Page 59 - RFU Annual Report 2017

57
Financial Statements

Accounting policies relating to the The RFU has granted TEL exclusive £3m of the committed £28m was paid to
Parent only hospitality rights at the stadium for a the RFU during the year and has been
period of 40 years from May 2000. included in creditors – amounts falling
(x) Disclosure exemptions due after one year (see note 20). As the
The Parent has taken advantage of Under the terms of the shareholder aforementioned contractual milestones
the following disclosure exemptions agreement, Compass has the had not been met at the Balance
available under FRS 102: irrevocable right to exercise a put Sheet date, neither the remaining
option, at a stated price, on the contribution receivable from Compass
The requirements of section 7 occurrence of an option event, being Group nor the potential increased
“Statement of Cash Flows” and the closure of Twickenham, the purchase price payable for their 40%
section 3 “Financial Statement reduction of England matches at shareholding have been recognised in
Presentation” paragraph 3.17 (d); Twickenham or the RFU ceasing to these Financial Statements.
be the governing body of rugby in
The requirements of section 11 England. If no option event occurs Subsequent to year-end, the RFU
paragraphs 11.39 to 11.48A and before 30 June 2025, the agreement and Compass Group entered into
section 12 paragraphs 12.26 to 12.29; requires the RFU to buy the 40% new Shareholders’ and Share
Compass share of TEL for £55m. Transfer Agreements, terminating
The requirement of section 33 the existing arrangement. Under the
“Related Party Disclosures” The Directors consider it to be highly new agreement, Compass Group’s
paragraph 33.7. unlikely that an option event will occur contribution to the development of the
before 30 June 2025. East Stand will be in the form of an
3. Judgements in applying increase in the value of its investment
accounting policies and key sources FRS102 does not provide specific in TEL rather than a loan to the RFU.
of estimation uncertainty guidance for such arrangements. This will be effected by Compass
The RFU has considered available Group selling its 40% share in TEL to
The preparation of the financial guidance from various sources, the RFU for £49.7m and immediately
statements requires management including information contained repurchasing it for £78.5m. Similar to
to make judgements, estimates and in the International Financial the previous arrangement, Compass
assumptions that affect the amounts Reporting Standards (IFRS). The will be granted the irrevocable right to
reported for assets and liabilities at the IFRS Interpretations Committee exercise a put option, at a stated price,
Balance Sheet date, and the amounts (IFRIC), while making no formal on the occurrence of an option event. If
reported for revenues and expenses pronouncements, has indicated that no option event occurs before 30 June
during the year. Actual outcomes could in circumstances where there is an 2028, the contract requires the RFU to
differ from the estimates made but acquisition of a controlling interest in a purchase Compass Group’s 40% share
management seeks to mitigate this risk company with a purchase arrangement of TEL for £97m. As the agreement
by using all available information and over the non-controlling interest, then was concluded post year-end, it will be
experience to make the most accurate those arrangements should be treated accounted for in the 2017/18 accounts.
judgements possible. as a liability in the Balance Sheet.
Whilst the arrangement here does Professional Game Agreement
a) Critical judgements not arise in relation to an acquisition,
the RFU has concluded that the most During the year, the RFU entered into
The following judgements (apart from appropriate treatment to reflect the a new Professional Game Agreement
those involving estimates) have had the purchase of the non-controlling interest with Premiership Rugby Limited (PRL),
most significant impact on amounts in TEL is to record it as a liability. covering a period of eight years from
recognised in the financial statements. 2016/17 to 2023/24 and worth in excess
The liability is recognised in the Group of £200m. Under the agreement, the
Consolidation accounts in creditors due after more RFU will invest up to £112m across the
than one year (see note 20) in the first four seasons, provided that agreed
The Group has a number of quasi Balance Sheet with the other side of the conditions aimed at strengthening
subsidiaries which are registered entry being recorded in other reserves. domestic rugby and England
charities. As the charities do not international teams are met. The level
have share capital, the Group has RFU/Compass funding deal of investment for the remainder of the
determined that it has control of these agreement will, in part, be linked to
entities through representation on their During the year, the RFU entered into the financial performance of the RFU
Boards of Trustees and as such these a new agreement whereby Compass under a rugby revenue share approach,
entities are consolidated. Group committed to contributing allowing clubs to benefit from potential
£28m to the development of the East commercial growth of the game in
Twickenham Experience Ltd (TEL) Stand, pursuant to certain contractual future years. Payments specific to each
milestones being met. Once the entire contractual year of the agreement are
TEL is a joint venture between the RFU contribution has been received, the recognised in the period to which they
(owning 60%) and the Compass Group amount at which the RFU is required to relate once the agreed conditions have
(owning 40%), established to provide purchase Compass Group’s 40% share been met.
catering and hospitality services at of TEL on 30 June 2025 will increase by
Twickenham Stadium. £32m, from £55m to £87m.

Annual Report 2017