3. Working capital

3.1 Changes in working capital

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3.2 Unbilled services and advance billings to customers

Accounting policies

Unbilled services

Unbilled services (contract assets) represent revenues recognised in satisfying performance obligations where the Group’s right to consideration is conditional upon something other than the passage of time, such as our performance for other performance obligations being completed in accordance with the terms of the contract, or the final revenue amount being agreed with the customer prior to amounts being billed. These amounts will become unconditional when performance obligations are completed in accordance with the terms of the contract, or when the customer has agreed to the amount of final billings. These amounts will be billed to the customer in accordance with the agreed-upon contractual terms.

Advanced billings

Advanced billings (contract liabilities) arise when payments are received from customers in advance of the Group satisfying the performance obligations under the contract. These liabilities are extinguished and revenues recognised as (or when) the Group satisfies the performance obligations, which is normally within one year after balance date.

Key accounting estimates and judgments

Unbilled services and advance billings to customers are specified as follows:

Amounts are not yet billed and measured at expected realisable value and are neither past due nor impaired. Billing in excess of project revenue earned is included in trade and other payables. Compared to last year unbilled services and advance billing increased in line with the increased revenue.

During the year ended May 31, 2023 a substantial majority of the Group’s €46 million recorded progress billings as at May 31, 2022 was recognised as revenue.

3.3 Trade and other receivables

Accounting policies

Trade Receivables

Trade receivables are recognised when the right to consideration becomes unconditional and an invoice to the customer is raised. The Group’s customers, including member firms in the DTTL network, are required to settle invoices on invoice presentation or on such other date as is agreed in the engagement terms for that client. The Group’s standard terms state that invoices are due for settlement 30 days after the invoice date and after this date invoices are considered past due. DTTL network firm transactions are non-interest bearing. The Group applies the simplified approach to recognise lifetime expected credit losses for its trade receivables and amounts due from customer as required or permitted by IFRS 9.

Key accounting estimates and judgments

Expected credit losses

The credit period of services rendered is between 14 and 90 days. No interest is charged on trade receivables. The Group has recognised an allowance for the Expected Credit Losses (ECL), for which a simplified approach has been used based on a lifetime expected loss for non-impaired items. The concentration of credit risk is limited to the fact that the customer base is large and unrelated. Given the current developments in the Russia-Ukraine War and impact thereof, the risk of default has slightly increased. For trade receivables we have limited relevant historical data and experience reflecting sufficiently the current conditions on which to base the estimate in the ECL matrix. Uncertain is what the duration of the negative consequences will be. To date, we have experienced a limited effect of the for trade receivables collections. Our existing collection policies enable us to closely monitor developments in our receivables. The billing and subsequent collection are still meeting our targets. We see no noteworthy developments in delayed payments or changes in credit limits. We have not added one or more additional scenarios to the existing scenarios. See note 5.4.1 on how the Group manages its credit risks.

Trade and other receivables

Accounts receivable

Accounts receivable are generally payable between 14 and 90 days. The balance is shown net of allowance for doubtful debts:

The credit period of services rendered is between 14 and 90 days. No interest is charged on trade receivables. The Group has recognised an allowance for the Expected Credit Losses (ECL), for which a simplified approach has been used based on a lifetime expected loss for non-impaired items. The concentration of credit risk is limited to the fact that the customer base is large and unrelated.

The maximum exposure to credit risk of trade receivables and unbilled services at the reporting date is the carrying value thereof. 

The movement in the allowance for doubtful debts during the reporting period is as follows:

Ageing of past due and impaired accounts receivable as of the reporting date is as follows:

• 1 Gross carrying amount includes individually credit impaired receivables of approximately €1.9 million which were excluded from the ECL rate calculation.

All of the above impairment losses relate to receivables arising from contracts with customers.

3.4 Trade and other payables

The specification of the trade and other payables is as follows: