2043. Exchange retranslation and the interest on the hedged bonds in the income statement are expected to
offset those on the cross currency swaps in each of the years.\u00a0
In respect of cash flow hedging instruments, a gain of \u00a3247 million (2022 \u2013 \u00a3124 million gain; 2021 \u2013 \u00a3157 million loss) was recognised in other
comprehensive income due to changes in fair value. A gain of \u00a313 million was transferred out of other comprehensive income to other operating
expenses and a loss of \u00a354 million to other finance charges, respectively, (2022 \u2013 a loss of \u00a342 million and a gain of \u00a3239 million; 2021 \u2013 a loss of
\u00a310 million and a loss of \u00a3175 million) to offset the foreign exchange impact on the underlying transactions. A gain of \u00a333 million (2022 \u2013 \u00a346 million
gain, 2021 \u2013 \u00a32 million gain) was transferred out of other comprehensive income to operating profit in relation to commodity hedges. The carrying
amount of hedged items recognised in the consolidated balance sheet in relation to hedges of cash flow risk arising from foreign currency debts
equals the notional value of the hedging instruments at 30 June 2023 and are included within borrowings. The notional amount for cash flow
hedges of foreign currency debt at 30 June 2023 was \u00a3873 million (2022 \u2013 \u00a31,694 million).
For cash flow hedges of forecast transactions at 30 June 2023, based on year end interest and exchange rates, a gain to the income statement
of \u00a3143 million in the year ending 30 June 2024 and a gain of \u00a320 million in the year ending 30 June 2025 is expected to be recognised.
In respect of hedges of foreign currency borrowings that are no longer applicable at 30 June 2023, a loss of \u00a318 million (2022 \u2013 a loss of \u00a319
million) was reported in reserves. There was no significant ineffectiveness on net investment and cash flow hedges during the year ended 30 June
2023.
The \u00a33,999 million (2022 \u2013\u00a0\u00a34,444 million) notional value of hedged items in fair value hedges equals to the notional value of hedging
instruments designated in these relationships at 30 June 2023 and the carrying amount of hedged items are included within borrowings in the
consolidated balance sheet.\u00a0
For fair value hedges that are no longer applicable, the accumulated fair value changes shown on the consolidated balance sheet at 30 June
2023 was \u00a3nil (2022 \u2013 \u00a31 million).
The following table sets out information regarding the effectiveness of hedging relationships designated by the group, as well as the impacts on the
income statement and other comprehensive income:
At the beginning
of the year
\u00a3 million
Consolidated Income
statement
\u00a3 million
Consolidated
statement of
comprehensive
income
\u00a3 million
Other
\u00a3 million
At the end
of the year
\u00a3 million
2023
Net investment hedges
Derivatives in net investment hedges of foreign operations
(1)
\u2014
\u2014
1
\u2014
Cash flow hedges
Derivatives in cash flow hedge (foreign currency debt)
367
(54)
60
(25)
348
Derivatives in cash flow hedge (foreign currency risk)
(77)
(17)
260
17
183
Derivatives in cash flow hedge (commodity price risk)
50
33
(89)
(19)
(25)
Fair value hedges
Derivatives in fair value hedge (interest rate risk)
(283)
(94)
\u2014
\u2014
(377)
Fair value hedge hedged item
276
96
\u2014
\u2014
372
Instruments in fair value hedge relationship
(7)
2
\u2014
\u2014
(5)
2022
Net investment hedges
Derivatives in net investment hedges of foreign operations
\u2014
\u2014
5
(6)
(1)
Cash flow hedges
Derivatives in cash flow hedge (foreign currency debt)
154
239
(6)
(20)
367
Derivatives in cash flow hedge (foreign currency risk)
53
(11)
(130)
11
(77)
Derivatives in cash flow hedge (commodity price risk)
16
46
32
(44)
50
Fair value hedges
Derivatives in fair value hedge (interest rate risk)
63
(346)
\u2014
\u2014
(283)
Fair value hedge hedged item
(65)
341
\u2014
\u2014
276
Instruments in fair value hedge relationship
(2)
(5)
\u2014
\u2014
(7)
(i) Reconciliation of financial instruments\u00a0
The table below sets out the group\u2019s accounting classification of each class of financial assets and liabilities:
Fair value
through income
statement
\u00a3 million
Fair value
through other
comprehensive
income
\u00a3 million
Assets and
liabilities at
amortised cost
\u00a3 million
Not categorised
as a financial
instrument
\u00a3 million
Total
\u00a3 million
Current
\u00a3 million
Non-current
\u00a3 million
2023
Other investments and loans(1)
192
\u2014
31
2
225
\u2014
225
Trade and other receivables
\u2014
\u2014
2,234
517
2,751
2,720
31
Cash and cash equivalents
\u2014
\u2014
1,439
\u2014
1,439
1,439
\u2014
Derivatives in cash flow hedge (foreign currency debt)
348
\u2014
\u2014
\u2014
348
\u2014
348
Derivatives in cash flow hedge (foreign currency risk)
192
\u2014
\u2014
\u2014
192
147
45
Derivatives in cash flow hedge (commodity price risk)
2
\u2014
\u2014
\u2014
2
2
\u2014
Other instruments
198
\u2014
\u2014
\u2014
198
198
\u2014
Leases
\u2014
\u2014
1
\u2014
1
\u2014
1
Total other financial assets
740
\u2014
1
\u2014
741
347
394
Total financial assets
932
\u2014
3,705
519
5,156
4,506
650
Borrowings(2)
\u2014
\u2014
(16,502)
\u2014
(16,502)
(1,701)
(14,801)
Trade and other payables
(311)
\u2014
(4,472)
(885)
(5,668)
(5,300)
(368)
Derivatives in fair value hedge (interest rate risk)
(377)
\u2014
\u2014
\u2014
(377)
(6)
(371)
Derivatives in cash flow hedge (foreign currency risk)
(9)
\u2014
\u2014
\u2014
(9)
(7)
(2)
Derivatives in cash flow hedge (commodity price risk)
(27)
\u2014
\u2014
\u2014
(27)
(26)
(1)
Other instruments
(245)
\u2014
\u2014
\u2014
(245)
(245)
\u2014
Leases
\u2014
\u2014
(448)
\u2014
(448)
(75)
(373)
Total other financial liabilities
(658)
\u2014
(448)
\u2014
(1,106)
(359)
(747)
Total financial liabilities
(969)
\u2014
(21,422)
(885)
(23,276)
(7,360)
(15,916)
Total net financial (liabilities)/assets
(37)
\u2014
(17,717)
(366)
(18,120)
(2,854)
(15,266)
2022
Other investments and loans(1)
180
4
15
1
200
\u2014
200
Trade and other receivables
\u2014
\u2014
2,365
605
2,970
2,933
37
Cash and cash equivalents
\u2014
\u2014
2,285
\u2014
2,285
2,285
\u2014
Derivatives in fair value hedge (interest rate risk)
1
\u2014
\u2014
\u2014
1
\u2014
1
Derivatives in cash flow hedge (foreign currency debt)
367
\u2014
\u2014
\u2014
367
43
324
Derivatives in cash flow hedge (foreign currency risk)
32
\u2014
\u2014
\u2014
32
15
17
Derivatives in cash flow hedge (commodity price risk)
57
\u2014
\u2014
\u2014
57
57
\u2014
Other instruments
136
\u2014
\u2014
\u2014
136
136
\u2014
Leases
\u2014
\u2014
3
\u2014
3
\u2014
3
Total other financial assets
593
\u2014
3
\u2014
596
251
345
Total financial assets
773
4
4,668
606
6,051
5,469
582
Borrowings(2)
\u2014
\u2014
(16,020)
\u2014
(16,020)
(1,522)
(14,498)
Trade and other payables
(371)
\u2014
(4,774)
(1,122)
(6,267)
(5,887)
(380)
Derivatives in fair value hedge (interest rate risk)
(284)
\u2014
\u2014
\u2014
(284)
(1)
(283)
Derivatives in cash flow hedge (foreign currency risk)
(109)
\u2014
\u2014
\u2014
(109)
(81)
(28)
Derivatives in cash flow hedge (commodity price risk)
(7)
\u2014
\u2014
\u2014
(7)
(5)
(2)
Derivatives in net investment hedge
(1)
\u2014
\u2014
\u2014
(1)
(1)
\u2014
Other instruments
(271)
\u2014
(117)
\u2014
(388)
(388)
\u2014
Leases
\u2014
\u2014
(475)
\u2014
(475)
(85)
(390)
Total other financial liabilities
(672)
\u2014
(592)
\u2014
(1,264)
(561)
(703)
Total financial liabilities
(1,043)
\u2014
(21,386)
(1,122)
(23,551)
(7,970)
(15,581)
Total net financial (liabilities)/assets
(270)
4
(16,718)
(516)
(17,500)
(2,501)
(14,999)
is as
follows:
2023
2022
\u00a3 million
%
\u00a3 million
%
Fixed rate
11,961
77
11,070
78
Floating rate(1)
3,225
21
2,612
19
Impact of financial derivatives
and fair value adjustments
(93)
(1)
(20)
\u2014
Lease liabilities
448
3
475
3
Net borrowings
15,541
100
14,137
100
(1)The impact on foreign currency borrowings and derivatives in net investment hedges is
largely offset by the foreign exchange difference arising on the translation of net
investments.\u00a0
(2)The impact on the consolidated statement of comprehensive income includes the
impact on the income statement.", "dimensions": { "concept": "ifrs-full:DisclosureOfMarketRiskExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-726": { "value": "
(e) Credit risk\u00a0
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the group. Credit risk
arises on cash balances (including bank deposits and cash and cash
equivalents), derivative financial instruments and credit exposures to
customers, including outstanding loans, trade and other receivables,
financial guarantees and committed transactions.
The carrying amount of financial assets of \u00a34,637 million (2022 \u2013
\u00a35,445 million) represents the group\u2019s exposure to credit risk at the
balance sheet date as disclosed in section (i), excluding the impact of
any collateral held or other credit enhancements. A financial asset is in
default when the counterparty fails to pay its contractual obligations.
Financial assets are written off when there is no reasonable expectation
of recovery.
Credit risk is managed separately for financial and business related
credit exposures.
Financial credit risk\u00a0
Diageo aims to minimise its financial credit risk through the application
of risk management policies approved and monitored by the Board.
Counterparties are predominantly limited to investment grade banks
and financial institutions, and policy restricts the exposure to any one
counterparty by setting credit limits taking into account the credit quality
of the counterparty. The group\u2019s policy is designed to ensure that
individual counterparty limits are adhered to and that there are no
significant concentrations of credit risk. The Board also defines the types
of financial instruments which may be transacted. The credit risk arising
through the use of financial instruments for currency, interest rate and
commodity price risk management is estimated with reference to the
fair value of contracts with a positive value, rather than the notional
amount of the instruments themselves. Diageo annually reviews the
credit limits applied and regularly monitors the counterparties\u2019 credit
quality reflecting market credit conditions.
When derivative transactions are undertaken with bank
counterparties, the group may, where appropriate, enter into certain
agreements with such bank counterparties whereby the parties agree to
post cash collateral for the benefit of the other if the net valuations of
the derivatives are above a predetermined threshold. At 30 June 2023,
the collateral held under these agreements amounted to $(19) million
(\u00a3(15) million) (2022 \u2013 $23 million (\u00a319 million)).
Business related credit risk\u00a0
Exposures from loan, trade and other receivables are managed locally
in the operating units where they arise and active risk management is
applied, focusing on country risk, credit limits, ongoing credit evaluation
and monitoring procedures. There is no significant concentration of
credit risk with respect to loans, trade and other receivables as the
group has a large number of customers which are internationally
dispersed.", "dimensions": { "concept": "ifrs-full:DisclosureOfCreditRiskExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-727": { "value": "
(f) Liquidity risk\u00a0
Liquidity risk is the risk of Diageo encountering difficulties in meeting its
obligations associated with financial liabilities that are settled by
delivering cash or other financial assets. The group uses short-term
commercial paper to finance its day-to-day operations. The group\u2019s
policy with regard to the expected maturity profile of borrowings is to
limit the amount of such borrowings maturing within 12 months to 50%
of gross borrowings less money market demand deposits, and the level
of commercial paper to 30% of gross borrowings less money market
demand deposits. In addition, the group\u2019s policy is to maintain
backstop facilities with relationship banks to support commercial paper
obligations.
The following tables provide an analysis of the anticipated
contractual cash flows including interest payable for the group\u2019s
financial liabilities and derivative instruments on an undiscounted basis.
Where interest payments are calculated at a floating rate, rates of each
cash flow until maturity of the instruments are calculated based on the
forward yield curve prevailing at the respective year ends. The gross
cash flows of cross currency swaps are presented for the purposes of
this table. All other derivative contracts are presented on a net basis.
Financial assets and liabilities are presented gross in the consolidated
balance sheet although, in practice, the group uses netting
arrangements to reduce its liquidity requirements on these instruments.
Contractual cash flows\u00a0
Due within
1 year
\u00a3 million
Due between
1 and 3 years
\u00a3 million
Due between
3 and 5 years
\u00a3 million
Due after
5 years
\u00a3 million
Total
\u00a3 million
Carrying
amount at
balance
sheet date
\u00a3 million
2023
Borrowings(1)
(1,707)
(3,615)
(2,980)
(8,652)
(16,954)
(16,502)
Interest on borrowings(1)(2)
(541)
(750)
(623)
(1,503)
(3,417)
(217)
Lease capital repayments
(75)
(104)
(69)
(200)
(448)
(448)
Lease future interest payments
(18)
(28)
(19)
(37)
(102)
\u2014
Trade and other financial liabilities(3)
(4,417)
(231)
(122)
(96)
(4,866)
(4,782)
Non-derivative financial liabilities
(6,758)
(4,728)
(3,813)
(10,488)
(25,787)
(21,949)
Cross currency swaps (gross)
Receivable
43
87
87
1,341
1,558
Payable
(28)
(56)
(56)
(930)
(1,070)
Other derivative instruments (net)
19
(88)
(79)
(54)
(202)
Derivative instruments(2)
34
(57)
(48)
357
286
134
2022
Borrowings(1)
(1,524)
(2,842)
(2,738)
(9,276)
(16,380)
(16,020)
Interest on borrowings(1)(2)
(427)
(626)
(560)
(1,622)
(3,235)
(141)
Lease capital repayments
(85)
(107)
(61)
(222)
(475)
(475)
Lease future interest payments
(13)
(20)
(16)
(44)
(93)
\u2014
Trade and other financial liabilities(3)
(4,765)
(123)
(142)
(126)
(5,156)
(5,145)
Non-derivative financial liabilities
(6,814)
(3,718)
(3,517)
(11,290)
(25,339)
(21,781)
Cross currency swaps (gross)
Receivable
851
90
90
1,442
2,473
Payable
(783)
(56)
(56)
(958)
(1,853)
Other derivative instruments (net)
(86)
(123)
(78)
(65)
(352)
Derivative instruments(2)
(18)
(89)
(44)
419
268
22
In the years ended 30 June 2023 and 30 June 2022, the increase in financial assets - other of \u00a38 million (2022 \u2013 \u00a346 million) is principally in respect
of acquisitions.
The movements in level 3 instruments, measured on a recurring basis, are as follows:
Zacapa
financial
liability
Contingent
consideration
recognised on
acquisition of
businesses
Zacapa
financial
liability
Contingent
consideration
recognised on
acquisition of
businesses
2023
\u00a3 million
2023
\u00a3 million
2022
\u00a3 million
2022
\u00a3 million
At the beginning of the year
(216)
(371)
(149)
(429)
Net (losses)/gains included in the income statement
(8)
117
(20)
62
Net gains/(losses) included in exchange in other comprehensive income
9
11
(26)
(39)
Net losses included in retained earnings
(16)
\u2014
(34)
\u2014
Acquisitions
\u2014
(76)
\u2014
(70)
Settlement of liabilities
13
8
13
105
At the end of the year
(218)
(311)
(216)
(371)
", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-729": { "value": "
(g) Fair value measurements
Fair value measurements of financial instruments are presented through
the use of a three-level fair value hierarchy that prioritises the valuation
techniques used in fair value calculations.
The group maintains policies and procedures to value instruments
using the most relevant data available. If multiple inputs that fall into
different levels of the hierarchy are used in the valuation of an
instrument, the instrument is categorised on the basis of the most
subjective input. \u00a0
Foreign currency forwards and swaps, cross currency swaps and
interest rate swaps are valued using discounted cash flow techniques.
These techniques incorporate inputs at levels 1 and 2, such as foreign
exchange rates and interest rates. These market inputs are used in the
discounted cash flow calculation incorporating the instrument\u2019s term,
notional amount and discount rate, and taking credit risk into account.
As significant inputs to the valuation are observable in active markets,
these instruments are categorised as level 2 in the hierarchy. \u00a0
Other financial liabilities include a put option, which does not have
an expiry date, held by Industrias Licoreras de Guatemala (ILG) to sell
the remaining 50% equity stake in Rum Creation & Products Inc., the
owner of the Zacapa rum brand, to Diageo. The liability is fair valued
using the discounted cash flow method and as at 30 June 2023, an
amount of \u00a3218 million (30 June 2022 \u2013 \u00a3216\u00a0million) is recognised as a
liability with changes in the fair value of the put option included in
retained earnings. As the valuation of this option uses assumptions not
observable in the market, it is categorised as level 3 in the hierarchy. As
at 30 June 2023, because it is unknown when or if ILG will exercise the
option, the liability is measured as if the exercise date is on the last day
of the next financial year considering forecast future performance. The
option is sensitive to reasonably possible changes in assumptions; if the
option were to be exercised as at 30 June 2025, the fair value of the
liability would increase by approximately \u00a330\u00a0million.
Included in other financial liabilities, the contingent consideration on
acquisition of businesses represents the present value of payments up to
\u00a3422 million, which are expected to be paid over the next eight years.
Contingent considerations linked to certain volume targets at 30 June
2023 included \u00a3113 million in respect of the acquisition of Aviation Gin
and Davos Brands (2022 \u2013 \u00a3157 million), \u00a359 million in respect of the
acquisition of 21Seeds (2022 \u2013 \u00a359 million) and \u00a318 million in respect of
the acquisition of Lone River Ranch Water (2022 \u2013 \u00a357 million).
Contingent consideration of \u00a370 million in respect of the acquisition of
Don Papa Rum (2022 \u2013 \u00a3nil) is linked to certain financial performance
targets. Contingent considerations are fair valued based on discounted
cash flow method using assumptions not observable in the market.
Contingent considerations are sensitive to possible changes in
assumptions; a 10% increase or decrease in volume would increase or
decrease the fair value of contingent considerations linked to certain
volume targets by approximately \u00a330\u00a0million and \u00a350\u00a0million,
respectively, and a 10% increase or decrease in cash flows would
increase or decrease the fair value of contingent considerations linked
to certain financial performance targets by approximately \u00a325\u00a0million.
There were no significant changes in the measurement and
valuation techniques, or significant transfers between the levels of the
financial assets and liabilities in the year ended 30 June 2023.
The group\u2019s financial assets and liabilities measured at fair value are
categorised as follows:
2023
\u00a3 million
2022
\u00a3 million
Derivative assets
594
480
Derivative liabilities
(440)
(456)
Valuation techniques based on observable market input (Level 2)
154
24
Financial assets - other
192
184
Financial liabilities - other
(529)
(587)
Valuation techniques based on unobservable market input (Level 3)
(337)
(403)
In the years ended 30 June 2023 and 30 June 2022, the increase in financial assets - other of \u00a38 million (2022 \u2013 \u00a346 million) is principally in respect
of acquisitions.
The movements in level 3 instruments, measured on a recurring basis, are as follows:
Zacapa
financial
liability
Contingent
consideration
recognised on
acquisition of
businesses
Zacapa
financial
liability
Contingent
consideration
recognised on
acquisition of
businesses
2023
\u00a3 million
2023
\u00a3 million
2022
\u00a3 million
2022
\u00a3 million
At the beginning of the year
(216)
(371)
(149)
(429)
Net (losses)/gains included in the income statement
(8)
117
(20)
62
Net gains/(losses) included in exchange in other comprehensive income
9
11
(26)
(39)
Net losses included in retained earnings
(16)
\u2014
(34)
\u2014
Acquisitions
\u2014
(76)
\u2014
(70)
Settlement of liabilities
13
8
13
105
At the end of the year
(218)
(311)
(216)
(371)
", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueMeasurementExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-730": { "value": "
(i) Reconciliation of financial instruments\u00a0
The table below sets out the group\u2019s accounting classification of each class of financial assets and liabilities:
Fair value
through income
statement
\u00a3 million
Fair value
through other
comprehensive
income
\u00a3 million
Assets and
liabilities at
amortised cost
\u00a3 million
Not categorised
as a financial
instrument
\u00a3 million
Total
\u00a3 million
Current
\u00a3 million
Non-current
\u00a3 million
2023
Other investments and loans(1)
192
\u2014
31
2
225
\u2014
225
Trade and other receivables
\u2014
\u2014
2,234
517
2,751
2,720
31
Cash and cash equivalents
\u2014
\u2014
1,439
\u2014
1,439
1,439
\u2014
Derivatives in cash flow hedge (foreign currency debt)
348
\u2014
\u2014
\u2014
348
\u2014
348
Derivatives in cash flow hedge (foreign currency risk)
192
\u2014
\u2014
\u2014
192
147
45
Derivatives in cash flow hedge (commodity price risk)
2
\u2014
\u2014
\u2014
2
2
\u2014
Other instruments
198
\u2014
\u2014
\u2014
198
198
\u2014
Leases
\u2014
\u2014
1
\u2014
1
\u2014
1
Total other financial assets
740
\u2014
1
\u2014
741
347
394
Total financial assets
932
\u2014
3,705
519
5,156
4,506
650
Borrowings(2)
\u2014
\u2014
(16,502)
\u2014
(16,502)
(1,701)
(14,801)
Trade and other payables
(311)
\u2014
(4,472)
(885)
(5,668)
(5,300)
(368)
Derivatives in fair value hedge (interest rate risk)
(377)
\u2014
\u2014
\u2014
(377)
(6)
(371)
Derivatives in cash flow hedge (foreign currency risk)
(9)
\u2014
\u2014
\u2014
(9)
(7)
(2)
Derivatives in cash flow hedge (commodity price risk)
(27)
\u2014
\u2014
\u2014
(27)
(26)
(1)
Other instruments
(245)
\u2014
\u2014
\u2014
(245)
(245)
\u2014
Leases
\u2014
\u2014
(448)
\u2014
(448)
(75)
(373)
Total other financial liabilities
(658)
\u2014
(448)
\u2014
(1,106)
(359)
(747)
Total financial liabilities
(969)
\u2014
(21,422)
(885)
(23,276)
(7,360)
(15,916)
Total net financial (liabilities)/assets
(37)
\u2014
(17,717)
(366)
(18,120)
(2,854)
(15,266)
2022
Other investments and loans(1)
180
4
15
1
200
\u2014
200
Trade and other receivables
\u2014
\u2014
2,365
605
2,970
2,933
37
Cash and cash equivalents
\u2014
\u2014
2,285
\u2014
2,285
2,285
\u2014
Derivatives in fair value hedge (interest rate risk)
1
\u2014
\u2014
\u2014
1
\u2014
1
Derivatives in cash flow hedge (foreign currency debt)
367
\u2014
\u2014
\u2014
367
43
324
Derivatives in cash flow hedge (foreign currency risk)
32
\u2014
\u2014
\u2014
32
15
17
Derivatives in cash flow hedge (commodity price risk)
57
\u2014
\u2014
\u2014
57
57
\u2014
Other instruments
136
\u2014
\u2014
\u2014
136
136
\u2014
Leases
\u2014
\u2014
3
\u2014
3
\u2014
3
Total other financial assets
593
\u2014
3
\u2014
596
251
345
Total financial assets
773
4
4,668
606
6,051
5,469
582
Borrowings(2)
\u2014
\u2014
(16,020)
\u2014
(16,020)
(1,522)
(14,498)
Trade and other payables
(371)
\u2014
(4,774)
(1,122)
(6,267)
(5,887)
(380)
Derivatives in fair value hedge (interest rate risk)
(284)
\u2014
\u2014
\u2014
(284)
(1)
(283)
Derivatives in cash flow hedge (foreign currency risk)
(109)
\u2014
\u2014
\u2014
(109)
(81)
(28)
Derivatives in cash flow hedge (commodity price risk)
(7)
\u2014
\u2014
\u2014
(7)
(5)
(2)
Derivatives in net investment hedge
(1)
\u2014
\u2014
\u2014
(1)
(1)
\u2014
Other instruments
(271)
\u2014
(117)
\u2014
(388)
(388)
\u2014
Leases
\u2014
\u2014
(475)
\u2014
(475)
(85)
(390)
Total other financial liabilities
(672)
\u2014
(592)
\u2014
(1,264)
(561)
(703)
Total financial liabilities
(1,043)
\u2014
(21,386)
(1,122)
(23,551)
(7,970)
(15,581)
Total net financial (liabilities)/assets
(270)
4
(16,718)
(516)
(17,500)
(2,501)
(14,999)
During the year, the following bonds were issued and repaid:
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Issued
\u20ac denominated
441
1,371
636
\u00a3 denominated
\u2014
892
395
$ denominated
1,788
\u2014
\u2014
Repaid
\u20ac denominated
\u2014
(769)
(696)
$ denominated
(1,340)
(752)
(551)
889
742
(216)
(1)In the year ended 30 June 2023, net increase in bonds and other borrowings excludes
\u00a32 million cash outflow in respect of derivatives designated in forward point hedges
(2022 \u2013 \u00a34 million).
(2)In the year ended 30 June 2023, other non-cash items are principally in respect of fair
value changes of cross currency interest rate swaps and interest rate swaps of
\u00a3(34)\u00a0million and lease liabilities of \u00a3(82)\u00a0million, partially offset by the \u00a384\u00a0million fair
value change of borrowings. In the year ended 30 June 2022, other non-cash items are
principally in respect of fair value changes of cross currency interest rate swaps and
interest rate swaps of \u00a3(346)\u00a0million and lease liabilities of \u00a3(183)\u00a0million, partially offset
by the \u00a3331 million fair value change of borrowings.
(b) Analysis of net borrowings by currency
2023
2022
Cash and
cash
equivalents
\u00a3 million
Gross
borrowings(1)
\u00a3 million
Cash and
cash
equivalents
\u00a3 million
Gross
borrowings(1)
\u00a3 million
US dollar
542
(5,751)
1,315
(3,260)
Euro(2)
48
(3,864)
61
(2,943)
Sterling
46
(6,227)
67
(9,214)
Indian rupee
123
(31)
26
(74)
Mexican peso
25
(286)
14
(264)
Hungarian forint
3
(261)
2
(214)
Kenyan shilling
28
(253)
53
(254)
Chinese yuan
199
(63)
290
(75)
Nigerian naira
83
\u2014
133
\u2014
Other(2)
342
(244)
324
(124)
Total
1,439
(16,980)
2,285
(16,422)
(1)Includes foreign currency forwards and swaps and leases.
(2)Includes \u00a321 million (Euro) cash and cash equivalents in cash-pooling arrangements
(2022 \u2013 \u00a323 million (Turkish lira and Euro)).", "dimensions": { "concept": "ifrs-full:DisclosureOfBorrowingsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-733": { "value": "
17. Net borrowings
Accounting policies
Borrowings are initially recognised at fair value net of transaction
costs and are subsequently reported at amortised cost. Certain
bonds are designated in fair value hedge relationship. In these
cases, the amortised cost is adjusted for the fair value of the risk
being hedged, with changes in value recognised in the income
statement. The fair value adjustment is calculated using a
discounted cash flow technique based on unadjusted market
data.\u00a0
Bank overdrafts form an integral part of the group\u2019s cash
management and are included as a component of net cash and
cash equivalents in the consolidated statement of cash flows.
Cash and cash equivalents comprise cash in hand and deposits
which are readily convertible to known amounts of cash and
which are subject to insignificant risk of changes in value and
have an original maturity of three months or less, including
money market deposits, commercial paper and investments.
Net borrowings are defined as gross borrowings (short-term
borrowings and long-term borrowings plus lease liabilities plus
interest rate hedging instruments, cross currency interest rate
swaps and foreign currency forwards and swaps used to
manage borrowings) less cash and cash equivalents.
2023
\u00a3 million
2022
\u00a3 million
Bank overdrafts
36
74
Commercial paper
198
\u2014
Bank and other loans
121
105
Credit support obligations
15
(19)
$300\u00a0million 8% bonds due 2022(1)
\u2014
248
$1,350\u00a0million 2.625% bonds due 2023(2)
\u2014
1,115
\u20ac600 million 0.125% bonds due 2023
513
\u2014
$500 million 3.5% bonds due 2023(2)
397
\u2014
\u20ac500\u00a0million 0.5% bonds due 2024
427
\u2014
Fair value adjustment to borrowings
(6)
(1)
Borrowings due within one year
1,701
1,522
\u20ac600\u00a0million 0.125% bonds due 2023
\u2014
516
$500\u00a0million 3.5% bonds due 2023(2)
\u2014
413
\u20ac500 million 0.5% bonds due 2024
\u2014
430
$600\u00a0million 2.125% bonds due 2024(2)
476
495
\u20ac500\u00a0million 1.75% bonds due 2024
427
430
$500 million 5.2% bonds due 2025(2)
396
\u2014
$750 million 1.375% bonds due 2025(2)
594
618
\u20ac600 million 1% bonds due 2025
511
515
\u20ac 500 million 3.5% bonds due 2025
427
\u2014
\u20ac850 million 2.375% bonds due 2026
725
731
\u00a3500 million 1.75% bonds due 2026
497
498
$750 million 5.3% bonds due 2027(2)
593
\u2014
\u20ac750 million 1.875% bonds due 2027
638
643
\u20ac500 million 1.5% bonds due 2027
426
430
\u20ac700 million 0.125% bonds due 2028
595
600
$500 million 3.875% bonds due 2028(2)
395
411
\u00a3300 million 2.375% bonds due 2028
298
298
$1,000 million 2.375% bonds due 2029(2)
787
819
\u00a3300 million 2.875% bonds due 2029
299
298
\u20ac750 million 1.15% bonds due 2029
640
645
$1,000 million 2% bonds due 2030(2)
789
821
\u20ac1,000 million 2.5% bonds due 2032
850
856
$750 million 2.125% bonds due 2032(2)
590
614
\u00a3400 million 1.25% bonds due 2033
396
395
$750 million 5.5% bonds due 2033(2)
590
\u2014
\u20ac900 million 1.15% bonds due 2034
764
770
$400\u00a0million 7.45% bonds due 2035(1)
317
331
$600\u00a0million 5.875% bonds due 2036(2)
472
491
\u00a3600\u00a0million 2.75% bonds due 2038
595
595
$500\u00a0million 4.25% bonds due 2042(1)
393
409
$500\u00a0million 3.875% bonds due 2043(2)
391
407
Bank and other loans
296
293
Fair value adjustment to borrowings
(366)
(274)
Borrowings due after one year
14,801
14,498
Total borrowings before derivative financial instruments
16,502
16,020
Fair value of cross currency interest rate swaps
(348)
(367)
Fair value of foreign currency swaps and forwards
1
11
Fair value of interest rate hedging instruments
377
283
Lease liabilities
448
475
Gross borrowings
16,980
16,422
Less: Cash and cash equivalents
(1,439)
(2,285)
Net borrowings
15,541
14,137
During the year, the following bonds were issued and repaid:
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Issued
\u20ac denominated
441
1,371
636
\u00a3 denominated
\u2014
892
395
$ denominated
1,788
\u2014
\u2014
Repaid
\u20ac denominated
\u2014
(769)
(696)
$ denominated
(1,340)
(752)
(551)
889
742
(216)
(1)In the year ended 30 June 2023, net increase in bonds and other borrowings excludes
\u00a32 million cash outflow in respect of derivatives designated in forward point hedges
(2022 \u2013 \u00a34 million).
(2)In the year ended 30 June 2023, other non-cash items are principally in respect of fair
value changes of cross currency interest rate swaps and interest rate swaps of
\u00a3(34)\u00a0million and lease liabilities of \u00a3(82)\u00a0million, partially offset by the \u00a384\u00a0million fair
value change of borrowings. In the year ended 30 June 2022, other non-cash items are
principally in respect of fair value changes of cross currency interest rate swaps and
interest rate swaps of \u00a3(346)\u00a0million and lease liabilities of \u00a3(183)\u00a0million, partially offset
by the \u00a3331 million fair value change of borrowings.
(b) Analysis of net borrowings by currency
2023
2022
Cash and
cash
equivalents
\u00a3 million
Gross
borrowings(1)
\u00a3 million
Cash and
cash
equivalents
\u00a3 million
Gross
borrowings(1)
\u00a3 million
US dollar
542
(5,751)
1,315
(3,260)
Euro(2)
48
(3,864)
61
(2,943)
Sterling
46
(6,227)
67
(9,214)
Indian rupee
123
(31)
26
(74)
Mexican peso
25
(286)
14
(264)
Hungarian forint
3
(261)
2
(214)
Kenyan shilling
28
(253)
53
(254)
Chinese yuan
199
(63)
290
(75)
Nigerian naira
83
\u2014
133
\u2014
Other(2)
342
(244)
324
(124)
Total
1,439
(16,980)
2,285
(16,422)
(1)Includes foreign currency forwards and swaps and leases.
(2)Includes \u00a321 million (Euro) cash and cash equivalents in cash-pooling arrangements
(2022 \u2013 \u00a323 million (Turkish lira and Euro)).", "dimensions": { "concept": "ifrs-full:DisclosureOfDebtSecuritiesExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-734": { "value": "
Accounting policies
Borrowings are initially recognised at fair value net of transaction
costs and are subsequently reported at amortised cost. Certain
bonds are designated in fair value hedge relationship. In these
cases, the amortised cost is adjusted for the fair value of the risk
being hedged, with changes in value recognised in the income
statement. The fair value adjustment is calculated using a
discounted cash flow technique based on unadjusted market
data.\u00a0
Bank overdrafts form an integral part of the group\u2019s cash
management and are included as a component of net cash and
cash equivalents in the consolidated statement of cash flows.
Cash and cash equivalents comprise cash in hand and deposits
which are readily convertible to known amounts of cash and
which are subject to insignificant risk of changes in value and
have an original maturity of three months or less, including
money market deposits, commercial paper and investments.
Net borrowings are defined as gross borrowings (short-term
borrowings and long-term borrowings plus lease liabilities plus
interest rate hedging instruments, cross currency interest rate
swaps and foreign currency forwards and swaps used to
manage borrowings) less cash and cash equivalents.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-735": { "value": "
Accounting policies
Borrowings are initially recognised at fair value net of transaction
costs and are subsequently reported at amortised cost. Certain
bonds are designated in fair value hedge relationship. In these
cases, the amortised cost is adjusted for the fair value of the risk
being hedged, with changes in value recognised in the income
statement. The fair value adjustment is calculated using a
discounted cash flow technique based on unadjusted market
data.\u00a0
Bank overdrafts form an integral part of the group\u2019s cash
management and are included as a component of net cash and
cash equivalents in the consolidated statement of cash flows.
Cash and cash equivalents comprise cash in hand and deposits
which are readily convertible to known amounts of cash and
which are subject to insignificant risk of changes in value and
have an original maturity of three months or less, including
money market deposits, commercial paper and investments.
Net borrowings are defined as gross borrowings (short-term
borrowings and long-term borrowings plus lease liabilities plus
interest rate hedging instruments, cross currency interest rate
swaps and foreign currency forwards and swaps used to
manage borrowings) less cash and cash equivalents.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyToDetermineComponentsOfCashAndCashEquivalents", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-736": { "value": "
18. Equity
Accounting policies
Own shares represent shares and share options of Diageo plc
that are held in treasury or by employee share trusts for the
purpose of fulfilling obligations in respect of various employee
share plans or were acquired as part of a share buyback
programme. Own shares are treated as a deduction from equity
until the shares are cancelled, reissued or disposed of and when
vest are transferred from own shares to retained earnings at their
weighted average cost.
Share-based payments include share awards and options
granted to directors and employees. The fair value of equity
settled share options and share grants is initially measured at
grant date based on Monte Carlo and Black Scholes models
and is charged to the income statement over the vesting period.
For equity settled shares, the credit is included in retained
earnings. Cancellations of share options are treated as an
acceleration of the vesting period and any outstanding charge is
recognised in operating profit immediately. Any surplus or deficit
arising on the sale of the Diageo plc shares held by the group is
included as a movement in equity.
Dividends are recognised in the financial statements in the year
in which they are approved.
(a) Allotted and fully paid share capital \u2013 ordinary shares
of 28101\u2044108 pence each
Number
of shares
million
Nominal
value
\u00a3 million
At 30 June 2023
2,460
712
At 30 June 2022
2,498
723
At 30 June 2021
2,559
741
the five business days prior to the day the purchase is made and (b) the
higher of the price of the last independent trade and the highest current
independent bid on the trading venue where the purchase is carried
out. The programme expires at the conclusion of the next Annual
General Meeting or on 5 January 2024, if earlier.\u00a0
Diageo completed a total of \u00a31.4\u00a0billion return of capital for the year
ended 30 June 2023, which included \u00a30.9\u00a0billion related to the
successful completion of Diageo\u2019s previous share buyback programme
in which \u00a34.5\u00a0billion of capital was returned to shareholders finalised in
February 2023, and returned an additional \u00a30.5\u00a0billion of capital to
shareholders which was announced as a new share buyback
programme on 16 February 2023 and completed on 2 June 2023.
During the year ended 30 June 2023, the group purchased
38\u00a0million ordinary shares (2022 \u2013 61\u00a0million; 2021 \u2013 3 million),
representing approximately 1.5% of the issued ordinary share capital
(2022 \u2013 2.4%; 2021 \u2013 0.1%) at an average price of 3616 pence per
share, and an aggregate cost of \u00a31,381 million (including \u00a313 million of
transaction costs) (2022 \u2013 3709 pence per share, and an aggregate
cost of \u00a32,284 million, including \u00a316 million of transaction costs; 2021 \u2013
3407 pence per share, and an aggregate cost of \u00a3109\u00a0million, including
\u00a31 million of transaction costs) under the share buyback programme.
The shares purchased under the share buyback programmes were
cancelled.
The monthly breakdown of all shares purchased and the average
price paid per share (excluding expenses) for the year ended 30 June
2023 were as follows:
Period
Number
of shares
purchased under
share buyback
programme
Total number of
shares purchased
Average
price paid
pence
Authorised
purchases
unutilised at
month end
July 2022
1,660,507
1,660,507
3567
177,756,956
August 2022
1,646,883
1,646,883
3820
176,110,073
September 2022
2,273,226
2,273,226
3744
173,836,847
1-6 October 2022
131,864
131,864
3702
173,704,983
7-31 October 2022 (1)
\u2014
\u2014
\u2014
227,870,414
November 2022
4,497,414
4,497,414
3679
223,373,000
December 2022
4,571,923
4,571,923
3710
218,801,077
January 2023
7,989,915
7,989,915
3558
210,811,162
February 2023
1,718,877
1,718,877
3577
209,092,285
March 2023
4,353,777
4,353,777
3541
204,738,508
April 2023
2,883,950
2,883,950
3672
201,854,558
May 2023
5,196,558
5,196,558
3534
196,658,000
June 2023
410,562
410,562
3348
196,247,438
Total
37,335,456
37,335,456
3617
196,247,438
(1)\u00a0 \u00a0 New maximum number of purchasable shares was authorised by shareholders at the
AGM held on 6 October 2022.
(d) Dividends
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Amounts recognised as distributions to
equity shareholders in the year
Final dividend for the year ended 30 June
2022 46.82 pence per share (2021 \u2013 44.59
pence; 2020 \u2013 42.47 pence)
1,066
1,040
992
Interim dividend for the year ended 30 June
2023 30.83 pence per share (2022 \u2013 29.36
pence; 2021 \u2013 27.96 pence)
696
680
654
1,762
1,720
1,646
additional shares in USL in exchange for their 25% interest in PDL and non-controlling interest increased from 42.73% to 42.79%.
(ii) On 24 March 2023, Diageo completed the purchase of an additional 14.97% of the share capital of EABL. This increased Diageo\u2019s controlling shareholding position in EABL from 50.03%
to 65.00%.
(f) Employee share compensation
The group uses a number of share award and option plans to grant to
its directors and employees.
The annual fair value charge in respect of the equity settled plans
for the three years ended 30 June 2023 is as follows:
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Executive share award plans
41
51
41
Executive share option plans
4
4
4
Savings plans
4
4
4
49
59
49
Executive share awards have been made primarily under the Diageo
2014 Long Term Incentive Plan (DLTIP) from September 2014 onwards
and delivered in conditional awards in the form of performance shares,
performance share options, time-vesting restricted stock units (RSUs)
and/or time-vesting share options (or cash-based equivalents in certain
locations for regulatory reasons). Share options are granted at the
market value at the time of grant. Prior to the introduction of the DLTIP,
employees in associated companies were granted awards under the
Diageo plc 2011 Associated Companies Share Incentive Plan (DACSIP).
In the case of Executive Directors, conditional awards of time-vesting
RSUs or forfeitable shares may be awarded under the 2020 Deferred
Bonus Share Plan (DBSP), with vesting not subject to any performance
conditions and not subject to a post-vesting retention period. The DLTIP
plan rules will be presented for renewal at the AGM in September 2023
and any future awards made post approval will be made under the
new plan rules.
Share awards normally vest and are released on the third
anniversary of the grant date. Participants do not make a payment to
receive the award at grant. Executive Directors are required to hold any
vested shares awarded under DLTIP for a further two-year post-vesting
holding period. Share options may normally be exercised between
three and ten years after the grant date. Executives in North America
and Latin America and Caribbean are granted awards over the
company\u2019s ADRs (one ADR is equivalent to four ordinary shares).
Performance shares under the DLTIP (for awards in 2020 and
thereafter) are subject to the achievement of three performance
measures: 1) compound annual growth in profit before exceptional
items over three years; 2) compound annual growth in organic net sales
over three years; 3) environmental, social and governance (ESG)
priorities, weighted 40%, 40% and 20% of the maximum respectively,
as set out in the Directors\u2019 remuneration report. Performance share
options under the DLTIP are subject to the achievement of two equally
weighted performance measures: 1) a comparison of Diageo\u2019s three-
year TSR with a peer group; 2) cumulative free cash flow over a three-
year period, measured at constant exchange rates. Performance
measures and targets are set annually by the Remuneration Committee.
The vesting range is 20% for Executive Directors and 25% for other
participants for achieving minimum performance targets, up to 100%
for achieving the maximum target level. Retesting of the performance
measures is not permitted.
For performance shares under the DLTIP, dividends are accrued on
awards and are given to participants to the extent that the awards
actually vest at the end of the performance period. Dividends are
normally paid out in the form of shares.
Savings plans are provided in the form of a savings-related share
option plan. For UK employees, awards were made under the Diageo
2010 Sharesave plan (for options granted up until 2020) and the
Diageo 2020 Sharesave plan (for options granted from 2021).
For Republic of Ireland (ROI) based employees, awards were made
under the Diageo 2009 Irish Sharesave Scheme (for options granted up
until 2019) and the Diageo 2019 Irish Sharesave Scheme (for options
granted in 2020). These are HMRC and Irish Revenue approved all-
employee savings plans.
For ROI employees, grants from 2021 and 2022 were made under
the Diageo 2020 Sharesave plan which is not an approved plan in the
Republic of Ireland. These plans are made available to UK and ROI
employees who are employed on the annual results announcement
date. Participants can save monthly, with deductions taken directly from
net pay, for a period of 3 or 5 years. In return, employees are granted
the option to buy Diageo shares using the savings accrued at the end of
the relevant savings period and at a 20% discounted option price,
which is set at the time of grant. Provided participants fulfil the terms set
out within the relevant UK or ROI tax approved scheme rules, any gains
from the option exercise are free from UK or ROI income tax. For the
ROI Sharesave awards granted in 2021 and 2022, as these are not
made under a Revenue tax approved plan, the gains from the option
exercise are subject to ROI income tax.
For US employees, the awards are made under the Diageo plc 2017
United States Employee Stock Purchase Plan. Employees agree to make
regular monthly savings for a period of one year and acquire American
Depositary Receipts (ADRs) at 15% discounted price (which is set at the
time of grant) using their contributions at the end of the plan cycle. They
receive the benefit of tax relief if certain conditions are satisfied.
For the three years ended 30 June 2023, the calculation of the fair value
of each share award used the Monte Carlo and Black Scholes pricing
model and the following assumptions:
2023
2022
2021
Risk free interest rate
3.1%
0.4%
(0.1%)
Expected life of the awards
35 months
40 months
36 months
Dividend yield
2.0%
2.1%
2.7%
Weighted average share price
3758 p
3545 p
2557 p
Weighted average fair value of
awards granted in the year
1992 p
2729 p
2107 p
Number of awards granted in
the year
1.7 million
2.1 million
2.1 million
Fair value of all awards granted
in the year
\u00a334 million
\u00a357 million
\u00a345 million
The exercise price of share options outstanding at 30 June 2023 was in
the range of 1709 pence - 3864 pence (2022 \u2013 1704 pence - 4024
pence; 2021 \u2013 1232 pence - 3483 pence).
At 30 June 2023, 2.5\u00a0million share options were exercisable at a
weighted average exercise price of 2443 pence. Weighted average
remaining contractual life of share options was five years at 30 June
2023.
", "dimensions": { "concept": "ifrs-full:DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-737": { "value": "
Own shares represent shares and share options of Diageo plc
that are held in treasury or by employee share trusts for the
purpose of fulfilling obligations in respect of various employee
share plans or were acquired as part of a share buyback
programme. Own shares are treated as a deduction from equity
until the shares are cancelled, reissued or disposed of and when
vest are transferred from own shares to retained earnings at their
weighted average cost.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTreasurySharesExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-738": { "value": "
Share-based payments include share awards and options
granted to directors and employees. The fair value of equity
settled share options and share grants is initially measured at
grant date based on Monte Carlo and Black Scholes models
and is charged to the income statement over the vesting period.
For equity settled shares, the credit is included in retained
earnings. Cancellations of share options are treated as an
acceleration of the vesting period and any outstanding charge is
recognised in operating profit immediately. Any surplus or deficit
arising on the sale of the Diageo plc shares held by the group is
included as a movement in equity.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-739": { "value": "Dividends are recognised in the financial statements in the year in which they are approved.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDividendsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-740": { "value": "
(a) Allotted and fully paid share capital \u2013 ordinary shares
of 28101\u2044108 pence each
Number
of shares
million
Nominal
value
\u00a3 million
At 30 June 2023
2,460
712
At 30 June 2022
2,498
723
At 30 June 2021
2,559
741
the five business days prior to the day the purchase is made and (b) the
higher of the price of the last independent trade and the highest current
independent bid on the trading venue where the purchase is carried
out. The programme expires at the conclusion of the next Annual
General Meeting or on 5 January 2024, if earlier.\u00a0
Diageo completed a total of \u00a31.4\u00a0billion return of capital for the year
ended 30 June 2023, which included \u00a30.9\u00a0billion related to the
successful completion of Diageo\u2019s previous share buyback programme
in which \u00a34.5\u00a0billion of capital was returned to shareholders finalised in
February 2023, and returned an additional \u00a30.5\u00a0billion of capital to
shareholders which was announced as a new share buyback
programme on 16 February 2023 and completed on 2 June 2023.
During the year ended 30 June 2023, the group purchased
38\u00a0million ordinary shares (2022 \u2013 61\u00a0million; 2021 \u2013 3 million),
representing approximately 1.5% of the issued ordinary share capital
(2022 \u2013 2.4%; 2021 \u2013 0.1%) at an average price of 3616 pence per
share, and an aggregate cost of \u00a31,381 million (including \u00a313 million of
transaction costs) (2022 \u2013 3709 pence per share, and an aggregate
cost of \u00a32,284 million, including \u00a316 million of transaction costs; 2021 \u2013
3407 pence per share, and an aggregate cost of \u00a3109\u00a0million, including
\u00a31 million of transaction costs) under the share buyback programme.
The shares purchased under the share buyback programmes were
cancelled.
The monthly breakdown of all shares purchased and the average
price paid per share (excluding expenses) for the year ended 30 June
2023 were as follows:
Period
Number
of shares
purchased under
share buyback
programme
Total number of
shares purchased
Average
price paid
pence
Authorised
purchases
unutilised at
month end
July 2022
1,660,507
1,660,507
3567
177,756,956
August 2022
1,646,883
1,646,883
3820
176,110,073
September 2022
2,273,226
2,273,226
3744
173,836,847
1-6 October 2022
131,864
131,864
3702
173,704,983
7-31 October 2022 (1)
\u2014
\u2014
\u2014
227,870,414
November 2022
4,497,414
4,497,414
3679
223,373,000
December 2022
4,571,923
4,571,923
3710
218,801,077
January 2023
7,989,915
7,989,915
3558
210,811,162
February 2023
1,718,877
1,718,877
3577
209,092,285
March 2023
4,353,777
4,353,777
3541
204,738,508
April 2023
2,883,950
2,883,950
3672
201,854,558
May 2023
5,196,558
5,196,558
3534
196,658,000
June 2023
410,562
410,562
3348
196,247,438
Total
37,335,456
37,335,456
3617
196,247,438
(1)\u00a0 \u00a0 New maximum number of purchasable shares was authorised by shareholders at the
AGM held on 6 October 2022.
", "dimensions": { "concept": "ifrs-full:DisclosureOfTreasurySharesExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-745": { "value": "
(d) Dividends
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Amounts recognised as distributions to
equity shareholders in the year
Final dividend for the year ended 30 June
2022 46.82 pence per share (2021 \u2013 44.59
pence; 2020 \u2013 42.47 pence)
1,066
1,040
992
Interim dividend for the year ended 30 June
2023 30.83 pence per share (2022 \u2013 29.36
pence; 2021 \u2013 27.96 pence)
696
680
654
1,762
1,720
1,646
additional shares in USL in exchange for their 25% interest in PDL and non-controlling interest increased from 42.73% to 42.79%.
(ii) On 24 March 2023, Diageo completed the purchase of an additional 14.97% of the share capital of EABL. This increased Diageo\u2019s controlling shareholding position in EABL from 50.03%
to", "dimensions": { "concept": "ifrs-full:DisclosureOfNoncontrollingInterestsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-749": { "value": "
(f) Employee share compensation
The group uses a number of share award and option plans to grant to
its directors and employees.
The annual fair value charge in respect of the equity settled plans
for the three years ended 30 June 2023 is as follows:
2023
\u00a3 million
2022
\u00a3 million
2021
\u00a3 million
Executive share award plans
41
51
41
Executive share option plans
4
4
4
Savings plans
4
4
4
49
59
49
Executive share awards have been made primarily under the Diageo
2014 Long Term Incentive Plan (DLTIP) from September 2014 onwards
and delivered in conditional awards in the form of performance shares,
performance share options, time-vesting restricted stock units (RSUs)
and/or time-vesting share options (or cash-based equivalents in certain
locations for regulatory reasons). Share options are granted at the
market value at the time of grant. Prior to the introduction of the DLTIP,
employees in associated companies were granted awards under the
Diageo plc 2011 Associated Companies Share Incentive Plan (DACSIP).
In the case of Executive Directors, conditional awards of time-vesting
RSUs or forfeitable shares may be awarded under the 2020 Deferred
Bonus Share Plan (DBSP), with vesting not subject to any performance
conditions and not subject to a post-vesting retention period. The DLTIP
plan rules will be presented for renewal at the AGM in September 2023
and any future awards made post approval will be made under the
new plan rules.
Share awards normally vest and are released on the third
anniversary of the grant date. Participants do not make a payment to
receive the award at grant. Executive Directors are required to hold any
vested shares awarded under DLTIP for a further two-year post-vesting
holding period. Share options may normally be exercised between
three and ten years after the grant date. Executives in North America
and Latin America and Caribbean are granted awards over the
company\u2019s ADRs (one ADR is equivalent to four ordinary shares).
Performance shares under the DLTIP (for awards in 2020 and
thereafter) are subject to the achievement of three performance
measures: 1) compound annual growth in profit before exceptional
items over three years; 2) compound annual growth in organic net sales
over three years; 3) environmental, social and governance (ESG)
priorities, weighted 40%, 40% and 20% of the maximum respectively,
as set out in the Directors\u2019 remuneration report. Performance share
options under the DLTIP are subject to the achievement of two equally
weighted performance measures: 1) a comparison of Diageo\u2019s three-
year TSR with a peer group; 2) cumulative free cash flow over a three-
year period, measured at constant exchange rates. Performance
measures and targets are set annually by the Remuneration Committee.
The vesting range is 20% for Executive Directors and 25% for other
participants for achieving minimum performance targets, up to 100%
for achieving the maximum target level. Retesting of the performance
measures is not permitted.
For performance shares under the DLTIP, dividends are accrued on
awards and are given to participants to the extent that the awards
actually vest at the end of the performance period. Dividends are
normally paid out in the form of shares.
Savings plans are provided in the form of a savings-related share
option plan. For UK employees, awards were made under the Diageo
2010 Sharesave plan (for options granted up until 2020) and the
Diageo 2020 Sharesave plan (for options granted from 2021).
For Republic of Ireland (ROI) based employees, awards were made
under the Diageo 2009 Irish Sharesave Scheme (for options granted up
until 2019) and the Diageo 2019 Irish Sharesave Scheme (for options
granted in 2020). These are HMRC and Irish Revenue approved all-
employee savings plans.
For ROI employees, grants from 2021 and 2022 were made under
the Diageo 2020 Sharesave plan which is not an approved plan in the
Republic of Ireland. These plans are made available to UK and ROI
employees who are employed on the annual results announcement
date. Participants can save monthly, with deductions taken directly from
net pay, for a period of 3 or 5 years. In return, employees are granted
the option to buy Diageo shares using the savings accrued at the end of
the relevant savings period and at a 20% discounted option price,
which is set at the time of grant. Provided participants fulfil the terms set
out within the relevant UK or ROI tax approved scheme rules, any gains
from the option exercise are free from UK or ROI income tax. For the
ROI Sharesave awards granted in 2021 and 2022, as these are not
made under a Revenue tax approved plan, the gains from the option
exercise are subject to ROI income tax.
For US employees, the awards are made under the Diageo plc 2017
United States Employee Stock Purchase Plan. Employees agree to make
regular monthly savings for a period of one year and acquire American
Depositary Receipts (ADRs) at 15% discounted price (which is set at the
time of grant) using their contributions at the end of the plan cycle. They
receive the benefit of tax relief if certain conditions are satisfied.
For the three years ended 30 June 2023, the calculation of the fair value
of each share award used the Monte Carlo and Black Scholes pricing
model and the following assumptions:
2023
2022
2021
Risk free interest rate
3.1%
0.4%
(0.1%)
Expected life of the awards
35 months
40 months
36 months
Dividend yield
2.0%
2.1%
2.7%
Weighted average share price
3758 p
3545 p
2557 p
Weighted average fair value of
awards granted in the year
1992 p
2729 p
2107 p
Number of awards granted in
the year
1.7 million
2.1 million
2.1 million
Fair value of all awards granted
in the year
\u00a334 million
\u00a357 million
\u00a345 million
The exercise price of share options outstanding at 30 June 2023 was in
the range of 1709 pence - 3864 pence (2022 \u2013 1704 pence - 4024
pence; 2021 \u2013 1232 pence - 3483 pence).
At 30 June 2023, 2.5\u00a0million share options were exercisable at a
weighted average exercise price of 2443 pence. Weighted average
remaining contractual life of share options was five years at 30 June
2023.
", "dimensions": { "concept": "ifrs-full:DisclosureOfSharebasedPaymentArrangementsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-750": { "value": "
19. Contingent liabilities and legal proceedings
Accounting policies
Provision is made for the anticipated settlement costs of legal or
other disputes against the group where it is considered to be
probable that a liability exists and a reliable estimate can be
made of the likely outcome. Where it is possible that a settlement
may be reached or it is not possible to make a reliable estimate
of the estimated financial effect, appropriate disclosure is made
but no provision created.
Critical accounting judgements and estimates
Judgement is necessary in assessing the likelihood that a claim
will succeed, or a liability will arise, and an estimate to quantify
the possible range of any settlement. Due to the inherent
uncertainty in this evaluation process, actual losses may be
different from the liability originally estimated. The group may be
involved in legal proceedings in respect of which it is not
possible to make a reliable estimate of any expected settlement.
In such cases, appropriate disclosure is provided but no
provision is made and no contingent liability is quantified.
(a) Guarantees and related matters
As of 30 June 2023, the group has no material unprovided guarantees
or indemnities in respect of liabilities of third parties.
(b) Acquisition of USL shares from UBHL and related
proceedings in relation to the USL transaction
On 4\u00a0July 2013, Diageo completed its acquisition, under a share
purchase agreement with United Breweries (Holdings) Limited (UBHL)
and various other sellers (the SPA), of shares representing 14.98% in
USL, including shares representing 6.98% from UBHL. The SPA was
signed on 9\u00a0November 2012 as part of the transaction announced by
Diageo in relation to USL on that day (the Original USL Transaction).
Following a series of further transactions, as of 30 June 2023, Diageo
has a 55.88% investment in USL (excluding 2.38% owned by the USL
Benefit Trust).
Prior to the acquisition from UBHL on 4\u00a0July 2013, the High Court of
Karnataka (High Court) had granted leave to UBHL under the Indian
Companies Act 1956 (the Leave Order) to enable the sale by UBHL to
Diageo to take place (the UBHL Share Sale) notwithstanding the
continued existence of certain winding-up petitions that were pending
against UBHL on the date of the SPA. At the time of the completion of
the UBHL Share Sale, the Leave Order remained subject to review on
appeal. However, as stated by Diageo at the time of closing, it was
considered unlikely that any appeal process in respect of the Leave
Order would definitively conclude on a timely basis and, accordingly,
Diageo waived the conditionality under the SPA relating to the absence
of insolvency proceedings in relation to UBHL and acquired the 6.98%
stake in USL from UBHL at that time.
Following appeal and counter-appeal in respect of the Leave Order,
this matter is now before the Supreme Court of India which has issued
an order that the status quo be maintained with regard to the UBHL
Share Sale pending a hearing on the matter before it. Following a
number of adjournments, the next date for a substantive hearing is yet
to be fixed.
In separate proceedings, the High Court passed a winding-up order
against UBHL on 7\u00a0February 2017, and appeals filed by UBHL against
that order have since been dismissed, initially by a division bench of the
High Court and subsequently by the Supreme Court of India.
Diageo continues to believe that the acquisition price of INR 1,440
per share paid to UBHL for the USL shares is fair and reasonable as
regards UBHL, UBHL\u2019s shareholders and UBHL\u2019s secured and unsecured
creditors. However, adverse results for Diageo in the proceedings
referred to above could, absent leave or relief in other proceedings,
ultimately result in Diageo losing title to the 6.98% stake in USL
acquired from UBHL. Diageo believes, including by reason of its rights
under USL\u2019s articles of association to nominate USL\u2019s CEO and CFO
and the right to appoint, through USL, a majority of the directors on the
boards of USL\u2019s subsidiaries as well as its ability as promoter to
nominate for appointment up to two-thirds of USL\u2019s directors for so long
as the chairperson of USL is an independent director, that it would
remain in control of USL and would continue to be able to consolidate
USL as a subsidiary for accounting purposes regardless of the outcome
of this litigation.
There can be no certainty as to the outcome of the existing or any
further related legal proceedings or the time frame within which they
would be concluded.
(c) Continuing matters relating to Dr Vijay Mallya and
affiliates
On 25\u00a0February 2016, Diageo and USL each announced that they had
entered into arrangements with Dr Mallya under which he had agreed
to resign from his position as a director and as chairman of USL and
from his positions in USL\u2019s subsidiaries. \u00a0
Diageo\u2019s agreement with Dr Mallya (the February 2016 Agreement)
provided for a payment of $75 million (\u00a360 million) to Dr Mallya over a
five-year period of which $40\u00a0million (\u00a332\u00a0million) was paid on signing
of the February 2016 Agreement with the balance being payable in
equal instalments of $7\u00a0million (\u00a36\u00a0million) a year over five years
(2017-2021). All payments were subject to and conditional on Dr
Mallya\u2019s compliance with the agreement. The February 2016 Agreement
also provided for the release of Dr Mallya\u2019s personal obligations to
indemnify Diageo Holdings Netherlands B.V. (DHN) in respect of its
earlier liability ($141 million (\u00a3112 million)) under a backstop guarantee
of certain borrowings of Watson Limited (Watson) (a company affiliated
with Dr Mallya).
On account of various breaches and other provisions of agreements
between Dr Mallya and persons connected with him and Diageo and/
or USL, Diageo did not make the five instalment payments due during
the five-year period between 2017 and 2021. In addition, Diageo has
also demanded that Dr Mallya repay the $40 million (\u00a332 million) paid
by Diageo in February 2016 and sought compensation for various losses
incurred by the relevant members of the Diageo group.
On 16\u00a0November 2017, Diageo and other relevant members of the
Diageo group commenced claims in the High Court of Justice in
England and Wales (the English High Court) against Dr Mallya in
relation to these matters. At the same time DHN also commenced
claims in the English High Court against Dr Mallya, his son Sidhartha
Mallya, Watson and Continental Administration Services Limited (CASL)
(a company affiliated with Dr Mallya and understood to hold assets on
trust for him and certain persons affiliated with him) for in excess of $142
million (\u00a3113 million) (plus interest) in relation to Watson\u2019s liability to DHN
in respect of its borrowings referred to above and the breach of
associated security documents. Dr Mallya, Sidhartha Mallya and the
relevant affiliated companies filed a defence to these claims, and Dr
Mallya also filed a counterclaim for payment of the two instalment
payments that had by that time been withheld as described above.
Diageo continues to prosecute its claims and to defend the
counterclaim. As part of these proceedings, Diageo and the other
relevant members of its group filed an application for strike out and/or
summary judgement in respect of certain aspects of the defence filed by
Dr Mallya and the other defendants, including their defence in relation
to Watson and CASL\u2019s liability to repay DHN. The application was
successful resulting in Watson being ordered to pay approximately $135
million (\u00a3107 million) plus various amounts in respect of interest to DHN,
with CASL being held liable as co-surety for 50% of any such amount
unpaid by Watson. These amounts were, contrary to the relevant orders,
not paid by the relevant deadlines and Watson and CASL\u2019s remaining
defences in the proceedings were struck out. Diageo and DHN have
accordingly sought asset disclosure and are considering further
enforcement steps against Watson and CASL, both in the United
Kingdom and in other jurisdictions where they are present or hold
assets.
A trial of the remaining elements of these claims was due to
commence on 21 November 2022. However, on 26 July 2021 Dr Mallya
was declared bankrupt by the English High Court pursuant to a
bankruptcy petition presented by a consortium of Indian banks. Diageo
and the relevant members of its group have informed the Trustee in
Bankruptcy of their position as creditors in the bankruptcy and have
engaged with the Trustee regarding their claims and the status of the
current proceedings. An appeal by Dr Mallya against his bankruptcy
(and an appeal by the bank consortium against orders made in the
course of the bankruptcy proceedings) are pending. In light of the
uncertainty posed by the ongoing bankruptcy proceedings, the trial of
Diageo\u2019s claim was initially relisted to take place in February 2024.
However, Dr Mallya\u2019s appeal against his bankruptcy and the banks\u2019
cross appeal will not now be heard until April 2024, and thus the trial of
Diageo\u2019s claim has been deferred from February 2024 until after those
appeals have been determined.
At this stage, it is not possible to assess the extent to which the
various ongoing proceedings related to the bankruptcy will affect the
remaining elements of the claims by Diageo and the relevant members
of its group.
Upon completion of an initial inquiry in April 2015 into past improper
transactions which identified references to certain additional parties and
matters, USL carried out an additional inquiry into these transactions
(Additional Inquiry) which was completed in July 2016. The Additional
Inquiry, prima facie, identified transactions indicating actual and
potential diversion of funds from USL and its Indian and overseas
subsidiaries to, in most cases, entities that appeared to be affiliated or
associated with Dr Mallya. All amounts identified in the Additional
Inquiry have been provided for or expensed in the financial statements
of USL or its subsidiaries in the respective prior periods. USL has filed
recovery suits against relevant parities identified pursuant to the
Additional Inquiry.
Further, at this stage, it is not possible for the management of USL to
estimate the financial impact on USL, if any, arising out of potential non-
compliance with applicable laws in relation to such fund diversions.
(d) Other matters in relation to USL
In respect of the Watson backstop guarantee arrangements, the
Securities and Exchange Board of India (SEBI) issued a notice to Diageo
on 16 June 2016 that if there is any net liability incurred by Diageo (after
any recovery under relevant security or other arrangements, which
matters remain pending) on account of the Watson backstop
guarantee, such liability, if any, would be considered to be part of the
price paid for the acquisition of USL shares under the SPA which formed
part of the Original USL Transaction and that, in that case, additional
equivalent payments would be required to be made to those
shareholders (representing 0.04% of the shares in USL) who tendered in
the open offer made as part of the Original USL Transaction. Diageo
believes that the Watson backstop guarantee arrangements were not
part of the price paid or agreed to be paid for any USL shares under the
Original USL Transaction and that therefore SEBI's decision was not
consistent with applicable law, and Diageo appealed against it before
the Securities Appellate Tribunal, Mumbai (SAT). On 1 November 2017,
SAT issued an order in respect of Diageo\u2019s appeal in which, amongst
other things, it observed that the relevant officer at SEBI had neither
considered Diageo\u2019s earlier reply nor provided Diageo with an
opportunity to be heard, and accordingly directed SEBI to pass a fresh
order after giving Diageo an opportunity to be heard. Following SAT\u2019s
order, Diageo made its further submissions in the matter, including at a
personal hearing before a Deputy General Manager of SEBI. On 26
June 2019, SEBI issued an order reiterating the directions contained in its
previous notice dated 16 June 2016. As with the previous SEBI notice,
Diageo believes that SEBI's latest order is not consistent with applicable
law. Diageo appealed against this order before SAT and, after a
hearing in March 2023, SAT allowed Diageo\u2019s appeal on 26 July 2023.
Accordingly, SEBI\u2019s order dated 26 June 2019 stands quashed. Under
applicable law, SEBI is entitled to file an appeal against SAT\u2019s order
before the Supreme Court of India. Therefore, pending any appeal
which may be filed by SEBI, there can be no certainty as to its outcome
or the timeframe within which any such appeal would be concluded.
(e) USL\u2019s dispute with IDBI Bank Limited
Prior to the acquisition by Diageo of a controlling interest in USL, USL
had prepaid a term loan of INR 6,280 million (\u00a360 million) taken
through IDBI Bank Limited (IDBI), an Indian bank, which was secured on
certain fixed assets and brands of USL, as well as by a pledge of certain
shares in USL held by the USL Benefit Trust (of which USL is the sole
beneficiary). The maturity date of the loan was 31 March 2015. IDBI
disputed the prepayment, following which USL filed a writ petition in
November 2013 before the High Court of Karnataka (the High Court)
challenging the bank\u2019s actions.
Following the original maturity date of the loan, USL received notices
from IDBI seeking to recall the loan, demanding a further sum of INR
459 million (\u00a34 million) on account of the outstanding principal,
accrued interest and other amounts, and also threatening to enforce the
security in the event that USL did not make these further payments.
Pursuant to an application filed by USL before the High Court in the writ
proceedings, the High Court directed that, subject to USL depositing
such further amount with the bank (which amount was duly deposited
by USL), the bank should hold the amount in a suspense account and
not deal with any of the secured assets including the shares until
disposal of the original writ petition filed by USL before the High Court.
On 27 June 2019, a single judge bench of the High Court issued an
order dismissing the writ petition filed by USL, amongst other things, on
the basis that the matter involved an issue of breach of contract by USL
and was therefore not maintainable in exercise of the court\u2019s writ
jurisdiction. USL filed an appeal against this order before a division
bench of the High Court, which on 30 July 2019 issued an interim order
directing the bank to not deal with any of the secured assets until the
next date of hearing. On 13 January 2020, the division bench of the
High Court admitted the writ appeal and extended the interim stay. This
appeal is currently pending. Based on the assessment of USL\u2019s
management supported by external legal opinions, USL continues to
believe that it has a strong case on the merits and therefore continues to
believe that the secured assets will be released to USL and the aforesaid
amount of INR 459 million (\u00a34 million) remains recoverable from IDBI.
(f) Tax
The international tax environment has seen increased scrutiny and rapid
change over recent years bringing with it greater uncertainty for
multinationals. Against this backdrop, Diageo has been monitoring
developments and continues to engage transparently with the tax
authorities in the countries where Diageo operates to ensure that the
group manages its arrangements on a sustainable basis.
The group operates in a large number of markets with complex tax
and legislative regimes that are open to subjective interpretation, and
for which tax audits can take several years to resolve. In the context of
these operations, it is possible that tax exposures which have not yet
materialised (including those which could arise as a result of tax
assessments) may result in losses to the group. In the circumstances
where tax authorities have raised assessments, challenging
interpretations which may lead to a possible material outflow, these
have been included as contingent liabilities. Where the potential tax
exposures are known to us and have not been assessed, the group
considers disclosure of such matters taking into account their size and
nature, relevant regulatory requirements and potential prejudice of the
future resolution or assessment thereof.
Diageo has a large number of ongoing tax cases in Brazil and India.
Since assessing an accurate value of contingent liabilities in these
markets requires a high degree of judgement, contingent liabilities are
disclosed on the basis of the current known possible exposure from tax
assessment values. While not all of these cases are individually
significant, the current aggregate known possible exposure from tax
assessment values is up to approximately \u00a3616 million for Brazil and up
to approximately \u00a390 million for India. The group believes that the
likelihood that the tax authorities will ultimately prevail is lower than
probable but higher than remote. Due to the fiscal environment in Brazil
and in India, the possibility of further tax assessments related to the
same matters cannot be ruled out and the judicial processes may take
extended periods to conclude. Based on its current assessment, Diageo
believes that no provision is required in respect of these issues.
Payments were made under protest in India in respect of the periods
1\u00a0April 2006 to 31\u00a0March 2019 in relation to tax assessments where the
risk is considered to be remote or possible. These payments have to be
made in order to be able to challenge the assessments and as such
have been recognised as a receivable in the group's balance sheet. The
total amount of payments under protest recognised as a receivable as
at 30\u00a0June 2023 is \u00a3116\u00a0million (corporate tax payments of \u00a3104\u00a0million
and indirect tax payments of \u00a312\u00a0million).
(g) Other disputes
On 31 May 2023, a complaint against Diageo North America, Inc (DNA)
was filed in the Supreme Court of New York by Combs Wine and Spirits
LLC (an entity associated with Mr Sean Combs) alleging, inter alia,
breach of contract in respect of a joint venture agreement related to
DeLe\u00f3n tequila. DNA has also served notice of material breaches and
termination to Mr Combs and his relevant associated entities of certain
agreements related to services provided by Mr Combs and these
entities in respect of C\u00eeroc, and notice of material breaches and an
intent to arbitrate in respect of the DeLe\u00f3n joint venture agreement.
Diageo categorically denies the allegations that have been made by Mr
Combs and his associated parties in the complaint and will defend itself
vigorously. Diageo will refrain from making any further disclosures given
the inherent uncertainties of these matters and the prejudicial nature
any such disclosures may have on the potential outcomes related
thereto or other associated matters.
(h) Other
The group has extensive international operations and routinely makes
judgements on a range of legal, customs and tax matters which are
incidental to the group's operations. Some of these judgements are or
may become the subject of challenges and involve proceedings, the
outcome of which cannot be foreseen. In particular, the group is
currently a defendant in various customs proceedings that challenge
the declared customs value of products imported by certain Diageo
companies. Diageo continues to defend its position vigorously in these
proceedings.
Save as disclosed above, neither Diageo, nor any member of the
Diageo group, is or has been engaged in, nor (so far as Diageo is
aware) is there pending or threatened by or against it, any legal or
arbitration proceedings which may have a significant effect on the
financial position of the Diageo group.
20. Commitments
(a) Capital commitments
Commitments for expenditure on intangibles and property, plant and
equipment not provided for in these consolidated financial statements
are estimated at \u00a3599 million (2022 \u2013 \u00a3399 million; 2021 \u2013 \u00a3263 million).
(b) Other commitments
The future minimum lease rentals payable in the year ended 30 June
2023 for short-term leases and leases of low-value assets are estimated
at \u00a336\u00a0million (2022 \u2013 \u00a313\u00a0million; 2021 \u2013 \u00a311 million). The total future
cash outflows for leases that had not yet commenced, and not
recognised as lease liabilities at 30 June 2023, are estimated at \u00a311
million (2022 \u2013 \u00a311 million; 2021 \u2013 \u00a3132 million).
", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-751": { "value": "
19. Contingent liabilities and legal proceedings
Accounting policies
Provision is made for the anticipated settlement costs of legal or
other disputes against the group where it is considered to be
probable that a liability exists and a reliable estimate can be
made of the likely outcome. Where it is possible that a settlement
may be reached or it is not possible to make a reliable estimate
of the estimated financial effect, appropriate disclosure is made
but no provision created.
Critical accounting judgements and estimates
Judgement is necessary in assessing the likelihood that a claim
will succeed, or a liability will arise, and an estimate to quantify
the possible range of any settlement. Due to the inherent
uncertainty in this evaluation process, actual losses may be
different from the liability originally estimated. The group may be
involved in legal proceedings in respect of which it is not
possible to make a reliable estimate of any expected settlement.
In such cases, appropriate disclosure is provided but no
provision is made and no contingent liability is quantified.
(a) Guarantees and related matters
As of 30 June 2023, the group has no material unprovided guarantees
or indemnities in respect of liabilities of third parties.
(b) Acquisition of USL shares from UBHL and related
proceedings in relation to the USL transaction
On 4\u00a0July 2013, Diageo completed its acquisition, under a share
purchase agreement with United Breweries (Holdings) Limited (UBHL)
and various other sellers (the SPA), of shares representing 14.98% in
USL, including shares representing 6.98% from UBHL. The SPA was
signed on 9\u00a0November 2012 as part of the transaction announced by
Diageo in relation to USL on that day (the Original USL Transaction).
Following a series of further transactions, as of 30 June 2023, Diageo
has a 55.88% investment in USL (excluding 2.38% owned by the USL
Benefit Trust).
Prior to the acquisition from UBHL on 4\u00a0July 2013, the High Court of
Karnataka (High Court) had granted leave to UBHL under the Indian
Companies Act 1956 (the Leave Order) to enable the sale by UBHL to
Diageo to take place (the UBHL Share Sale) notwithstanding the
continued existence of certain winding-up petitions that were pending
against UBHL on the date of the SPA. At the time of the completion of
the UBHL Share Sale, the Leave Order remained subject to review on
appeal. However, as stated by Diageo at the time of closing, it was
considered unlikely that any appeal process in respect of the Leave
Order would definitively conclude on a timely basis and, accordingly,
Diageo waived the conditionality under the SPA relating to the absence
of insolvency proceedings in relation to UBHL and acquired the 6.98%
stake in USL from UBHL at that time.
Following appeal and counter-appeal in respect of the Leave Order,
this matter is now before the Supreme Court of India which has issued
an order that the status quo be maintained with regard to the UBHL
Share Sale pending a hearing on the matter before it. Following a
number of adjournments, the next date for a substantive hearing is yet
to be fixed.
In separate proceedings, the High Court passed a winding-up order
against UBHL on 7\u00a0February 2017, and appeals filed by UBHL against
that order have since been dismissed, initially by a division bench of the
High Court and subsequently by the Supreme Court of India.
Diageo continues to believe that the acquisition price of INR 1,440
per share paid to UBHL for the USL shares is fair and reasonable as
regards UBHL, UBHL\u2019s shareholders and UBHL\u2019s secured and unsecured
creditors. However, adverse results for Diageo in the proceedings
referred to above could, absent leave or relief in other proceedings,
ultimately result in Diageo losing title to the 6.98% stake in USL
acquired from UBHL. Diageo believes, including by reason of its rights
under USL\u2019s articles of association to nominate USL\u2019s CEO and CFO
and the right to appoint, through USL, a majority of the directors on the
boards of USL\u2019s subsidiaries as well as its ability as promoter to
nominate for appointment up to two-thirds of USL\u2019s directors for so long
as the chairperson of USL is an independent director, that it would
remain in control of USL and would continue to be able to consolidate
USL as a subsidiary for accounting purposes regardless of the outcome
of this litigation.
There can be no certainty as to the outcome of the existing or any
further related legal proceedings or the time frame within which they
would be concluded.
(c) Continuing matters relating to Dr Vijay Mallya and
affiliates
On 25\u00a0February 2016, Diageo and USL each announced that they had
entered into arrangements with Dr Mallya under which he had agreed
to resign from his position as a director and as chairman of USL and
from his positions in USL\u2019s subsidiaries. \u00a0
Diageo\u2019s agreement with Dr Mallya (the February 2016 Agreement)
provided for a payment of $75 million (\u00a360 million) to Dr Mallya over a
five-year period of which $40\u00a0million (\u00a332\u00a0million) was paid on signing
of the February 2016 Agreement with the balance being payable in
equal instalments of $7\u00a0million (\u00a36\u00a0million) a year over five years
(2017-2021). All payments were subject to and conditional on Dr
Mallya\u2019s compliance with the agreement. The February 2016 Agreement
also provided for the release of Dr Mallya\u2019s personal obligations to
indemnify Diageo Holdings Netherlands B.V. (DHN) in respect of its
earlier liability ($141 million (\u00a3112 million)) under a backstop guarantee
of certain borrowings of Watson Limited (Watson) (a company affiliated
with Dr Mallya).
On account of various breaches and other provisions of agreements
between Dr Mallya and persons connected with him and Diageo and/
or USL, Diageo did not make the five instalment payments due during
the five-year period between 2017 and 2021. In addition, Diageo has
also demanded that Dr Mallya repay the $40 million (\u00a332 million) paid
by Diageo in February 2016 and sought compensation for various losses
incurred by the relevant members of the Diageo group.
On 16\u00a0November 2017, Diageo and other relevant members of the
Diageo group commenced claims in the High Court of Justice in
England and Wales (the English High Court) against Dr Mallya in
relation to these matters. At the same time DHN also commenced
claims in the English High Court against Dr Mallya, his son Sidhartha
Mallya, Watson and Continental Administration Services Limited (CASL)
(a company affiliated with Dr Mallya and understood to hold assets on
trust for him and certain persons affiliated with him) for in excess of $142
million (\u00a3113 million) (plus interest) in relation to Watson\u2019s liability to DHN
in respect of its borrowings referred to above and the breach of
associated security documents. Dr Mallya, Sidhartha Mallya and the
relevant affiliated companies filed a defence to these claims, and Dr
Mallya also filed a counterclaim for payment of the two instalment
payments that had by that time been withheld as described above.
Diageo continues to prosecute its claims and to defend the
counterclaim. As part of these proceedings, Diageo and the other
relevant members of its group filed an application for strike out and/or
summary judgement in respect of certain aspects of the defence filed by
Dr Mallya and the other defendants, including their defence in relation
to Watson and CASL\u2019s liability to repay DHN. The application was
successful resulting in Watson being ordered to pay approximately $135
million (\u00a3107 million) plus various amounts in respect of interest to DHN,
with CASL being held liable as co-surety for 50% of any such amount
unpaid by Watson. These amounts were, contrary to the relevant orders,
not paid by the relevant deadlines and Watson and CASL\u2019s remaining
defences in the proceedings were struck out. Diageo and DHN have
accordingly sought asset disclosure and are considering further
enforcement steps against Watson and CASL, both in the United
Kingdom and in other jurisdictions where they are present or hold
assets.
A trial of the remaining elements of these claims was due to
commence on 21 November 2022. However, on 26 July 2021 Dr Mallya
was declared bankrupt by the English High Court pursuant to a
bankruptcy petition presented by a consortium of Indian banks. Diageo
and the relevant members of its group have informed the Trustee in
Bankruptcy of their position as creditors in the bankruptcy and have
engaged with the Trustee regarding their claims and the status of the
current proceedings. An appeal by Dr Mallya against his bankruptcy
(and an appeal by the bank consortium against orders made in the
course of the bankruptcy proceedings) are pending. In light of the
uncertainty posed by the ongoing bankruptcy proceedings, the trial of
Diageo\u2019s claim was initially relisted to take place in February 2024.
However, Dr Mallya\u2019s appeal against his bankruptcy and the banks\u2019
cross appeal will not now be heard until April 2024, and thus the trial of
Diageo\u2019s claim has been deferred from February 2024 until after those
appeals have been determined.
At this stage, it is not possible to assess the extent to which the
various ongoing proceedings related to the bankruptcy will affect the
remaining elements of the claims by Diageo and the relevant members
of its group.
Upon completion of an initial inquiry in April 2015 into past improper
transactions which identified references to certain additional parties and
matters, USL carried out an additional inquiry into these transactions
(Additional Inquiry) which was completed in July 2016. The Additional
Inquiry, prima facie, identified transactions indicating actual and
potential diversion of funds from USL and its Indian and overseas
subsidiaries to, in most cases, entities that appeared to be affiliated or
associated with Dr Mallya. All amounts identified in the Additional
Inquiry have been provided for or expensed in the financial statements
of USL or its subsidiaries in the respective prior periods. USL has filed
recovery suits against relevant parities identified pursuant to the
Additional Inquiry.
Further, at this stage, it is not possible for the management of USL to
estimate the financial impact on USL, if any, arising out of potential non-
compliance with applicable laws in relation to such fund diversions.
(d) Other matters in relation to USL
In respect of the Watson backstop guarantee arrangements, the
Securities and Exchange Board of India (SEBI) issued a notice to Diageo
on 16 June 2016 that if there is any net liability incurred by Diageo (after
any recovery under relevant security or other arrangements, which
matters remain pending) on account of the Watson backstop
guarantee, such liability, if any, would be considered to be part of the
price paid for the acquisition of USL shares under the SPA which formed
part of the Original USL Transaction and that, in that case, additional
equivalent payments would be required to be made to those
shareholders (representing 0.04% of the shares in USL) who tendered in
the open offer made as part of the Original USL Transaction. Diageo
believes that the Watson backstop guarantee arrangements were not
part of the price paid or agreed to be paid for any USL shares under the
Original USL Transaction and that therefore SEBI's decision was not
consistent with applicable law, and Diageo appealed against it before
the Securities Appellate Tribunal, Mumbai (SAT). On 1 November 2017,
SAT issued an order in respect of Diageo\u2019s appeal in which, amongst
other things, it observed that the relevant officer at SEBI had neither
considered Diageo\u2019s earlier reply nor provided Diageo with an
opportunity to be heard, and accordingly directed SEBI to pass a fresh
order after giving Diageo an opportunity to be heard. Following SAT\u2019s
order, Diageo made its further submissions in the matter, including at a
personal hearing before a Deputy General Manager of SEBI. On 26
June 2019, SEBI issued an order reiterating the directions contained in its
previous notice dated 16 June 2016. As with the previous SEBI notice,
Diageo believes that SEBI's latest order is not consistent with applicable
law. Diageo appealed against this order before SAT and, after a
hearing in March 2023, SAT allowed Diageo\u2019s appeal on 26 July 2023.
Accordingly, SEBI\u2019s order dated 26 June 2019 stands quashed. Under
applicable law, SEBI is entitled to file an appeal against SAT\u2019s order
before the Supreme Court of India. Therefore, pending any appeal
which may be filed by SEBI, there can be no certainty as to its outcome
or the timeframe within which any such appeal would be concluded.
(e) USL\u2019s dispute with IDBI Bank Limited
Prior to the acquisition by Diageo of a controlling interest in USL, USL
had prepaid a term loan of INR 6,280 million (\u00a360 million) taken
through IDBI Bank Limited (IDBI), an Indian bank, which was secured on
certain fixed assets and brands of USL, as well as by a pledge of certain
shares in USL held by the USL Benefit Trust (of which USL is the sole
beneficiary). The maturity date of the loan was 31 March 2015. IDBI
disputed the prepayment, following which USL filed a writ petition in
November 2013 before the High Court of Karnataka (the High Court)
challenging the bank\u2019s actions.
Following the original maturity date of the loan, USL received notices
from IDBI seeking to recall the loan, demanding a further sum of INR
459 million (\u00a34 million) on account of the outstanding principal,
accrued interest and other amounts, and also threatening to enforce the
security in the event that USL did not make these further payments.
Pursuant to an application filed by USL before the High Court in the writ
proceedings, the High Court directed that, subject to USL depositing
such further amount with the bank (which amount was duly deposited
by USL), the bank should hold the amount in a suspense account and
not deal with any of the secured assets including the shares until
disposal of the original writ petition filed by USL before the High Court.
On 27 June 2019, a single judge bench of the High Court issued an
order dismissing the writ petition filed by USL, amongst other things, on
the basis that the matter involved an issue of breach of contract by USL
and was therefore not maintainable in exercise of the court\u2019s writ
jurisdiction. USL filed an appeal against this order before a division
bench of the High Court, which on 30 July 2019 issued an interim order
directing the bank to not deal with any of the secured assets until the
next date of hearing. On 13 January 2020, the division bench of the
High Court admitted the writ appeal and extended the interim stay. This
appeal is currently pending. Based on the assessment of USL\u2019s
management supported by external legal opinions, USL continues to
believe that it has a strong case on the merits and therefore continues to
believe that the secured assets will be released to USL and the aforesaid
amount of INR 459 million (\u00a34 million) remains recoverable from IDBI.
(f) Tax
The international tax environment has seen increased scrutiny and rapid
change over recent years bringing with it greater uncertainty for
multinationals. Against this backdrop, Diageo has been monitoring
developments and continues to engage transparently with the tax
authorities in the countries where Diageo operates to ensure that the
group manages its arrangements on a sustainable basis.
The group operates in a large number of markets with complex tax
and legislative regimes that are open to subjective interpretation, and
for which tax audits can take several years to resolve. In the context of
these operations, it is possible that tax exposures which have not yet
materialised (including those which could arise as a result of tax
assessments) may result in losses to the group. In the circumstances
where tax authorities have raised assessments, challenging
interpretations which may lead to a possible material outflow, these
have been included as contingent liabilities. Where the potential tax
exposures are known to us and have not been assessed, the group
considers disclosure of such matters taking into account their size and
nature, relevant regulatory requirements and potential prejudice of the
future resolution or assessment thereof.
Diageo has a large number of ongoing tax cases in Brazil and India.
Since assessing an accurate value of contingent liabilities in these
markets requires a high degree of judgement, contingent liabilities are
disclosed on the basis of the current known possible exposure from tax
assessment values. While not all of these cases are individually
significant, the current aggregate known possible exposure from tax
assessment values is up to approximately \u00a3616 million for Brazil and up
to approximately \u00a390 million for India. The group believes that the
likelihood that the tax authorities will ultimately prevail is lower than
probable but higher than remote. Due to the fiscal environment in Brazil
and in India, the possibility of further tax assessments related to the
same matters cannot be ruled out and the judicial processes may take
extended periods to conclude. Based on its current assessment, Diageo
believes that no provision is required in respect of these issues.
Payments were made under protest in India in respect of the periods
1\u00a0April 2006 to 31\u00a0March 2019 in relation to tax assessments where the
risk is considered to be remote or possible. These payments have to be
made in order to be able to challenge the assessments and as such
have been recognised as a receivable in the group's balance sheet. The
total amount of payments under protest recognised as a receivable as
at 30\u00a0June 2023 is \u00a3116\u00a0million (corporate tax payments of \u00a3104\u00a0million
and indirect tax payments of \u00a312\u00a0million).
(g) Other disputes
On 31 May 2023, a complaint against Diageo North America, Inc (DNA)
was filed in the Supreme Court of New York by Combs Wine and Spirits
LLC (an entity associated with Mr Sean Combs) alleging, inter alia,
breach of contract in respect of a joint venture agreement related to
DeLe\u00f3n tequila. DNA has also served notice of material breaches and
termination to Mr Combs and his relevant associated entities of certain
agreements related to services provided by Mr Combs and these
entities in respect of C\u00eeroc, and notice of material breaches and an
intent to arbitrate in respect of the DeLe\u00f3n joint venture agreement.
Diageo categorically denies the allegations that have been made by Mr
Combs and his associated parties in the complaint and will defend itself
vigorously. Diageo will refrain from making any further disclosures given
the inherent uncertainties of these matters and the prejudicial nature
any such disclosures may have on the potential outcomes related
thereto or other associated matters.
(h) Other
The group has extensive international operations and routinely makes
judgements on a range of legal, customs and tax matters which are
incidental to the group's operations. Some of these judgements are or
may become the subject of challenges and involve proceedings, the
outcome of which cannot be foreseen. In particular, the group is
currently a defendant in various customs proceedings that challenge
the declared customs value of products imported by certain Diageo
companies. Diageo continues to defend its position vigorously in these
proceedings.
Save as disclosed above, neither Diageo, nor any member of the
Diageo group, is or has been engaged in, nor (so far as Diageo is
aware) is there pending or threatened by or against it, any legal or
arbitration proceedings which may have a significant effect on the
financial position of the Diageo group.
", "dimensions": { "concept": "ifrs-full:DisclosureOfContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-752": { "value": "
Accounting policies
Provision is made for the anticipated settlement costs of legal or
other disputes against the group where it is considered to be
probable that a liability exists and a reliable estimate can be
made of the likely outcome. Where it is possible that a settlement
may be reached or it is not possible to make a reliable estimate
of the estimated financial effect, appropriate disclosure is made
but no provision created.
Critical accounting judgements and estimates
Judgement is necessary in assessing the likelihood that a claim
will succeed, or a liability will arise, and an estimate to quantify
the possible range of any settlement. Due to the inherent
uncertainty in this evaluation process, actual losses may be
different from the liability originally estimated. The group may be
involved in legal proceedings in respect of which it is not
possible to make a reliable estimate of any expected settlement.
In such cases, appropriate disclosure is provided but no
provision is made and no contingent liability is quantified.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForContingentLiabilitiesAndContingentAssetsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-753": { "value": "
20. Commitments
(a) Capital commitments
Commitments for expenditure on intangibles and property, plant and
equipment not provided for in these consolidated financial statements
are estimated at \u00a3599 million (2022 \u2013 \u00a3399 million; 2021 \u2013 \u00a3263 million).
(b) Other commitments
The future minimum lease rentals payable in the year ended 30 June
2023 for short-term leases and leases of low-value assets are estimated
at \u00a336\u00a0million (2022 \u2013 \u00a313\u00a0million; 2021 \u2013 \u00a311 million). The total future
cash outflows for leases that had not yet commenced, and not
recognised as lease liabilities at 30 June 2023, are estimated at \u00a311
million (2022 \u2013 \u00a311 million; 2021 \u2013 \u00a3132 million).
", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-754": { "value": "
21. Related party transactions
Transactions between the group and its related parties are made on
terms equivalent to those that prevail in arm\u2019s length transactions.
(a) Subsidiaries
Transactions between the company and its subsidiaries are eliminated
on consolidation and therefore are not disclosed. Details of the principal
group companies are given in note 22.
(b) Associates and joint ventures
Sales and purchases to and from associates and joint ventures are
principally in respect of premium drinks products but also include the
provision of management services.
Transactions and balances with associates and joint ventures are set
out in the table below:
2023
2022
2021
\u00a3 million
\u00a3 million
\u00a3 million
Income statement items
Sales
10
11
8
Purchases
13
31
23
Balance sheet items
Group payables
2
2
5
Group receivables
1
2
1
Loans payable
\u2014
\u2014
9
Loans receivable
197
175
108
Cash flow items
Loans and equity contributions, net
93
66
38
Other disclosures in respect of associates and joint ventures are
included in note 6.
(c) Key management personnel
The key management of the group comprises the Executive and Non-
Executive Directors, the members of the Executive Committee and the
Company Secretary. They are listed under \u2018Board of Directors and
Company Secretary\u2019 and \u2018Executive Committee\u2019.
2023
2022
2021
\u00a3 million
\u00a3 million
\u00a3 million
Salaries and short-term employee benefits
11
10
9
Annual incentive plan
6
13
13
Non-Executive Directors\u2019 fees
1
1
1
Share-based payments(1)
12
19
12
Post employment benefits
2
2
1
Termination benefits
\u2014
\u2014
2
32
45
38
(1)Time-apportioned fair value of unvested options and share awards.
Non-Executive Directors do not receive share-based payments or post
employment benefits.
There were no transactions with these related parties during the year
ended 30 June 2023 on terms other than those that prevail in arm\u2019s
length transactions.
(d) Pension plans
In October 2022, Diageo plc provided an interim credit facility to
Diageo Pension Trust Limited, consisting of \u00a3850\u00a0million for the Diageo
Pension Scheme, to support temporary liquidity challenges until 29
December 2022. In December 2022, the maturity date was extended to
29 June 2023. The facility amount was reduced on 22 May 2023 to
\u00a3350\u00a0million and on 14 June 2023 the maturity date was extended to 11
October 2023. The facility was subsequently cancelled on 25 July 2023.
The Diageo pension plans are recharged with the cost of
administration services provided by the group to the pension plans and
with professional fees paid by the group on behalf of the pension plans.
The total amount recharged for the year was \u00a30.1 million (2022 \u2013 \u00a30.1
million; 2021 \u2013 \u00a30.1 million).
(e) Directors\u2019 remuneration
2023
2022
2021
\u00a3 million
\u00a3 million
\u00a3 million
Salaries and short-term employee benefits
3
3
2
Annual incentive plan
2
4
4
Non-Executive Directors' fees
1
1
1
Share option exercises(1)
\u2014
4
\u2014
Shares vesting(1)
4
3
1
Post employment benefits
1
\u2014
\u2014
11
15
8
(1)Gains on options realised in the year and the benefit from share awards, calculated by
using the share price applicable on the date of exercise of the share options and
release of the awards.", "dimensions": { "concept": "ifrs-full:DisclosureOfRelatedPartyExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-755": { "value": "
(c) Key management personnel
The key management of the group comprises the Executive and Non-
Executive Directors, the members of the Executive Committee and the
Company Secretary. They are listed under \u2018Board of Directors and
Company Secretary\u2019 and \u2018Executive Committee\u2019.
2023
2022
2021
\u00a3 million
\u00a3 million
\u00a3 million
Salaries and short-term employee benefits
11
10
9
Annual incentive plan
6
13
13
Non-Executive Directors\u2019 fees
1
1
1
Share-based payments(1)
12
19
12
Post employment benefits
2
2
1
Termination benefits
\u2014
\u2014
2
32
45
38
(1)Time-apportioned fair value of unvested options and share awards.
Non-Executive Directors do not receive share-based payments or post
employment benefits.
There were no transactions with these related parties during the year
ended 30 June 2023 on terms other than those that prevail in arm\u2019s
length transactions.
(e) Directors\u2019 remuneration
2023
2022
2021
\u00a3 million
\u00a3 million
\u00a3 million
Salaries and short-term employee benefits
3
3
2
Annual incentive plan
2
4
4
Non-Executive Directors' fees
1
1
1
Share option exercises(1)
\u2014
4
\u2014
Shares vesting(1)
4
3
1
Post employment benefits
1
\u2014
\u2014
11
15
8
(1)Gains on options realised in the year and the benefit from share awards, calculated by
using the share price applicable on the date of exercise of the share options and
release of the awards.", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutKeyManagementPersonnelExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-756": { "value": "
22. Principal group companies
The companies listed below include those which principally affect the profits and assets of the group. The operating companies listed below may
carry on the business described in the countries listed in conjunction with their subsidiaries and other group companies.
Country of
incorporation
Country of operation
Percentage of
equity owned(1)
Business description
Subsidiaries
Diageo Ireland Unlimited Company
Ireland
Worldwide
100%
Production, marketing and distribution of premium drinks
Diageo Great Britain Limited
England
Great Britain
100%
Marketing and distribution of premium drinks
Diageo Scotland Limited
Scotland
Worldwide
100%
Production, marketing and distribution of premium drinks
Diageo Brands B.V.
Netherlands
Worldwide
100%
Marketing and distribution of premium drinks
Diageo North America, Inc.
United States
Worldwide
100%
Production, importing, marketing and distribution of premium drinks
United Spirits Limited(2)
India
India
55.88%
Production, importing, marketing and distribution of premium drinks
Diageo Capital plc(3)
Scotland
United Kingdom
100%
Financing company for the group
Diageo Capital B.V.(3)
Netherlands
Netherlands
100%
Financing company for the group
Diageo Finance plc(3)
England
United Kingdom
100%
Financing company for the group
Diageo Investment Corporation
United States
United States
100%
Financing company for the US group
Mey \u0130\u00e7ki Sanayi ve Ticaret A.\u015e.
Turkey
Turkey
100%
Production, marketing and distribution of premium drinks
Associates
Mo\u00ebt Hennessy, SAS(4)
France
France
34%
Production, marketing and distribution of premium drinks
(1)All percentages, unless otherwise stated, are in respect of holdings of ordinary share capital and are equivalent to the percentages of voting rights held by the group.
(2)Percentage ownership excludes 2.38% owned by the USL Benefit Trust.
(3)Directly owned by Diageo plc.
(4)French limited liability company.", "dimensions": { "concept": "ifrs-full:DisclosureOfSignificantInvestmentsInSubsidiariesExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } }, "f-757": { "value": "
23. Post balance sheet events
Starting 1 July 2023, in line with reporting requirements the functional currency of Diageo plc has changed from sterling to US dollar which is applied
prospectively. This is because the group's share of net sales and expenses in the US and other countries whose currencies correlate closely with the
US dollar has been increasing over the years, and that trend is expected to continue in line with the group's strategic focus. Diageo has also decided
to change its presentation currency to US dollar with effect from 1 July 2023, applied retrospectively, as it believes that this change will provide better
alignment of the reporting of performance with its business exposures.
Diageo will propose adopting new Articles of Association (New Articles) at the AGM to be held on 28 September 2023 which reflects the change
in the functional currency of Diageo plc and presentation currency of the group from sterling to US dollar. The New Articles shall, among other
things, empower the Board to declare and/or pay dividends in any currency or currencies and enable the Board to make provisions for
shareholders to receive dividends in a different currency to the currency in which dividends were declared. Subject to the approval of the New
Articles by shareholders at the AGM and commencing with the interim dividend that is expected to be declared in January 2024, Diageo\u2019s future
dividends will be declared in US dollar. Holders of ordinary shares will continue to receive their dividends in sterling but will have the option to elect
to receive it in US dollar. Holders of ADRs will continue to receive dividends in US dollar.
On 31 July 2023, the Board approved plans for a further return of capital programme of $1.0\u00a0billion to shareholders.
", "dimensions": { "concept": "ifrs-full:DisclosureOfEventsAfterReportingPeriodExplanatory", "language": "en", "entity": "scheme:213800ZVIELEA55JMJ32", "period": "2022-07-01T00:00:00/2023-07-01T00:00:00" } } } }