Notes to the Interim Statements

Basis of preparation

The condensed consolidated financial statements for the six months ended 30 June 2022 have been prepared in accordance with the AQSE Growth Market Rules and the recognition and measurement requirements of IFRSs as adopted for use in the UK.  The interim financial information should be read in conjunction with the Group's Annual Report and Financial Statements for the year ended 31 December 2021, which were prepared in accordance with IFRSs as adopted for use in the UK.

The comparative figures for the financial year ended 31 December 2021 are not the company's statutory accounts for that financial year.  Those accounts have been reported on by the company's auditor and delivered to the registrar of companies. The report of the auditor was (i) unqualified, and (ii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The Group's business activities together with the factors that are likely to affect its future developments, performance and position are set out in the Update.  The condensed consolidated financial statements were approved by the Board of Directors on 22 August 2022.

Going Concern

The Group holds appropriate cash reserves and no debt. The Group has concluded that its cash reserves will be sufficient to fund the Group's ongoing running costs together with any future investment in litigation required.

On this basis, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Directors have not identified any material uncertainties that would cast significant doubt on the ability of the Group to continue as a going concern. Therefore, the Directors continue to adopt the Going Concern basis of accounting in the preparation of the condensed consolidated financial statements.

Statement of Directors' responsibilities

The Directors confirm that, to the best of their knowledge, this set of condensed consolidated financial statements have been prepared in accordance with the AQSE Growth Market Rules.

Significant Accounting Policies

The accounting policies applied by the Group in this set of condensed consolidated financial statements are the same as those applied by the Group in its consolidated financial statements for the year ended 31 December 2021, except for the adoption of new standards and interpretations as of 1 January 2022.  None of these standards have any significant impact on the accounting policies, financial position or performance of the Group, as noted below:

•              Amendment to IFRS 1 and IAS 12, relating to deferred tax assets and liabilities arising from a single transaction.

•              Amendment to IFRS 16 relating to COVID-19 rent concessions.

•              Taxonomy changes to various standards and 2020 general improvements cycle.

•              Amendments to IAS 1, "Disclosure of Accounting Policies".

•              Amendment to IAS 8, "Definition of Accounting Estimates".

The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

In the process of applying the Group's accounting policies, management has made a number of judgements, and the preparation of condensed consolidated financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.

The key management judgements together with assumptions concerning the future and other key sources of estimation uncertainty at 30 June 2022 that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities during the current financial year are discussed below.

Estimate and judgement: Legal cases

The Group is involved with a number of actual or potential legal cases which, if successful, could result in material cash inflows to the Group.  The relative merits of these cases and the assessment of their likely outcome is highly judgemental by nature.  Similarly, management recognise the hurdle set by accounting standards to recognise an asset or disclose a contingent asset is very high and therefore neither is recognised or disclosed within these condensed consolidated financial statements.

Judgement: Recognition of liabilities arising under the Distribution Incentive Scheme

As discussed in the Directors' Remuneration Report on pages 16 to 18 of the 2021 Annual Report and Financial Statements the Group Chief Executive Officer is entitled to 5.43% of any distribution over and above a prescribed distribution hurdle ("DIS Hurdle") which was first and permanently exceeded during 2020.  No amounts have been recognised in these condensed consolidated financial statements in respect of any future payments as it is the judgement of management that the liability does not crystallise, and is materially uncertain, until Court approval has been obtained for the related capital reduction and cash return and furthermore, any distribution (and therefore incentive payment) is made at the discretion of the Group. The impact of this judgement is 5.43% of any future amounts distributed.

*At 31 December 2021

Legal expenses and tax related matters primarily relate to the costs of legal cases where the Group is the claimant or counter claimant.

Split:

Legal disputes and regulatory matters

It is the policy of the Group to provide for legal costs in cases where the Group is (or would be) the defendant. Defence costs are provided as the Group is committed to defending the actions.  Such costs are provided for at the mid-range of possible eventualities given the uncertainty of the outcome, this range is reassessed on a continuous basis. 

Provisions at 1 January 2022 and 30 June 2022 relate to the decision of the First Tier VAT Tribunal which found against the Group and that Watchstone' s subsidiary WTGIL Limited ("WTGIL") did not make any supplies of telematics devices or related services in the VAT periods 07/2014 to 07/2018.  Accordingly, WTGIL's appeal was dismissed. The Group has since appealed this decision.

In legal cases where the Group is the claimant (or counter claimant), costs are not provided as there is no obligation to proceed and the Group is not contractually committed to incur costs.  Similarly, in such legal cases where the Group is the claimant and has indemnified a third party, potential future costs associated with the indemnification are not provided for.

(Loss)/profit for the period from discontinued operations:

Litigation in relation to the historic activities of the Group is being pursued including claims against PricewaterhouseCoopers LLP, KPMG LLP and Aviva Canada Inc. These give rise to contingent assets, which are not recognised within the Condensed Financial Statements due to lack of certainty as to the outcome, despite an inflow of economic benefit being considered probable.

The Group routinely enters into a range of contractual arrangements in the ordinary course of business which can give rise to claims or potential litigation against Group companies.  It is the Group's policy to make specific provisions at the Condensed Statement of Financial Position date for all liabilities which, in the opinion of the Directors, are expected to result in a loss.