Company: AZN
Filing Date: 2025-02-18
Form Type: 20-F
Source: 0001104659-25-014750
Chunk: 7

Company: ASTRAZENECA PLC
Filing Date: 2025-02-18
Form: 20-F
Item: Item 18
Chunk 7
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 provisions and disclosure of contingent liabilities
As described in the Group Accounting Policies, Note 21 and Note 30 to the consolidated financial statements, the Group is involved in various legal proceedings considered typical to its business, including actual or threatened litigation and actual or potential government investigations relating to employment matters, product liability, commercial disputes, pricing, sales and marketing practices, infringement of IP rights and the validity of certain patents and competition laws. Most of the claims involve highly complex issues. Often these issues are subject to substantial uncertainties and, therefore, the probability of a loss, if any, being sustained and/or an estimate of the amount of any loss is difficult to ascertain. As at 31 December 2024 the Group held legal provisions of $859 million and disclosed the more significant legal matters. Provisions are recognised when either a legal or constructive obligation as a result of a past event exists, it is probable that an outflow of economic resources will be required to settle the obligation and a reasonable estimate can be made of the amount of the obligation. Provision is made where an adverse outcome is probable and associated costs, including related legal costs, can be estimated reliably. Management’s assessment as to whether or not to recognise provisions or assets, and of the amounts concerned, usually involves a series of complex judgements about future events and can rely heavily on estimates and assumptions. Determining the timing of recognition of when an adverse outcome is probable is considered a key judgement.
The principal considerations for our determination that performing procedures related to recognition and measurement of legal provisions and disclosure of contingent liabilities is a critical audit matter are the significant judgement by management when assessing whether an adverse outcome is probable and can be estimated reliably, which in turn led to a high degree of auditor judgement and subjectivity in performing procedures and evaluating management’s assessment of the legal provisions and disclosures of contingent liabilities. In addition, the audit effort involved the use of professionals with specialised skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s evaluation of the liability of legal claims, including controls over determining the probability of a loss and whether the amount of loss can be reasonably estimated, as well as financial statement disclosures. These procedures also included, among others, (i) obtaining and evaluating letters of audit inquiry with internal and external legal counsel for significant litigation; (ii) testing the completeness of management’s assessment of both the identification of legal claims and possible outcomes of each significant legal matter; (