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Revenue recognition is a key audit matter due to the:

•    naturę of the regulatory framework and billing process for the distribution of electricity and gas which adds complexity to our audit approach, in particular:

- determining approved tariff rates, which are used to bill customers for the distribution of electricity and gas. The Group's regulatory determinations are promulgated by regulatory bodies, are routinely revised, require judgement to interpret and apply and are subject to legał proceedings;

-    mherent complexity in the Group's customer billings processes to estimate energy consumed and to determine the relevant tariff rates; and

-    judgement required to audit management's revenue accrual models which estimate the revenue accrued for the unbilled period between the customer's last bill and reporting datę. This estimate includes assumptions as to customers' energy consumption patterns, weather conditions and relevant tariffs.

•    judgement required to audit management's estimate of revenue recognised related to infrastructure services fixed price construction contracts. This estimate nc udes assumptions for forecast revenue and costs to complete, stage of project completion, and the recoverability of unapproved variations and claims.

Our procedures included, amongst others:

•    involving our regulatory advisory specialists to consider the impact of relevant regulatory determinations on the Group's revenue, including developments in connection with the Group's limited merits review;

•    comparing system tariff rates charged to customers to regulator approved tariff rates for the time the services were provided;

•    evaluatmg the appropriateness of management's accounting policies for revenue recognition against accounting standard requirements;

•    ana ysmg revenue against historical performance, regulatory determinations, and energy consumption data;

•    working with our Information Technology specialists to:

-    test key Controls in the revenue process including interfaces between Systems, and the timing of revenue recognition over accounting periods; and

-    obtain an understanding of management's methodology for estimating unbilled revenue and assess the reasonableness of the methodology and assumptions applied against industry standards and practice.

•    testmg a sample of gas transmission tar ffs and infrastructure services revenue to customer contracts, and where relevant, to variations and claims documentation;

•    comparing a sample of accrued revenue balances to subsequent customer bill ngs and

•    assessmg and cha le ging management's assumptions relating to the recoverabi! ty of nfrastructure services revenue by:

-    testing key Controls such as the review and approval of project budgets, variations and actual costs incurred;

-    comparing forecast revenue and cost assumptions against source documents including approved project budgets and bid documents. We also compared them to actual costs incurred to datę and the status of project activities; and

-    comparing management's assumptions to available correspondence on contract variations and claims, and dispute resolution activities.