Allen & Overy LLP Annual Report and Financial Statements ... Report a… · 1 Financial statements Report to the Members The Board presents its report to the Members and the audited

Allen & Overy LLPAnnual Report and Financial Statements for the year ended 30 April 2013

1Financial statements

Report to the Members

The Board presents its report to the Members and the audited consolidated financial statements of Allen & Overy LLP for the year ended 30 April 2013.

Group structureThese financial statements consolidate the financial statements of Allen & Overy LLP and its subsidiary undertakings (the Group) for the year ended 30 April 2013. Allen & Overy is the collective name for an international legal practice comprising Allen & Overy LLP and its subsidiary undertakings. In this report, the terms ‘the Group’ and ‘Allen & Overy’ are interchangeable.

Allen & Overy LLP (the LLP) is a limited liability partnership registered in England and Wales with registered number OC306763. A list of Members and of the non-Members who are designated as partners is available for inspection at One Bishops Square, London E1 6AD, United Kingdom, which is also Allen & Overy LLP’s principal place of business and registered office. For more information, visit www.allenovery.com.

Partners/MembersThe term partner in this document is used to refer to a ‘Member’ of Allen & Overy LLP, or an employee or consultant with equivalent standing and qualifications, or an individual with equivalent status in one of Allen & Overy LLP’s subsidiary undertakings. The term Member in this document is used to refer only to a Member of Allen & Overy LLP.

Principal activityAllen & Overy’s principal activity is the provision of premium legal services. All results derive from continuing activities.

Business reviewMany of our clients are reaping the benefits of globalisation while also meeting the challenges it creates. As an international law firm, our overriding goal is to work alongside our clients as a trusted adviser, providing the support they need to thrive in this dynamic economic environment.

The developed economies struggled during the year ended 30 April 2013 as everyone continued to deleverage simultaneously. The level of acquisition and merger activity remained low, while countercyclical restructuring activity reduced. With some weakness in our traditional markets, we, like many of our clients, continued with our strategy of investing and expanded into new territories and work streams.

With 42 offices in 29 countries, our presence is amongst the largest of any legal practice. The newly established practices in Africa, Turkey, Indonesia and Vietnam performed well during the year as clients recognised our unique combination of high quality local advice combined with international knowledge and experience. We have been successful in integrating our new offices and practices, maintaining Allen & Overy’s collaborative culture to ensure that we combine our expertise and experience for the benefit of our clients. Nearly 70% of the work we perform continues to involve our offices in two or more jurisdictions.

Overall, we consider that achieving a £7 million increase in our level of turnover is a good result in challenging markets.

During the year, we continued to take action to reduce our overall cost base while benefiting from action taken in previous years. The relocation of some administrative support services from high cost centres to Northern Ireland is now providing substantial savings.

Total costs before the impact of foreign exchange were reduced by £20 million or 2%. Unfortunately, the foreign exchange movement of £19 million offset these savings. The net £1 million fall in costs, combined with the rise in revenue, caused the profit before tax to increase by 2% to £497 million.

Our expansion was achieved through a combination of lateral hires, partner transfers and internal promotions. The average number of full partners rose by 15 or 3% to 442. All activities and investments have been funded from the firm’s resources, with no external funding required.

The relentless pressure on price and the lack of market growth in many economies have not deterred our appetite for investing now as the globalisation of our client base and their search for quality continues.

ManagementThe development and implementation of policies and strategy and the co-ordination of management and overall direction of the Group are the responsibility of the Board (the Board). The Board comprises the following members:

David Morley Senior Partner (Designated Member) Wim Dejonghe Managing Partner (Designated Member) Cathy Bell-Walker (Designated Member) Simon Black – Tim House (Designated Member) Helge Schaefer (Designated Member) Jane Townsend (Designated Member) Boyan Wells (Designated Member)

The Senior Partner and Managing Partner and six independent partners are all elected by the partners for a period of four years. Further individuals may be co-opted onto the Board. The Board indirectly controls the subsidiary undertakings; however, some may have separate management structures which may include representatives of the Board. The Board meets several times a year and varies the location of Board meetings between offices around the world.

Overall responsibility for the key support functions rests with the directors. During the year, the directors were:

Richard Grove Marketing and Business Development Director Jason Haines Finance and Operations Director Genevieve Tennant Human Resources Director

Risk and ComplianceThe Board, the partners and the directors are also supported by the Business Protection Unit (formerly the Partnership Office) led by Andrew Clark (General Counsel) and Heather McCallum (Head of Risk and Compliance) and the Business Acceptance Unit led by Simon Fuge. Between them, they deal with client acceptance and risk management and compliance issues.


Report to the Members (continued)

IT BoardGiven the significance of information technology (IT) in the business, an IT Board, made up of partners and others drawn from across Allen & Overy, is responsible for ensuring that we receive value for our substantial investment in IT. The IT Board has ultimate responsibility for considering potential IT investments and prioritising investment decisions.

Audit CommitteeThe Audit Committee is appointed by the Board and consists of five partners and one independent external member. The Audit Committee is responsible for reviewing the Group’s financial risks. It reviews Allen & Overy’s financial statements and receives reports from the external auditors regarding the findings of the audit. It considers the scope, results and effectiveness of internal and external audits, including the review of the independence of the external auditors and their non-audit services and fees. It met five times during the year.

Risk CommitteeThe Risk Committee consists of eight partners, is appointed by the Board and met three times during the year. The Risk Committee’s role is to identify and assess the Group’s material risks, formulate and review the Group’s approach to risk, and support others with risk management responsibilities to improve the control and co-ordination of risk management across the Group. The Risk Committee liaises with other managers of legal and non-legal departments, and with relevant committees within the Group.

Principal risks and uncertaintiesThe principal risk and uncertainty that affects the financial results of the Group is the variability of the market for premium legal advice. Management seeks to match the Group’s resources to the expected demand while taking up opportunities to expand the Group’s market share and international reach.

The Group’s main financial risks relate to the non-recoverability of client receivables and foreign currency risk due to the international nature of the Group. These risks are commented upon in note 24.

Partners’ profit share, drawings and the subscription and repayment of partners’ capitalWhere a partner receives his/her remuneration as a director of a company, an employee or a consultant, this is shown under the heading of ‘Partners’ remuneration charged as an expense’ in the Consolidated Income Statement.

In the Consolidated Balance Sheet, the amounts shown as ‘Total partners’ other interests’ and ‘Amounts due from partners’ relate to amounts due to and from Members of Allen & Overy LLP or partners of its subsidiary undertakings. Balances due to partners remunerated as directors, employees or consultants are shown in ‘Other payables’ within ‘Trade and other payables’.

Partners subscribe the entire capital of Allen & Overy, which is provided interest free. Therefore, a proportion of the share of profits each partner receives can be considered as a return on capital employed. The amount of capital per profit sharing point (the Capital Unit) is agreed by the partners following a recommendation by the Board with reference to the expected future cash flows of the business. Capital is repaid to partners after they cease to be partners of Allen & Overy.

The amount of profit to be distributed to partners is determined by the Board after the year end.

Full partners usually draw a proportion of their expected profit share in 12 monthly instalments during the year in which the profit is earned, with the balance of their share of allocated profits, net of a tax retention, paid in 12 equal instalments starting in August of the subsequent financial year. All payments are made subject to the cash requirements of the business.

As partners draw a proportion of their expected profit share during the year before the profits for the year have been determined, divided and allocated to them, by the year end their personal current accounts with Allen & Overy are in deficit. The total of these accounts is shown in the Consolidated Balance Sheet within ‘Amounts due from partners’. Once the profit for the year has been divided and allocated, the partners’ current accounts are in surplus by the amount of their share of the year’s profits not already drawn.

In the majority of territories, the tax payable on a partner’s profit allocation is the personal liability of the partner. However, tax is retained from his/her profit entitlement, which is then paid to the relevant tax authorities on his/her behalf, with any excess being released and any shortfall being charged to the partner as appropriate. The balance of such retentions is included in the partners’ accounts, the total of which is shown within ‘Amounts due from partners’ in the Consolidated Balance Sheet’.

StaffAllen & Overy is committed to equal opportunities. Our people are diverse and are chosen for their experience, potential and personal attributes regardless of gender, sexual orientation, marital status, age, race, colour, nationality, ethnic origin, religion or disability.

Allen & Overy places considerable value on the views of its staff and has continued to keep them informed on matters affecting them and on the performance of Allen & Overy. This is achieved through daily updates on our intranet and a weekly newsletter emailed to everyone within the Group. There are also regular webcasts and briefings by the global Senior Partner and Managing Partner, regular office, practice group and sector team meetings and conference calls, and frequent associate forums across the business. We also publish special editions of our global staff magazine, Articles & Opinions, on key topics. Allen & Overy encourages the involvement of staff in its performance through a variety of bonus scheme arrangements, the values of which are linked to the profitability of the Group. Staff representatives are consulted regularly on a wide range of matters affecting their current and future interests, and an associate and counsel representative is invited to attend management meetings.

EnvironmentAllen & Overy continues to improve upon its strong environmental performance by enhancing its reporting capabilities and working in partnership with key stakeholders. Based upon available data and estimates for where data is unavailable, our 2012 global carbon footprint is c.36,900 tCO2 (using the Bishops Square office performance as the calculation standard). This equates to approximately 6.9 tCO2 per capita which compares well against other international law firms: the highest UK tCO2 per capita reported is 8.67 tCO2 (UK Legal Sector Alliance Report 2012) and the Australian international firm average is 7.82 tCO2 (Australia Legal Sector Alliance Report 2012). Our Madrid and Paris offices, in partnership with their landlords and contractors, achieved



Leadership in Energy and Environmental Design (LEED) and Haute Qualite Environnementale (HQE) certification, respectively. This adds to the number of our offices which are recognised as being environmentally efficient, including Amsterdam, Belfast, London, Sydney and Warsaw.

Allen & Overy continues to support the Legal Sector Alliance (LSA) and has increased its participation to include employee engagement and reporting verification sub-groups to strengthen the support we give to the wider legal industry.

Pro bono and community affairs Allen & Overy has one of the largest global footprints of any major law firm. With this comes an opportunity to make a difference around the world. We know that by behaving responsibly as a business we will retain the trust and loyalty of our clients, our staff and the wider community.

Our responsible business practices cover the volunteering we do through our pro bono and community programme, our charitable giving, our approach to diversity and inclusion, our efforts to manage and reduce our environmental impact, and how we work with our suppliers and other stakeholders.

We work hard to find solutions to some of society’s most pressing issues through large multi-jurisdictional projects and through the local programmes run in each office. That ranges from helping disadvantaged young people gain access to the world of work, to developing the rule of law in Rwanda and other emerging economies.

Over the last financial year, our lawyers recorded nearly 42,000 hours of pro bono volunteering time. This figure does not reflect the significant contribution and hours spent by our professional support staff.

As well as donating the time and skills of our people, Allen & Overy provides financial support to a wide range of organisations. Our charitable giving is managed by the Allen & Overy Global Foundation, which is funded by all of our partners globally.

We frequently work with clients and other law firms around the world, as well as charities, NGOs, community organisations and governments, to increase the impact we have. We focus on areas where our skills are best used, where our money can best be spent and where we are most able to make an impact.

We strive to achieve the same levels of excellence in these areas as in everything else we do.

Supplier payment policyAllen & Overy seeks to agree commercial payment terms with its suppliers and, provided performance is in accordance with the agreed terms, to make payment accordingly. The amount due to trade creditors at 30 April 2013 was equivalent to 45 days’ purchases (2012 – 36 days), based on the average daily amount invoiced by suppliers during the year.

Tax Contribution Allen & Overy makes significant financial contributions to the economies of the territories in which we practise through the payment of taxes by both the firm and its partners, and also by the collection of taxes from others. The total contributions are approximately £424 million.

Allen & Overy and its partners have paid, or will pay, taxes of over £242 million in relation to the year ended 30 April 2013. Globally, this amount comprises approximately £200 million of profit taxes, £31 million of employer’s social security contributions, £9 million of property taxes, and £2 million of other taxes.

In addition, Allen & Overy has collected approximately £182 million of taxes on behalf of governments of the territories in which we practise. £91 million was collected by way of payroll and social security deductions from remuneration paid to our staff and £91 million of VAT, GST and similar taxes was collected from clients.

FinancingAllen & Overy is financed through a combination of partners’ capital and undistributed profits (including tax retentions). As shown in note 22, total partners’ capital within Allen & Overy has increased during the year by £4 million to £149 million.

Borrowing facilities arranged with a number of banks remain unused. At 1 May 2013, the Group had unused general bank overdraft facilities of £10 million and unused committed bank facilities of £150 million (note 15).

The Board is satisfied that the available facilities are more than sufficient to meet the expected peak cash requirements of the Group over the next 12 months.

Statement of Members’ responsibilities in respect of the financial statementsThe Members are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

The Companies Act 2006 as applied to limited liability partnerships by the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008 (the Regulations) requires the Members to prepare financial statements for each financial year. Under that law, the Members have elected to prepare the financial statements for the LLP and the Group in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law, as applied to limited liability partnerships, the Members must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the LLP, and of the profit or loss of the Group for that period. In preparing these financial statements, the Members are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and accounting estimates that are reasonable and prudent;

• state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements; and

• prepare the financial statements on a going concern basis unless it is inappropriate to presume that the LLP and Group will continue in business.



The Members are responsible for keeping adequate accounting records that are suffi cient to show and explain the LLP’s and Group’s transactions and disclose with reasonable accuracy at any time the fi nancial position of the LLP and the Group, and enable them to ensure that the fi nancial statements comply with the Companies Act 2006 as applied to limited liability partnerships by the Regulations. They are also responsible for safeguarding the assets of the LLP and the Group, and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Members are responsible for the maintenance and integrity of the Partnership’s website. Legislation in the United Kingdom governing the preparation and dissemination of fi nancial statements may diff er from legislation in other jurisdictions.

These responsibilities are exercised by the Board on behalf of the Members.

Statement on disclosure of information to auditorsIn so far as the Members are aware:

• there is no relevant audit information of which the LLP’s auditors are unaware; and

• the Members have taken all steps they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.

Approved by the partners and signed on their behalf on 29 July 2013 by:

David MorleySenior Partner


Independent auditors’ report to the Members of Allen & Overy LLP

We have audited the financial statements of Allen & Overy LLP (the LLP) and the financial statements of the LLP and its subsidiary undertakings (together the Group) for the year ended 30 April 2013 which comprise the Consolidated income statement, the Consolidated statement of comprehensive income, the Consolidated and Limited Liability Partnership balance sheets, the Consolidated and Limited Liability Partnership cash flow statements, the Consolidated and Limited Liability Partnership statements of changes in equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Respective responsibilities of members and auditorsAs explained more fully in the Statement of Members’ Responsibilities set out on pages 3 and 4, the Members are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the Members of the LLP as a body in accordance with the Companies Act 2006 as applied to limited liability partnerships by the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of whether the accounting policies are appropriate to the Group’s and the LLP’s circumstances and have been consistently applied and adequately disclosed: the reasonableness of significant accounting estimates made by the Members or management and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statementsIn our opinion the financial statements:

• give a true and fair view of the state of the Group’s and the LLP’s affairs as at 30 April 2013 and of the Group’s profit and the Group’s and the LLP’s cash flows for the year then ended;

• have been properly prepared in accordance with IFRSs as adopted by the European Union; and

• have been prepared in accordance with the requirements of the Companies Act 2006 as applied to limited liability partnerships by the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Companies Act 2006 as applied to limited liability partnerships requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the LLP, or returns adequate for our audit have not been received from branches not visited by us; or

• the financial statements are not in agreement with the accounting records and returns; or

• we have not received all the information and explanations we require for our audit.

Kate Wolstenholme Statutory Auditor for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors 1 Embankment Place London WC2N 6RH

29 July 2013


Consolidated income statementYear ended 30 April 2013

Notes2013

£m2012

£mTurnover 1,189.4 1,182.6Other income 22.9 20.2Revenue 1,212.3 1,202.8

Operating costsStaff costs 5 (438.6) (446.8)Depreciation, amortisation and impairment (31.9) (31.5)Other operating expenses (244.3) (238.4)

Operating profit 497.5 486.1Finance income 6 2.9 2.7Finance cost 6 (3.7) (2.8)

Profit before taxation 496.7 486.0Taxation 7 (9.9) (23.3)

Profit before partners’ remuneration and profit shares 486.8 462.7Partners’ remuneration charged as an expense (130.8) (118.0)

Profit for the financial year available for division among partners 356.0 344.7

Consolidated statement of comprehensive incomeYear ended 30 April 2013

Notes2013

£m2012

£mProfit for the financial year available for division among partners 356.0 344.7Other comprehensive income:Exchange gain/(loss) on translation of foreign operations 22.6 (25.8)Actuarial loss on defined benefit pension scheme 21 (11.5) (12.8)Other comprehensive income/(loss) for the year 11.1 (38.6)

Total comprehensive income for the year 22 367.1 306.1


Consolidated balance sheetAt 30 April 2013

NotesAt 30 April 2013

£mAt 30 April 2012

£mAssetsNon-current assetsIntangible assets 9 1.8 4.3Property, plant and equipment 10 114.0 120.5Investments 12 0.4 0.2Retirement benefi t surplus 21 – 4.6

116.2 129.6

Current assetsClient and other receivables 13 563.4 533.8Amounts due from partners 22 79.8 92.8Cash and cash equivalents 14 121.2 92.6

764.4 719.2Total assets 880.6 848.8

LiabilitiesCurrent liabilitiesTrade and other payables 15 (259.7) (246.8)Current tax liabilities (0.9) (19.0)Provisions 16 (12.0) (12.3)

(272.6) (278.1)

Non-current liabilitiesTrade and other payables 15 (26.4) (23.2)Provisions 16 (86.1) (85.5)Retirement benefi t obligations 21 (0.6) –Partners’ capital 22 (148.5) (144.5)

(261.6) (253.2)Total liabilities (534.2) (531.3)

Net assets 346.4 317.5

EquityPartners’ other reserves 313.0 306.7Translation reserve 33.4 10.8

346.4 317.5

Total partners’ interestsAmounts due from partners 22 (79.8) (92.8)Partners’ capital classed as a liability 22 148.5 144.5Total partners’ other interests 22 346.4 317.5

22 415.1 369.2

These fi nancial statements on pages 6 to 32 were approved by the partners and signed on their behalf on 29 July 2013 by:

David Morley Wim Dejonghe Jason HainesSenior Partner Managing Partner Finance Director

Allen & Overy LLPRegistered no. OC306763


Limited Liability Partnership balance sheetAt 30 April 2013

NotesAt 30 April 2013

£mAt 30 April 2012

£mAssetsNon-current assetsIntangible assets 9 1.8 4.3Property, plant and equipment 11 101.3 107.9Investments 12 0.7 0.3Retirement benefi t surplus 21 – 4.6

103.8 117.1

Current assetsClient and other receivables 13 510.8 510.4Amounts due from Members 22 51.0 55.0Cash and cash equivalents 14 91.9 75.8

653.7 641.2Total assets 757.5 758.3

LiabilitiesCurrent liabilitiesTrade and other payables 15 (236.3) (240.4)Current tax liabilities (0.1) (12.0)Provisions 16 (11.7) (11.8)

(248.1) (264.2)

Non-current liabilitiesTrade and other payables 15 (24.7) (22.0)Provisions 16 (85.9) (85.4)Retirement benefi t obligations 21 (0.6) –Members’ capital 22 (108.4) (122.8)

(219.6) (230.2)Total liabilities (467.7) (494.4)

Net assets 289.8 263.9

EquityMembers’ other reserves 259.2 251.3Translation reserve 30.6 12.6

289.8 263.9

Total Members’ interestsAmounts due from Members 22 (51.0) (55.0)Members’ capital classed as a liability 22 108.4 122.8Total Members’ other interests 22 289.8 263.9

22 347.2 331.7

These fi nancial statements on pages 6 to 32 were approved by the Members and signed on their behalf on 29 July 2013 by:

David Morley Wim Dejonghe Jason HainesSenior Partner Managing Partner Finance Director

Allen & Overy LLPRegistered no. OC306763


Consolidated cash flow statementYear ended 30 April 2013

Notes2013

£m2012

£mCash flows from operating activities Cash generated from operations 19 523.0 501.2Tax paid (28.3) (19.0)Net cash inflow from operating activities 494.7 482.2

Cash flows from investing activitiesPurchase of property, plant and equipment (20.1) (40.1)Purchase of investments (0.2) –Interest received 1.3 0.6Proceeds on disposal of property, plant and equipment 0.2 0.2Net cash used in investing activities (18.8) (39.3)

Cash flows from financing activitiesPartners’ capital introduced 14.0 17.4Capital repayments to partners (11.2) (12.6)Payments to and on behalf of partners (454.9) (440.4)Retirement benefits paid to former partners (5.4) (5.6)Interest paid (1.5) (1.3)Net cash used in financing activities (459.0) (442.5)

Net increase in cash and cash equivalents 16.9 0.4

Cash and cash equivalents at beginning of year 92.6 106.6Effects of foreign exchange rate changes 11.7 (14.4)

Cash and cash equivalents at end of year 121.2 92.6


Limited Liability Partnership cash flow statementYear ended 30 April 2013

Notes2013

£m2012

£mCash flows from operating activities Cash generated from operations 20 422.9 383.3Tax paid (17.6) (19.4)Net cash inflow from operating activities 405.3 363.9

Cash flows from investing activitiesPurchase of property, plant and equipment (15.6) (32.0)Purchase of investments (0.4) –Interest received 1.1 0.5Proceeds on disposal of property, plant and equipment 0.1 –Net cash used in investing activities (14.8) (31.5)

Cash flows from financing activitiesMembers’ capital introduced 10.9 32.1Capital repayments to Members (26.5) (11.5)Payments to and on behalf of Members (363.8) (339.1)Retirement benefits paid to former Members (5.4) (5.6)Interest paid (1.2) (1.1)Net cash used in financing activities (386.0) (325.2)

Net increase in cash and cash equivalents 4.5 7.2

Cash and cash equivalents at beginning of year 75.8 84.6Effects of foreign exchange rate changes 11.6 (16.0)

Cash and cash equivalents at end of year 91.9 75.8


Consolidated statement of changes in equityYear ended 30 April 2013

Equity 2013 Equity 2012

Other reserves £m

Translation reserve

£mTotal

£m

Other reserves

£m

Translation reserve

£mTotal

£m

Equity at 1 May 306.7 10.8 317.5 288.0 36.6 324.6

Profit for the financial year attributable to partners 356.0 – 356.0 344.7 – 344.7Differences on translation of foreign operations – 22.6 22.6 – (25.8) (25.8)Actuarial loss on pension scheme (11.5) – (11.5) (12.8) – (12.8)

Total comprehensive income for the year 344.5 22.6 367.1 331.9 (25.8) 306.1Profit allocated to partners (338.2) – (338.2) (313.2) – (313.2)Equity at 30 April 313.0 33.4 346.4 306.7 10.8 317.5

Limited Liability Partnership statement of changes in equityYear ended 30 April 2013

Equity 2013 Equity 2012

Other reserves £m

Translation reserve

£mTotal

£m

Other reserves

£m

Translation reserve

£mTotal

£m

Equity at 1 May 251.3 12.6 263.9 238.2 35.0 273.2

Profit for the financial year attributable to Members 302.2 – 302.2 289.5 – 289.5Differences on translation of foreign operations – 18.0 18.0 – (22.4) (22.4)Actuarial loss on pension scheme (11.5) – (11.5) (12.8) – (12.8)

Total comprehensive income for the year 290.7 18.0 308.7 276.7 (22.4) 254.3Profit allocated to Members (282.8) – (282.8) (263.6) – (263.6)Equity at 30 April 259.2 30.6 289.8 251.3 12.6 263.9


Notes to the financial statementsYear ended 30 April 2013

1. ACCOUNTING POLICIESBasis of accountingThese financial statements have been prepared on a going concern basis in accordance with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretation Committee (IFRIC) interpretations adopted for use in the European Union and issued and effective as at 30 April 2013, and with those parts of the Companies Act 2006 applicable to limited liability partnerships reporting under IFRSs. The financial statements have been prepared on the historical cost basis. The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Accounting standards, interpretations and amendments to published standards adopted in the year ended 30 April 2013There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning on or after 1 May 2012 that had a material impact on the Group.

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 May 2013, and they have not been applied in preparing these consolidated financial statements. None of these are expected to have a significant effect on the consolidated financial statements of the Group or the LLP.

Basis of preparationThese financial statements consolidate the financial statements of Allen & Overy LLP and its subsidiary undertakings (the Group) for the year ended 30 April 2013. Allen & Overy is the collective name for an international legal practice comprising Allen & Overy LLP and its subsidiary undertakings. In this report, the terms ‘the Group’ and ‘Allen & Overy’ are interchangeable.

The term partner in this document is used to refer to a ‘Member’ of Allen & Overy LLP, or an employee or consultant with equivalent standing and qualifications, or an individual with equivalent status in one of Allen & Overy LLP’s subsidiary undertakings. The term Member in these financial statements is used to refer only to a Member of Allen & Overy LLP.

Where a partner receives his/her remuneration as a director of a company, an employee or a consultant, this is shown under the heading ‘Partners’ remuneration charged as an expense’ in the Consolidated income statement.

No individual income statement is presented for Allen & Overy LLP as permitted by section 408 of the Companies Act 2006. The profit for the financial year available for division among Members within the financial statements of the parent undertaking, Allen & Overy LLP, was £302.2 million (2012 – £289.5 million).

Basis of consolidationThe consolidated financial statements incorporate the financial statements of Allen & Overy LLP and its subsidiary entities. Subsidiary entities are those entities controlled by Allen & Overy LLP, which may be branches, partnerships or separate corporate entities. Control exists when Allen & Overy LLP has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements of subsidiary entities are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Intra-group balances and transactions are eliminated in the consolidated financial statements.

TurnoverTurnover represents amounts chargeable to clients for professional services provided during the year including expenses but excluding sales tax. The Group only recognises turnover once services have been provided.

Services provided to clients which at the balance sheet date have not been billed have been recognised as turnover. Turnover recognised in this manner is based on an assessment of the fair value of services provided by the balance sheet date. Where the right to receive payment is contingent on factors outside the control of Allen & Overy, turnover is only recognised (over and above any agreed minimum fee) when the contingent event occurs. Unbilled revenue is included in client and other receivables.

Other incomeOther income consists of two separate income streams: operating lease rental income received from the sub lease of surplus office space, and subscriptions to information solutions provided through electronic formats to the over-the-counter derivatives market industry.

Property, plant and equipmentProperty, plant and equipment is stated at cost (original purchase price and construction costs), net of depreciation and any provision for impairment.

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying amount of the asset, and is recognised as income.


Notes to the financial statements (continued)Year ended 30 April 2013

Depreciation is provided to write off the cost, less the estimated residual value, of the relevant assets by equal instalments over their estimated useful economic lives, which are as follows:

Leasehold improvements The shorter of the period of the lease, the expected use of the property, and ten years Furniture, fixtures and fittings The shorter of five years and the expected use of the asset Computer equipment Two years Motor vehicles Five years

The assets’ residual values and useful economic lives are reviewed, and if necessary adjusted, at each balance sheet date.

Internally generated intangible assetsAn internally generated intangible asset is recognised only if all of the following conditions are met:

• an asset is created that can be identified;

• it is probable that the asset created will generate future economic benefits; and

• the development cost of the asset can be measured reliably.

Internally generated intangible assets are amortised on a straight-line basis over their useful lives, which are as follows:

Computer software The shorter of five years and the expected use of the asset

Computer software under development is not amortised. Amortisation starts from the date on which the software is available for use. If a decision is made to halt development, the cost is immediately expensed.

Where no internally generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred. Costs associated with maintaining computer software programs are recognised as an expense when incurred.

Impairment of property, plant and equipment and intangible assets At each balance sheet date, the Group reviews the carrying amount of its property, plant and equipment and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of any impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss recognised as an expense immediately.

InvestmentsInvestments are stated at cost less provision for impairment. Investments are considered to be impaired when their carrying value is greater than their estimated recoverable amount. Quoted and unquoted shares classified as held for trading are measured at fair value through the income statement.

Client and other receivablesClient and other receivables are initially recognised at fair value, and are subsequently reduced for estimated irrecoverable amounts. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor and default or delinquency in payments are considered to be indicators that the client receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the estimated future cash flows. The carrying amount of the asset is reduced through the use of a provision account, and the amount of the loss is recognised in the income statement within ‘Other operating expenses’. When a client receivable is written off, a credit note is issued which reduces turnover and the charge for doubtful receivables.

Cash and cash equivalentsCash and cash equivalents comprise cash in hand or demand deposits and other short-term highly liquid investments.

Trade and other payablesTrade and other payables are initially measured at fair value, and are subsequently reduced for discounts given by suppliers.

TaxationIn most locations, including the UK, the taxation payable on the profits of limited liability partnerships is the personal liability of the partners and hence is not shown in these financial statements. A retention from profit distributions is made to fund the taxation payments on behalf of partners. These retentions are included within ‘Amounts due from partners’.



The tax expense in the Consolidated income statement represents the sum of the current and deferred tax relating to the corporate subsidiaries and branches that are subject to tax based on their profits.

The Group’s liability for current tax is calculated using tax rates that have been enacted or substantially enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

The carrying amount of deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on the tax rates that have been enacted or substantially enacted by the balance sheet date in the relevant country. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Foreign currenciesThe individual financial statements of each of the Group’s operations are presented in the currency of the primary economic environment in which it operates (its functional currency).

Transactions denominated in currencies other than the functional currency of the operation are recorded at the rates of exchange ruling at the dates of the transactions. Monetary assets and liabilities not denominated in the functional currency at the balance sheet date are translated at the rates ruling at that date. Translation differences to functional currencies are dealt with in the income statement.

For the purpose of the consolidated financial statements, the results and financial position of each operation are expressed in Sterling, which is the functional currency of the largest branch of Allen & Overy LLP, and the presentation currency for the consolidated financial statements.

The results of operations where the functional currency is not Sterling are translated at the average rates of exchange for the period, and their balance sheets at the rates ruling at the balance sheet date. Differences arising on translation of the opening net assets and results of such operations are reported in the Consolidated statement of comprehensive income.

Partners’ capital denominated in currencies other than Sterling is translated at the rates ruling on the balance sheet date. Any translation differences are reported in the Consolidated statement of comprehensive income.

LeasesLeases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Group as lesseeOperating lease rentals are charged to the income statement in equal amounts over the lease term from the date on which the asset becomes available for use.

Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.

Group as lessorThe Group sublets certain parts of its office premises. Rental income from these operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease and any benefits payable as an incentive to enter into the operating lease are also spread on a straight line basis over the lease term. The rental income is included within other income.

ProvisionsProvisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at management’s best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material. The increase during the year in the discounted amount arising from the passage of time and the effect of any change in the discount rate is charged to the income statement as a finance cost.

Retirement benefit obligationsPayments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

For defined benefit schemes, the cost of providing benefits is measured on an actuarial basis using the projected unit credit method, carried out at each balance sheet date. Actuarial gains and losses are recognised in full in the period in which they occur in the Consolidated statement of comprehensive income.



The retirement benefit obligation recognised in the balance sheet represents the present value of the defined obligation as reduced by the fair value of the scheme assets. Any asset resulting from this calculation is limited to the present value of available refunds and reductions in future contributions to the scheme and disclosed as the retirement benefit surplus.

Partners’ and Members’ capital and reservesPartners are required to provide capital in proportion to the number of profit sharing points allocated to them. The value of the Capital Unit is assessed annually, with any changes becoming effective on 1 May.

Capital is repaid to partners after they cease to be partners of Allen & Overy. In the event of Allen & Overy LLP going into administration or being wound up, the partners’ capital within Allen & Overy LLP ranks after unsecured creditors who are not Members of Allen & Overy LLP.

Amounts due to partners whose remuneration is charged as an expense are included in ‘Other payables’, within ‘Trade and other payables’.

The translation reserve comprises all foreign exchange translation differences arising on the results and financial position of subsidiaries and overseas branches which do not report in the Group’s reporting currency.

Other reserves comprise principally undistributed profits arising in the current and previous periods available for distribution in the future.

2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTSThe preparation of consolidated financial statements under IFRS’s requires management to make estimates and assumptions that affect the reported amounts of turnover, expenses, assets and liabilities. The estimates and judgements are based on historical experience and other factors including expectations of future events that are believed to be reasonable and constitute management’s best judgement at the date of the financial statements. In the future, actual outcomes could differ from those estimates.

The key estimates and assumptions relate to the actuarial assumptions used in calculating the retirement benefit obligations, in particular relating to discount rate, inflation rate and mortality, provisions in respect of client claims, onerous property costs and debt impairment, and the fair value of unbilled revenue on client assignments. Further details are set out in each of the relevant accounting policies and the notes to the financial statements. Management will continue to review the assumptions used against actual experience and market data and adjustments will be made in future periods where appropriate.

3. PROFIT BEFORE TAXATION2013

£m2012

£mProfit before taxation is stated after charging/(crediting):

Depreciation of property, plant and equipment 29.4 29.0(Profit)/loss on sale of property, plant and equipment (0.1) 0.3Amortisation of intangible assets 2.5 2.5Net foreign exchange loss/(gain) 8.0 (10.6)Restructuring costs – staff 2.4 1.7



4. AUDITORS’ REMUNERATIONFees payable to PricewaterhouseCoopers LLP and their associates are shown below:

2013 £m

2012 £m

Fees payable to the LLP’s auditors for the audit of the LLP’s and the Group’s consolidated financial statements 0.3 0.3Fees payable to the LLP’s auditors and its associates for other services:• The audit of the LLP’s subsidiary undertakings pursuant to legislation 0.2 0.2• Other services pursuant to legislation 0.1 0.1• Taxation compliance services 1.3 1.3• Taxation advisory services 0.2 0.1• All other services 0.6 0.4

2.7 2.4

5. STAFF AND STAFF COSTSConsolidated

2013 No.

2012 No.

The average number of people employed during the year (excluding partners) was:Lawyers 2,296 2,258Support staff 2,332 2,307

4,628 4,565

Consolidated2013

£m2012

£mStaff costs incurred during the year were:Salaries (including staff bonus) 340.3 345.1Social security costs 30.5 30.6Pension costs 14.9 15.8Restructuring costs 2.4 1.7Other costs (such as staff development, recruitment, medical expenses and the cost of temporary staff) 50.5 53.6

438.6 446.8

6. FINANCE INCOME AND COSTS2013

£m2012

£mFinance incomeInterest receivable on bank deposits 1.3 0.6Net finance income on retirement benefits plan (note 21) 1.6 2.1

2.9 2.7

Finance costsInterest payable on bank loans and overdrafts (1.5) (1.3)Unwinding of and change in discount on provisions (note 16) (2.2) (1.5)

(3.7) (2.8)



7. TAXATION2013

£m2012

£mCurrent tax 9.9 23.3

In most locations, including the UK, income tax payable on the profits allocated to partners is the personal liability of the partners and hence is not shown in these financial statements.

In some other locations, the income tax payable on the allocation of profits to partners is the personal liability of the partners resident in that location but the element payable by the partners not resident in that location is the liability of Allen & Overy LLP. Only the latter amounts are reflected in these financial statements.

2013 £m

2012 £m

Profit before taxation 496.7 486.0Less: Amounts subject to personal tax (436.6) (432.2)Profits subject to taxation 60.1 53.8

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the average UK corporation tax rate applicable to profits of the Group as follows:

2013 £m

2012 £m

Profits subject to tax 60.1 53.8At UK corporation tax of 24% (2012 – 26%) 14.4 13.9Tax effects of:Different tax rates and bases in other jurisdictions 5.6 4.6Unrelieved losses 1.3 4.8Adjustment in respect of prior years (11.4) –Current year charge for the year 9.9 23.3



8. PARTNERS’ SHARE OF PROFITSThe Board determines the amount of profits to be distributed after the financial statements have been finalised and approved by the partners. These distributable profits are then divided among the partners in accordance with agreed profit sharing arrangements.

On promotion to partnership, remuneration is initially a fixed prior share of profits plus a profit related bonus. Thereafter, most partners, referred to as full partners, receive 20 profit sharing points, rising by two points every year to a maximum of 50 points. The profit distribution will range from £627,000 for a partner with 20 profit sharing points to £1,566,000 for a partner with 50 profit sharing points (2012 – £640,000 to £1,601,000). The highest paid partner, excluding retirement payments, payments for tax equalisation and expatriate arrangements, will receive £1,566,000 (2012 – £1,601,000).

Profits payable to partners as directors of companies, employees or consultants, and amounts agreed between Allen & Overy and leaving partners, are charged as an expense to the income statement.

Profits are allocated on a gross basis before income tax charges, which are mainly the personal liability of the individual partners. Partners do not receive any interest on their capital contributions or any remuneration other than their share of the profits.

2013 No.

2012 No.

Average number of partners 525 512Average number of full partners 442 427

2013 £m

2012 £m

Profit before taxation 496.7 486.0Profits allocated to partners who are not full partners (32.3) (34.9)

464.4 451.1Average profit per full partner 1.1 1.1

9. INTANGIBLE ASSETSConsolidated and Limited

Liability Partnership2013

£m2012

£mInternally generated IT softwareCostAt 1 May 18.9 18.9Additions – –At 30 April 18.9 18.9

Accumulated amortisationAt 1 May 14.6 12.1Charge for year 2.5 2.5At 30 April 17.1 14.6Net book valueAt 30 April 1.8 4.3



10. PROPERTY, PLANT AND EQUIPMENT – CONSOLIDATEDLeasehold

improvements £m

Furniture, fixtures and fittings

£m

Computer equipment

£m

Motor vehicles

£mTotal

£mCostAt 1 May 2011 189.3 49.1 67.2 0.3 305.9Currency translation adjustments (2.9) (2.0) (1.2) – (6.1)Additions 25.1 9.1 6.2 – 40.4Disposals (10.4) (2.2) (3.4) – (16.0)At 1 May 2012 201.1 54.0 68.8 0.3 324.2

Currency translation adjustments 3.0 1.4 1.2 – 5.6Additions 11.4 2.7 7.0 0.1 21.2Disposals (2.6) (0.6) (2.0) (0.1) (5.3)At 30 April 2013 212.9 57.5 75.0 0.3 345.7

Accumulated depreciationAt 1 May 2011 95.9 40.1 59.3 0.3 195.6Currency translation adjustments (2.3) (1.7) (1.3) – (5.3)Charge for year 17.9 4.7 6.4 – 29.0Disposals (10.1) (2.1) (3.4) – (15.6)At 1 May 2012 101.4 41.0 61.0 0.3 203.7

Currency translation adjustments 1.8 1.0 1.1 – 3.9Charge for year 18.4 4.2 6.8 – 29.4Disposals (2.6) (0.6) (2.0) (0.1) (5.3)At 30 April 2013 119.0 45.6 66.9 0.2 231.7

Net book valueAt 30 April 2013 93.9 11.9 8.1 0.1 114.0At 30 April 2012 99.7 13.0 7.8 – 120.5

Fixtures and fittings includes the following amounts where the Group is a lessee under a finance lease:2013

£m2012

£mCost – capitalised finance leases 0.2 0.2Accumulated depreciation (0.1) (0.1)Net book value 0.1 0.1

Computer equipment includes the following amounts where the Group is a lessee under a finance lease:2013

£m2012

£mCost – capitalised finance leases 0.1 –Accumulated depreciation – –Net book value 0.1 –



11. PROPERTY, PLANT AND EQUIPMENT – LIMITED LIABILITY PARTNERSHIPLeasehold

improvements £m

Furniture, fixtures and fittings

£m

Computer equipment

£m

Motor vehicles

£mTotal

£mCostAt 1 May 2011 170.0 36.3 54.9 0.1 261.3Currency translation adjustments (1.8) (1.1) (0.8) – (3.7)Additions 21.7 6.9 3.7 – 32.3Disposals (9.8) (1.8) (3.0) – (14.6)At 1 May 2012 180.1 40.3 54.8 0.1 275.3

Currency translation adjustments 2.2 0.8 0.6 – 3.6Additions 9.5 2.0 5.1 – 16.6Disposals (0.6) (0.1) (1.1) – (1.8)At 30 April 2013 191.2 43.0 59.4 0.1 293.7

Accumulated depreciationAt 1 May 2011 81.4 30.2 48.5 0.1 160.2Currency translation adjustments (1.5) (1.1) (0.9) – (3.5)Charge for year 16.4 3.5 5.2 – 25.1Disposals (9.6) (1.8) (3.0) – (14.4)At 1 May 2012 86.7 30.8 49.8 0.1 167.4

Currency translation adjustments 1.1 0.6 0.5 – 2.2Charge for year 16.9 2.9 4.8 – 24.6Disposals (0.6) (0.1) (1.1) – (1.8)At 30 April 2013 104.1 34.2 54.0 0.1 192.4

Net book valueAt 30 April 2013 87.1 8.8 5.4 – 101.3At 30 April 2012 93.4 9.5 5.0 – 107.9

Fixtures and fittings includes the following amounts where the LLP is a lessee under a finance lease:2013

£m2012

£mCost – capitalised finance leases 0.2 0.2Accumulated depreciation (0.1) (0.1)Net book value 0.1 0.1

Computer equipment includes the following amounts where the LLP is a lessee under a finance lease:2013

£m2012

£mCost – capitalised finance leases 0.1 –Accumulated depreciation – –Net book value 0.1 –



12. INVESTMENTSAllen & Overy LLP has significant investments in the following entities:

Country of incorporation/ registration Activity

Proportion of ordinary shares or ownership

Allen & Overy (Asia) Pte Ltd Singapore Supply of legal services 100%Allen & Overy (Hong Kong) Ltd Hong Kong Service company 100%Allen & Overy Asian Shared Services (Pte) Ltd Singapore Service company 100%Allen & Overy Legal Services England & Wales Supply of legal services 100%Allen & Overy Service Company Ltd England & Wales Service company 100%Allen & Overy Services Italy s.r.l. Italy Service company 100%Allen & Overy Servicos de Consultoria Limitada Brazil Service company 100%Allen & Overy (SSF) Ltd England & Wales Service company 100%Allen & Overy (Holdings) Ltd England & Wales Supply of legal services 100%

Only subsidiary undertakings whose results or financial position, in the opinion of management, principally affected the Group’s and/or Limited Liability Partnership’s financial statements have been disclosed as permitted by section 410(2) of the Companies Act 2006.

Allen & Overy LLP has branches in Belgium, the People’s Republic of China, France, Germany, Japan, the Netherlands, Singapore, the United Arab Emirates, the United Kingdom, and the United States of America.

Allen & Overy LLP has the power to exercise, or actually exercises, dominant influence or control over a number of other entities and undertakings, the most significant of which are:

Country of incorporation/ registration Activity

Proportion of ordinary shares or ownership

Allen & Overy England & Wales Supply of legal services in Australia –Allen & Overy England & Wales Supply of legal services in Hong Kong –Allen & Overy England & Wales Supply of legal services in Luxembourg and Spain –Allen & Overy, A. Pędzich Sp.k. Poland Supply of legal services –Allen & Overy Bratislava, s.r.o. Slovak Republic Supply of legal services –Allen & Overy (Czech Republic) LLP England & Wales Supply of legal services –Allen & Overy Gaikokuho Kyodo Jigyo Horitsu Jimusho Japan Supply of legal services –Allen & Overy (Thailand) Co. Ltd Thailand Supply of legal services 49%Derivative Services LLP England & Wales Development and marketing of legal software –Morley Allen & Overy Iroda Hungary Supply of legal services –Naciri & Associés Allen & Overy S E P Morocco Supply of legal services –Spitalfields Projects LLP England & Wales Development and marketing of legal software –Studio Legale Associato Italy Supply of legal services –

Consolidated Limited Liability PartnershipOther investments

£mGroup interests

£mOther investments

£mTotal

£mCostAt 1 May 2011 0.3 0.2 0.1 0.3Disposals (0.1) – – –At 1 May 2012 0.2 0.2 0.1 0.3

Additions 0.2 0.4 – 0.4Disposals – – – –At 30 April 2013 0.4 0.6 0.1 0.7

Carrying amount at 30 April 2013 0.4 0.6 0.1 0.7Carrying amount at 30 April 2012 0.2 0.2 0.1 0.3

Other investments include quoted and unquoted shares which are classified as held for trading and are measured at fair value through the income statement. All other investments are stated at cost less provision for impairment.



13. CLIENT AND OTHER RECEIVABLES

Consolidated Limited Liability Partnership2013

£m2012

£m2013

£m2012

£mClient receivables 425.4 397.2 327.0 313.5Allowance for doubtful receivables (14.2) (18.0) (9.2) (12.2)

411.2 379.2 317.8 301.3

Unbilled revenue 96.9 93.0 74.4 70.8Amounts due from other Group undertakings – – 90.9 104.6Other receivables 29.1 37.0 5.9 12.7Prepayments 26.2 24.6 21.8 21.0

563.4 533.8 510.8 510.4

There is no difference between the carrying value of the consolidated or limited liability partnership’s client and other receivables and their fair value.

Movement in the allowance for doubtful receivablesConsolidated Limited Liability Partnership

2013 £m

2012 £m

2013 £m

2012 £m

At 1 May (18.0) (18.2) (12.2) (10.2)Currency translation adjustment (0.6) 0.7 (0.3) 0.1Provision utilised 6.8 5.6 3.9 3.3

(11.8) (11.9) (8.6) (6.8)Charged to the income statement (7.6) (12.3) (4.6) (9.0)Provision released 5.2 6.2 4.0 3.6At 30 April (14.2) (18.0) (9.2) (12.2)

The ageing of client receivables at the reporting date was:Consolidated Limited Liability Partnership

2013 £m

2012 £m

2013 £m

2012 £m

Not past due 137.3 138.6 128.4 125.4Past due 0-30 days 122.3 101.2 78.7 68.9Past due 31-120 days 94.8 94.4 69.3 71.2Past due greater than 120 days 56.8 45.0 41.4 35.8

411.2 379.2 317.8 301.3

The carrying amount of financial assets recorded in the financial statements, which is net of any impairment losses, represents the Group’s maximum exposure to credit risk. Financial assets include client and other receivables and cash. The Group does not hold collateral over these balances.



14. CASH AND CASH EQUIVALENTSConsolidated Limited Liability Partnership

2013 £m

2012 £m

2013 £m

2012 £m

Cash and cash equivalents 121.2 92.6 91.9 75.8

Cleared funds are monitored on a daily basis and surplus funds are placed on short-term deposit or invested in the money market.

There is no material difference between the book value of cash and cash equivalents and their fair values.

15. TRADE AND OTHER PAYABLESConsolidated Limited Liability Partnership

2013 £m

2012 £m

2013 £m

2012 £m

Trade payables 26.8 24.0 16.5 17.3Amounts due to other Group undertakings – – 15.5 25.9Employment and sales taxes 25.5 18.9 25.4 15.4Other payables 129.3 128.0 121.4 120.7Accruals 74.6 75.4 54.6 60.4Deferred rent 29.9 23.7 27.6 22.7

286.1 270.0 261.0 262.4

Consolidated Limited Liability Partnership2013

£m2012

£m2013

£m2012

£mIncluded in current liabilities 259.7 246.8 236.3 240.4Included in non-current liabilities 26.4 23.2 24.7 22.0

286.1 270.0 261.0 262.4

There is no difference between the carrying value of the consolidated or limited liability partnership’s trade and other payables and their fair values.

Included within Other payables are gross finance lease liabilities of £0.2 million (2012 – £0.1 million).

Allen & Overy is financed through a combination of partners’ capital, undistributed profits, tax retentions and borrowing facilities arranged with a number of banks. The Board reviews the projected financing requirements annually when agreeing the Group’s budget and, based on this review, sets the value of the Capital Unit. The cash flow forecast for the entire Group is updated regularly and compared with the budget, with any significant variance being reported to the Board.

The borrowing facilities arranged vary from overdraft facilities to cover short-term fluctuations in timing of payments and receipts to loan facilities spanning several years. All borrowing facilities are arranged through Allen & Overy LLP. It is the Group’s policy to have in place short-term borrowing facilities that comfortably exceed forecast borrowing requirements for the following 12 months.

At 30 April 2013, Allen & Overy LLP had bank overdraft facilities of £10 million and committed bank loan facilities of £150 million (2012 – £150 million). At the balance sheet date, no amounts were outstanding.

The committed facilities expire as follows:£m

Between two and three years 50.0Between three and five years 100.0

150.0

The overdraft facility is repayable on demand.



15. TRADE AND OTHER PAYABLES (continued)Interest on short-term borrowings would be payable at floating rates linked to the base rate and its currency equivalent, while any amounts drawn down in respect of the longer-term borrowing facilities would incur interest at floating rates linked to LIBOR and the currency equivalent.

The financial liabilities of the Group which correspond to trade payables, employment and sales taxes, other payables and accruals as at 30 April 2013 amounted to £256.2 million (2012 – £246.3 million).

16. PROVISIONSProvision for annuitiesAllen & Overy LLP has conditional commitments to pay annuities to certain individuals who are either former partners of Allen & Overy or widows of those partners. The annuities are payable only out of future profits of Allen & Overy LLP on which they constitute a first allocation of profits. Further entitlement to these arrangements was withdrawn in 1994. An actuarial valuation of the net present value of the expected liability for the future payments to these individuals is obtained at each year end and any change to the provision necessary is recorded in the income statement.

The provision for annuities is subject to actuarial adjustments and utilised over the life of the annuitants.

The assumptions used by the actuaries in the calculation of the provision are the same as those used in the valuation of the defined benefit pension scheme, as set out in note 21.

Provision for early retirement of partners/former partnersPartners satisfying certain conditions may elect to take early retirement in exchange for payments, normally spread over five years. These payments are determined by the profits of future years. The present value of the best estimate of the expected liabilities for future payments under this scheme is provided in full in the year in which a partner elects to take early retirement, the charge being included in ‘Partners’ remuneration charged as an expense’ in the Consolidated income statement. Any subsequent changes in the provision for liabilities under this scheme arising from changes in financial estimates while the person is still a partner in Allen & Overy are charged or credited under this heading. Once the partner retires, any changes are recorded in ‘Other operating expenses’ in the income statement.

The provision for partners’/former partners’ payments has been made using an estimated level of profit for future years, based on a rolling average of the last three years. This provision has been discounted to the present value using a 2% discount factor. It is expected that the early retirement provision will be paid over the next seven years.



16. PROVISIONS (continued)Provision for onerous leases and dilapidationsFor leases on properties that have been vacated and are considered surplus, a provision has been recognised to the extent that the continuing rental obligations are not expected to be recovered through subletting. The leases to which this provision relates all expire by 2023.

The provision for dilapidations is in respect of property leases which contain a requirement for the premises to be returned to their original state prior to the conclusion of the lease term. The leases to which this provision relates all expire by the end of 2027.

These provisions have also been discounted to the present value using 4%.

Consolidated

Provision for annuities

£m

Provision for early retirement

of partners/former partners

£m

Provision for restructuring

£m

Provision for onerous leases

and dilapidations £m

Total 2013

£m

Total 2012

£mAt 1 May 28.3 24.7 1.4 43.4 97.8 96.2Currency translation adjustments – – – – – (0.6)Provision utilised (2.1) (4.0) (0.7) (5.8) (12.6) (18.4)

26.2 20.7 0.7 37.6 85.2 77.2Charged to the income statement – – 1.3 1.2 2.5 6.9Charge for the year• former partners – – – – – 0.5• current partners – 9.0 – – 9.0 8.1Unwind of discount on provision – 0.6 – 1.4 2.0 1.5Change of discount rate – 0.2 – – 0.2 –Actuarial adjustment (0.6) – – – (0.6) 3.9Provision released• former partners – (0.1) – – (0.1) –• current partners – (1.2) – – (1.2) (0.7)Charged to fixed assets – – – 1.1 1.1 0.4

(0.6) 8.5 1.3 3.7 12.9 20.6

At 30 April 25.6 29.2 2.0 41.3 98.1 97.8

2013 £m

2012 £m

Included in current liabilities 12.0 12.3Included in non-current liabilities 86.1 85.5

98.1 97.8



16. PROVISIONS (continued)Limited Liability Partnership

Provision for annuities

£m

Provision for early retirement

of partners/former partners

£m

Provision for restructuring

£m

Provision for onerous leases

and dilapidations £m

Total 2013

£m

Total 2012

£mAt 1 May 28.3 24.7 1.1 43.1 97.2 96.2Currency translation adjustments – – – – – (0.6)Provision utilised (2.1) (4.0) (0.6) (5.7) (12.4) (18.4)

26.2 20.7 0.5 37.4 84.8 77.2Charged to the income statement – – 1.2 1.2 2.4 6.5Charge for the year

• former partners – – – – – 0.5• current partners – 9.0 – – 9.0 8.1

Unwind of discount on provision – 0.6 – 1.4 2.0 1.5Change in discount rate – 0.2 – – 0.2 –Actuarial adjustment (0.6) – – – (0.6) 3.9Provision released

• former partners – (0.1) – – (0.1) –• current partners – (1.2) – – (1.2) (0.7)

Charged to fixed assets – – – 1.1 1.1 0.2(0.6) 8.5 1.2 3.7 12.8 20.0

At 30 April 25.6 29.2 1.7 41.1 97.6 97.2

2013 £m

2012 £m

Included in current liabilities 11.7 11.8Included in non-current liabilities 85.9 85.4

97.6 97.2

17. CAPITAL COMMITMENTSThe following amounts have been contracted for but not provided in the financial statements:

2013 £m

2012 £m

Property fit-out costs 0.9 3.9Computer, telecommunications and other equipment – 0.7

0.9 4.6



18. OPERATING LEASE COMMITMENTSConsolidated

2013 £m

2012 £m

Lease payments under operating leases recognised as an expense in the income statement for the year 91.1 93.5

Rent receivable from sub-leases recognised as Other Income in the income statement for the year 13.2 13.4

At 30 April 2013, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

Land & Buildings Other2013

£m2012

£m2013

£m2012

£mWithin one year 90.1 85.0 0.7 0.9Within two to five years 346.1 326.0 1.1 1.6In more than five years 531.5 537.4 0.2 –

967.7 948.4 2.0 2.5

At 30 April 2013, the Group had the following minimum amounts to be received under non-cancellable subleases for land and buildings, which fall due as follows:

Consolidated2013

£m2012

£mWithin one year 13.3 13.1Within two to five years 16.7 25.6In more than five years 2.5 2.1

32.5 40.8

19. RECONCILIATION OF PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIESConsolidated

2013 £m

2012 £m

Profit before taxation 496.7 486.0Adjustments for:Depreciation of property, plant and equipment 29.4 29.0Amortisation of intangible assets 2.5 2.5Net finance costs 0.8 0.1(Profit)/loss on disposal of property, plant and equipment (0.1) 0.3(Decrease)/increase in provisions (2.2) 1.5Operating cash flows before movement in working capital 527.1 519.4

Increase in receivables (17.1) (45.6)Increase in payables 13.0 27.4

Cash generated by operations 523.0 501.2



20. RECONCILIATION OF PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES

Limited Liability Partnership2013

£m2012

£mProfit before taxation 393.7 386.4Adjustments for:Depreciation of property, plant and equipment 24.6 25.1Amortisation of intangible assets 2.5 2.5Net finance costs 0.8 –(Profit)/loss on disposal of property, plant and equipment (0.1) 0.3(Decrease)/increase in provisions (2.0) 0.9Operating cash flows before movement in working capital 419.5 415.2

Decrease/(increase) in receivables 7.0 (49.4)(Decrease)/increase in payables (3.6) 17.5

Cash generated by operations 422.9 383.3

21. RETIREMENT BENEFIT OBLIGATIONSAllen & Overy LLP operates a pension scheme which includes a defined benefit section and a defined contribution section for its UK-based staff. The defined benefit section was closed to new entrants in 1998 and closed to future year accruals in 2007. The assets of the pension scheme are held separately from those of Allen & Overy LLP.

Employees in territories outside the United Kingdom are usually members of insured schemes into which Allen & Overy pays contributions. These are included in amounts shown under the ‘Defined contribution section and schemes’ heading below.

Defined contribution section and schemesThe cost of contributions to the defined contribution section of the UK pension scheme plus contributions to non-UK pension schemes included in the income statement for the year was £13.2 million (2012 – £15.0 million). The cost charged represents contributions payable to these schemes by the Group at rates specified in the rules of the plans.

Defined benefit sectionAll assets are stated at their fair value at 30 April 2013. The liabilities have been updated from the most recent actuarial valuation, as at 1 January 2012, by an independent qualified actuary from Aon Hewitt Limited.

The principal assumptions used were as follows:2013

%2012

%Discount rate 4.2 4.9Inflation 3.4 3.3Expected rate of increase in salaries 3.4 4.3Expected rate of increases in pensions in payment 3.4 3.3Expected return on equity assets 8.0 8.1Expected return on fixed interest assets 3.1 3.3Expected return on property assets 7.3 7.2Expected return on other assets 3.1 3.3Overall expected return on assets 5.6 5.8

The overall expected rate of return on scheme assets is a weighted average of the individual expected rates of return on each asset class.



21. RETIREMENT BENEFIT OBLIGATIONS (continued)The post-retirement mortality assumptions are based on standard mortality tables which allow for future improvements in life expectancy resulting in the following life expectancies:

2013 Years

2012 Years

Current pensioners at age 65 – Male 23.3 23.2Current pensioners at age 65 – Female 24.7 25.2Future pensioners at age 65 – Male 26.0 25.7Future pensioners at age 65 – Female 27.6 27.6

The amounts recognised in the balance sheets are as follows:2013

£m2012

£mFair value of scheme assets 151.1 132.2Present value of defined benefit obligations (151.7) (127.6)Retirement benefit (deficit)/surplus (0.6) 4.6

The amounts recognised in the income statement are as follows:2013

£m2012

£mInvestment income:Expected return on pension scheme assets 7.7 8.1Finance cost: Interest on pension scheme defined benefit obligations (6.1) (6.0)Net finance income for the year 1.6 2.1

Changes in the fair value of plan assets are as follows:2013

£m2012

£mFair value of scheme assets at start of the year 132.2 124.1Expected return on scheme assets 7.7 8.1Actuarial gain/(loss) on assets 8.0 (2.3)Contributions by employer 4.7 3.9Benefits paid (1.5) (1.6)Fair value of scheme assets at end of the year 151.1 132.2

Changes in the present value of the defined benefit obligations are as follows:2013

£m2012

£mPresent value of defined benefit obligations at start of the year (127.6) (112.7)Interest cost (6.1) (6.0)Changes in actuarial assumptions underlying the present value of the scheme liabilities (19.5) (10.5)Benefits paid 1.5 1.6Present value of defined benefit obligations at end of the year (151.7) (127.6)



21. RETIREMENT BENEFIT OBLIGATIONS (continued)The expected rate of return on each asset class is as follows:

2013 2012 2011Equities 8.0% 8.1% 8.1%Bonds 3.1% 3.3% 4.2%Property 7.3% 7.2% 7.8%Other 3.1% 3.3% 4.3%

The expected return on assets is based on a projection of long-term investment returns for each asset class. The calculation incorporates the expected return on risk-free investments and the historical risk premium associated with other invested assets. The expected return is stated net of the levy payable to the Pension Protection Fund.

The actual return on the scheme assets during the period was a £15.7 million gain (2012 – £5.8 million gain).

The allocation and market value of the scheme assets at the balance sheet date were as follows:2013

£m2012

£mEquities 72.2 62.5Bonds 59.9 52.2Property 6.7 6.6Other 12.3 10.9Present value of defined benefit assets at end of the year 151.1 132.2

The analysis of the actuarial gains and losses recognised in the Consolidated statement of comprehensive income is as follows:2013

£m2012

£mActuarial gains/(loss) on scheme assets 8.0 (2.3)Actuarial loss on scheme liabilities (19.5) (10.5)Total actuarial loss (11.5) (12.8)Cumulative amount of actuarial loss recognisedin the Consolidated statement of comprehensive income (16.3) (4.8)

The five-year history of experience adjustments is as follows:2013

£m2012

£m2011

£m2010

£m2009

£mFair value of scheme assets 151.1 132.2 124.1 111.8 89.0Present value of defined benefit obligation (151.7) (127.6) (112.7) (120.3) (101.6)(Deficit)/surplus (0.6) 4.6 11.4 (8.5) (12.6)

Experience gains/(loss) on assets 8.0 (2.3) 2.4 15.5 (11.5)Experience gains/(loss) arising on the scheme liabilities 4.1 (1.6) 0.8 5.0 1.3



21. RETIREMENT BENEFIT OBLIGATIONS (continued)Sensitivity analysisThe principal actuarial assumptions all have an effect on the IAS 19 accounting valuations. The following table shows the sensitivity of the value of the defined benefit obligations to changes in these assumptions:

Defined benefit obligation (increase)

£m0.25% decrease in the assumed discount rate (8.9)0.25% increase in expected rate of increase in salaries (9.0)0.25% increase in the assumed rate of inflation (0.4)One year increase in average life expectancy (4.5)

Future cash fundingThe most recent full actuarial valuation was as at 1 January 2012 and was completed on 28 February 2013 using the Projected Unit method by actuaries Aon Hewitt Limited. The expected contributions by the employer over the next 12 months amount to £5.0 million.

22. TOTAL PARTNERS’/MEMBERS’ INTERESTS Consolidated

Amounts due from partners

£m

Capital classified as a liability

£mEquity

£m

Total 2013

£m

Total 2012

£mTotal partners’ interests at 1 May (92.8) 144.5 317.5 369.2 380.4Total comprehensive income for the year – – 367.1 367.1 306.1Profit allocated to partners 338.2 – (338.2) – –Drawings and distributions (325.2) – – (325.2) (322.1)Capital introduced – 15.2 – 15.2 17.4Capital repaid – (11.2) – (11.2) (12.6)

(79.8) 148.5 346.4 415.1 369.2

Limited Liability PartnershipAmounts due

from Members £m

Capital classified as a liability

£mEquity

£m

Total 2013

£m

Total 2012

£mTotal Members’ interests at 1 May (55.0) 122.8 263.9 331.7 316.9Total comprehensive income for the year – – 308.7 308.7 254.3Profit allocated to Members 282.8 – (282.8) – –Drawings and distributions (278.8) – – (278.8) (260.1)Capital introduced – 12.1 – 12.1 32.1Capital repaid – (26.5) – (26.5) (11.5)

(51.0) 108.4 289.8 347.2 331.7

23. RELATED PARTY TRANSACTIONSThe key management personnel comprise the senior partner and managing partner, the heads of the main global practice groups and the support directors. The majority of partners in key management positions maintain significant client responsibilities. The share of the profit and the salaries awarded to these key management personnel for the year ended 30 April 2013 will amount to £10.3 million (2012 – £10.5 million).


24. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The management’s objective in managing financial risks is to ensure the long-term sustainability of the Group.

As the Group’s principal financial instruments comprise cash, client receivables and unbilled revenue, and other payables and accruals that arise directly from operations, the main risks are those that relate to credit in regard to receivables, the Group’s liquidity in relation to the payables and foreign currency risk.

Credit riskAlthough the Group has a policy of performing credit checks on all new clients, its main protection against a significant charge to its income statement for non-recoverability of a client receivable is its wide client base. The Group’s large client base of reputable corporations and entities is both geographically diverse and spread across different industry sectors. This ensures that no one client accounts for a significant element of the combined client receivables and unbilled revenue balance. Management regularly reviews the concentration of specific clients to assess whether the level of credit risk is acceptable.

2013 £m

2012 £m

Net client receivables 411.2 379.2Unbilled revenue 96.9 93.0Other receivables 29.1 37.0Cash 121.2 92.6

658.4 601.8

Liquidity riskIn terms of ability to meet obligations, whether trade creditors, other payables or accruals, the Group carefully monitors its cash flow against its projections. It has a policy of setting its capital and drawings policy to enable the Group’s cash funds to be sufficient to meet the Group’s obligations. The Group also maintains borrowing facilities to cover any unforeseen cash demands.

Foreign currency riskThe presentational currency of the Group is Sterling. However, with offices in many different countries, the Group’s operations are conducted in many different currencies. In addition, the Group is willing, at a client’s request, to invoice in a currency other than the functional currency of the location from which the bill is sent. The principal currencies, other than Sterling, to which the Group is exposed are the Euro and the U.S. Dollar, and other currencies that are linked to the U.S. Dollar.

The effect of foreign currency fluctuations having a material impact on each entity’s results is mitigated by the costs incurred by that entity being principally in the functional currency of the location. The Group does not hedge or enter into forward derivative transactions because of the cost of these instruments. However, it does retain currency cash balances which it monitors closely to ensure that the balances in each currency match the currency of the expected future payments.

The Group had the following net currency denominated financial instruments at 30 April:2013

£m2012

£mAustralian Dollar 14.9 10.7Euro 158.8 126.7Sterling 57.3 71.2U.S. Dollar (or currencies correlated to U.S. Dollar) 142.5 125.2Other 28.7 21.7Balance sheet exposure 402.2 355.5

The effect of foreign currency fluctuations on the conversion of the entities’ results into Sterling is borne by the partners as the profit for the year is determined in Sterling.

Partners based outside London receive their profit shares in Sterling, converted at their request into local currency with an internal protection mechanism equivalent to a cap and collar.


Documents

Allen & Overy LLP Annual Report and Financial Statements ... Report a… · 1 Financial statements Report to the Members The Board presents its report to the Members and the audited