From Published Accounts

Revenue
recognition

Refer
to page 41 (Report of the Audit Committee), page 93 (accounting policy) and
pages 94 to 95 (financial disclosures).

Revenue is measured net of
discounts, incentives and rebates earned by customers on the Group’s sales.
Within a number of the Group’s markets, the estimation of discounts,
incentives and rebates recognised based on sales made during the year is
material and considered to be complex and judgemental. Therefore, there is a
risk of revenue being misstated as a result of faulty estimations over
discounts, incentives and rebates. This is an area of significant judgement
and with varying complexity, depending on nature of arrangement.  There is also a risk that revenue may be
overstated due to fraud through manipulation of the discounts, incentives and
rebates recognised resulting from the pressure local management may feel to
achieve performance targets.

Revenue is recognised when
the risks and rewards of the underlying products have been transferred to the
customer. There is a risk of revenue being overstated due to fraud resulting
from the pressure local management may feel to achieve performance targets at
the reporting period end.

Our
procedures included:

u Accounting
policies: Assessing the appropriateness of the Group’s revenue
recognition accounting policies, including those relating to discounts,
incentives and rebates by comparing with applicable accounting standards;

u Control
testing: Testing the effectiveness of the Group’s controls over the
calculation of discounts, incentives and rebates and correct timing of
revenue recognition;

u Tests
of details: Obtaining supporting documentation for sales transactions
recorded either side of year end as well as credit notes issued after the
year end date to determine whether revenue was recognised in the correct
period.

u Within a number of the Group’s markets,
comparing current year rebate accruals to the prior year and, where relevant,
completing further inquiries and testing.

u Agreeing a sample of claims and rebate
accruals to supporting documentation.

u Critically assessing manual journals posted
to revenue to identify unusual or irregular items;

u Our
sector experience: Challenging the Group’s assumptions used in estimating
rebate accruals using our experience of the industry in which it operates;

u Expectation
vs. outcome: Developing an expectation of the current year revenue based
on trend analysis information, taking into account historical weekly sales
and returns information, and our understanding of each market. We compared
this expectation against actual revenue and, where relevant, completed
further inquiries and testing; and

u Assessing
disclosures: Considering the adequacy of the Group’s disclosures in
respect of revenue.

u Our
results

The results of our testing
were satisfactory and we considered the estimate of the accrual relating to
discounts, incentives and rebates and the amount of revenue recognised to be
acceptable and recorded in the correct period.

Indirect
tax contingent liabilities

Refer
to page 41 (Report of the Audit Committee), page 131(accounting policy) and
page 132 (financial disclosures).

Contingent liability
disclosures for indirect tax require the directors to make judgements and
estimates in relation to the issues and exposures. In Brazil, one of the
Group’s largest markets, the complex nature of the local tax regulations and
jurisprudence make this a particular area of judgement.

Our
procedures included:

u Control
testing: Testing the effectiveness of controls around the recording and
re assessment of indirect tax contingent liabilities;

u Our
tax expertise: Use of our own local indirect tax specialists to assess
the value of the contingent liabilities in light of the nature of the
exposures, applicable regulations and related correspondence with the
authorities;

u Enquiry of lawyers:
Assessing relevant historical and recent judgements passed by the court
authorities in considering any legal precedent or case law, as well as
assessing legal opinions from third party lawyers and obtaining formal
confirmations from the Group’s external counsel, where appropriate; and

u Assessing disclosures:
Considering the adequacy of the Group’s disclosures made in relation to
indirect tax contingent liabilities.

u Our
results

The results of our testing
were satisfactory and we considered the indirect tax contingent liability
disclosures to be acceptable.

Direct
tax provisions

Refer
to page 41 (Report of the Audit Committee), page 105 (accounting policy) and
pages 105 to 107 (financial disclosures).

The Group has extensive
international operations and in the normal course of business the directors
make judgements and estimates in relation to transfer pricing tax issues and
exposures. This is a key judgement due to the Group operating in a number of
tax jurisdictions, the complexities of transfer pricing and other
international tax legislation.

Our
procedures included:

u Control testing:
Testing the effectiveness of the Group’s controls around the recording and
re-assessment of transfer pricing provisions;

u Our tax expertise: Use
of our own tax specialists to perform an assessment of the Group’s related
correspondence with relevant tax authorities, to consider the valuation of
transfer pricing provisions;

u Challenging the assumptions using our own
expectations based on our knowledge of the Group, considering relevant
judgements passed by authorities, as well as assessing relevant opinions from
third parties; and

u Assessing disclosures:
Considering the adequacy of the Group’s disclosures in respect of tax and
uncertain tax positions.

Our
results

u The results of our testing were
satisfactory and we found the level of tax provisioning to be acceptable.

Business
combinations –

Carver

Refer
to page 41 (Report of the Audit Committee), page 132 (accounting policy) and
pages 132 to 135 (financial disclosures).

On 1^st November
2017, the Group acquired approximately 98% of the share capital of Carver
Korea for €2.28 billion, recognising identifiable assets and liabilities
acquired at fair value. The measurement of the assets acquired at fair value
is inherently judgemental. In particular, judgement is required in
determining the royalty rate and discount rate to be applied in the relief from
royalty valuation of the acquired brand intangible asset. Small changes in
the royalty rate and discount rate assumptions can have  a significant impact on the valuation of
the brand.

Our
procedures included

u Control testing:
Testing the effectiveness of controls over the review of assumptions used in
the brand valuation;

u Assessing principles:
Assessing the principles of the relief from royalty valuation model;

u Benchmarking assumptions:
Evaluating assumptions used, in particular those relating to: i) the royalty
rate used and ii) the discount rate used; using our own valuation specialists
to compare these rates with externally derived data; and

u Assessing disclosures:
Considering the adequacy of the Group’s disclosures relating to the business
combination.

Our
results

u The results of our testing were
satisfactory and we considered the valuation of the acquired brand to be
acceptable.

Disposal
of Spreads business

–
presentation in the financial statements

Refer
to page 41 (Report of the Audit Committee), page 136 (accounting policy) and
page 136 (financial disclosures).

On 15^th December
2017, Unilever announced that it had received a binding offer to sell its
Spreads business.

The Spreads business
continues to be reported within continuing operations. The related assets
held for sale and liabilities held for sale amount to €3,184 million and €170
million respectively.

The presentation of the
event in the financial statements is an area of judgement, particularly
whether the Spreads business represents a separate major line of business or
component of the Group, and therefore should be presented as a discontinued
operation.

Our
procedures included:

u Control testing:
Testing the effectiveness of the Group’s controls over the presentation of the
event;

u Tests of details:
Inspecting the terms of the Share Purchase Agreement to identify the assets
and liabilities relating to the Spreads business and assess the directors’
conclusion to present them as
held for sale;

u Agreeing the assets and liabilities
presented as held for sale to relevant supporting evidence;

u Testing application:
Assessing the directors’ judgement that the Spreads business does not
represent a separate major line of business, considering quantitative and
qualitative factors such as the financial contribution of the business to the
Group and whether discrete financial information is regularly reviewed by the
Unilever Leadership Executive (ULE); and

u Assessing disclosures:
Considering the adequacy of the Group’s disclosures.

Our
results

u The results of our testing were
satisfactory and we consider the presentation of the Spreads business within
continuing operations to be acceptable.

Investment
in subsidiaries

Unilever N.V.

Refer
to page 148 (accounting policy) and page 150 (financial disclosures).

Unilever PLC

Refer
to page 153 (accounting policy) and page 154 (financial disclosures).

The carrying amount of the
investments in subsidiaries held at cost less impairment represent 87% and
68% of Unilever PLC and Unilever N.V. total assets respectively.

We do not consider the
valuation of these investments to be at a high risk of significant
misstatement, or to be subject to a significant level of judgement. However,
due to their materiality in the context of the NV Company Accounts and PLC
Company Accounts, this is considered to be an area which had the greatest
effect on our overall audit strategy and allocation of resources in planning
and completing our audits of Unilever PLC and
Unilever N.V.

Our
procedures included:

u Control design:
Testing the design of controls over the review of the investment impairment
analysis;

u Tests of details:
Comparing the carrying amount of investments with the relevant subsidiaries’
draft balance sheet to identify whether their net assets, being an
approximation of their minimum recoverable amount, were in excess of their
carrying amount and assessing whether those subsidiaries have historically
been profit-making;

u Our sector experience: For
the investments where the carrying amount exceeded the net asset value,
comparing the carrying amount of the investment with the expected value of
the business based on a suitable multiple of the subsidiaries’ earnings or
discounted cash flow analysis;

u Benchmarking assumptions:
Challenging the assumptions used in the discounted cash flow analysis based
on our knowledge of the Group and the markets in which the subsidiaries
operate; and

u Assessing disclosures:
Considering the adequacy of Unilever PLC and Unilever N.V. disclosures in
respect of the investment in subsidiaries.

Our
results

u The results of our testing were
satisfactory and we found the Group’s assessment of the recoverability of the
investment in subsidiaries to be acceptable.

Intangible
assets

Unilever N.V.

Refer
to page 148 (accounting policy) and page 149 (financial disclosures).

The carrying amount of
intangible assets represent 4% of Unilever N.V. total assets.

We do not consider the
valuation of these intangible assets to be at a high risk of significant
misstatement, or to be subject to a significant level of judgement. However,
due to their materiality in the context of the NV Company Accounts this is
considered to be an area which had the greatest effect on our overall audit
strategy and allocation of resources in planning and completing our audit of
Unilever N.V.

Our
procedures included:

u Control design:
Testing the design of controls over the review of the intangible assets
impairment analysis;

u Tests of details:
Assessing the directors’ triggering event review relating to the intangible
assets having regard to the performance of the related brands and trademarks;

u Our sector experience:
Evaluating assumptions used, in particular those relating to forecast revenue
growth and royalty rates;

u Benchmarking assumptions: Comparing
assumptions to externally derived data in relation to key inputs such as
royalty rates and discount rates;

u Sensitivity analysis:
Performing sensitivity analysis on the assumptions noted above; and

u Assessing disclosures:
Considering the adequacy of Unilever N.V. disclosures in respect of the
intangible assets.

Our
results

u The results of our testing were
satisfactory and we found the resulting estimate of the recoverable amount of
intangible assets to be acceptable.

Carrying value of
goodwill and intangible assets (group)

Refer to the Report of the Audit Committee
and note 10 –

Intangible assets

The group has goodwill of £2,723 million,
indefinite-lived brand intangibles of £8,229 million and other intangible
assets of £1,614 million as at 30 June 2017, contained within 21 cash
generating units (‘CGUs’).

Goodwill and
indefinite-lived intangible assets must be tested for impairment on at least
an annual basis. The determination of recoverable amount, being the higher of
value-in-use and fair value less costs to dispose, requires judgement on the
part of management in both identifying and then valuing the relevant CGUs. Recoverable
amounts are based on management’s view of variables and market conditions
such as future price and volume growth rates, the timing of future operating
expenditure, and the most appropriate discount and long-term growth rates.

Management has determined
that the CGUs containing the USL goodwill and the Meta brand are sensitive to
reasonably possible changes in the assumptions used, which could result in
the calculated recoverable amount being lower than the carrying value of the
CGU. Additional sensitivity disclosures have been included in the group
financial statements in respect of these CGUs.

We evaluated the
appropriateness of management’s identification of the group’s CGUs and tested
the operation of the group’s controls over the impairment assessment process,
which we found to be satisfactory for the purposes of our audit.

Our audit
procedures included challenging management on the appropriateness of the
impairment models and reasonableness of the assumptions used, focusing in
particular on USL goodwill, certain USL brands and the Meta brand, through
performing the following:

u Benchmarking Diageo’s key market-related
assumptions in the models, including discount rates, long term growth rates
and foreign exchange rates, against external data, using our valuation
expertise;

u Assessing the reliability of cash flow
forecasts through a review of actual past performance and comparison to
previous forecasts;

u Testing the mathematical accuracy and
performing sensitivity analyses of the models;

u Understanding the commercial prospects of
the assets, and where possible comparison of assumptions with external data
sources;

u For USL goodwill and USL brands, assessing
the reasonableness of forecasts by challenging assumptions in respect of
growth strategies in the Indian market; and

u For
USL goodwill and the USL brands, assessing the intermediary period in the
context of market conditions and forecast consumption per capita.

We assessed the
appropriateness and completeness of the related disclosures in note 10 of the
group financial statements, including the sensitivities provided in respect
of USL goodwill and the Meta brand, and considered them to be reasonable.

Based on our
procedures, we noted no material exceptions and considered management’s key
assumptions to be within reasonable ranges.

Taxation
matters (group)

Refer to the
Report of the Audit Committee, note 7 – Taxation, and note 18

– Contingent
liabilities and legal proceedings

The group operates
across a large number of jurisdictions and is subject to periodic challenges
by local tax authorities on a range of tax matters during the normal course
of business, including transfer pricing, direct and indirect taxes, and
transaction related tax matters. As at 30^th June 2017, the group
has current taxes payable of £294 million, deferred tax assets of £134
million and deferred tax liabilities of £2,112 million.

Where the amount
of tax payable is uncertain, the group establishes provisions based on
management’s judgement of the probable amount of the liability.

We focused on the
judgements made by management in assessing the quantification and likelihood
of potentially material exposures and therefore the level of provision
required. In particular we focused on the impact of changes in local tax
regulations and ongoing inspections by local tax authorities, which could
materially impact the amounts recorded in the group financial statements.

This included
evaluating the recent assessment under the Diverted Profits Tax regime issued
by HM Revenue & Customs in the UK and the assessments issued by the tax
authorities in France.

We evaluated the
design and implementation of controls in respect of identifying uncertain tax
positions, which we found to be satisfactory for the purposes of our audit.
We also evaluated the related accounting policy for provisioning for tax
exposures and found it to be appropriate.

We used our tax specialists
to gain an understanding of the current status of tax assessments and
investigations and to monitor developments in ongoing disputes. We read
recent rulings and correspondence with local tax authorities, as well as
external advice received by the group where relevant, to satisfy ourselves
that the tax provisions had been appropriately recorded or adjusted to
reflect the latest developments.

We challenged
management’s key assumptions, in particular on cases where there had been
significant developments with tax authorities, noting no significant
deviations from our expectations.

This included
review of the legal advice received, supporting relevant decisions where no
provision is recorded.

We assessed the
appropriateness of the related disclosures in notes 7 and 18 of the group
financial statements and considered them to be reasonable.

Presentation of
exceptional items (group)

Refer to the
Report of the Audit Committee and note 4 –

Exceptional items

In the past few
years, the group has reported significant levels of exceptional items
separately within the consolidated income statement which are excluded from
management’s reporting of the underlying results of the group.

We evaluated the
design and implementation of controls in respect of exceptional items, which
we found to be satisfactory for the purposes of our audit.

We considered the
judgements within management’s accounting papers for the one-off transactions
and obtained corroborative evidence for the items presented as exceptional items.
We considered these to be reasonable.

The nature of
these exceptional items is explained within the group accounting policy and
includes gains or losses arising on acquisitions or disposals, impairment
charges or reversals, and costs resulting from non-recurring legal or
regulatory matters.

This year the
group has reported £42 million of net operating exceptional costs and £20
million of non-operating exceptional income before tax, which relate
primarily to:

u The release of liabilities recorded in the
year ended 30^th June 2016 in respect of disengagement agreements
relating to United Spirits Limited (£23 million);

u A charge in respect of a customer claim in
India (£32 million);

u A charge in respect of a claim received from
the competition authorities in Turkey (£33 million); and

u A gain in respect of the finalisation of the
disposal of the group’s wine interests in the US and UK (Percy Fox) (£20
million).

Our specific are
of focus was to assess whether the items identified by management as exceptional
met the definition of the group’s accounting policy (i.e. are exceptional in
nature and value) and have been treated consistently, as the identification
of such items requires judgement by management. Consistency in the
identification and presentation of these items is important to ensure the
comparability of year on year reporting.

The audit
procedures pertaining to the claims in India and Turkey are summarised under
the “Provisions and contingent liabilities” section below.

We challenged
management’s rationale for the designation of certain items as exceptional
and assessed such items against the group’s accounting policy considering the
nature and value of the items.

We assessed the
appropriateness and completeness of the disclosures in note 4 and other
related notes to the group financial statements and checked that these
reflected the output of management’s accounting papers, noting no significant
deviations from our expectations.

We also considered
whether there were items that were recorded within underlying profit that we
determined to be exceptional in nature and should have been reported within
‘exceptional items’.

No such material
items were identified.

Provisions and
contingent liabilities (group and company)

Refer to the
Report of the Audit Committee, note 14(d) – Working capital (provisions) and
note 18 – Contingent liabilities and legal proceedings

The group faces a
number of threatened and actual legal and regulatory cases. There is a high
level of judgement required in estimating the level of provisioning and/or
the level of disclosures required.

We evaluated the
design and implementation of controls in respect of litigation and regulatory
matters, which we found to be satisfactory for the purposes of our audit.

Our procedures
included the following:

u Where
relevant, reading external legal advice obtained by management;

u Discussing open matters and developments
with the group and regional general counsel;

u Meeting
with regional and local management and reading relevant correspondence;

u Assessing and challenging management’s
conclusions through understanding precedents set in similar cases; and

u Circularising relevant third party legal
representatives, together with follow up discussions, where appropriate, on
certain cases.

Based on the
evidence obtained, whilst noting the inherent uncertainty with such legal and
regulatory matters, we determined that the level of provisioning at 30^th
June 2017 is appropriate.

We assessed the
appropriateness of the related disclosures in notes 14(d) and 18 of the group
financial statements and consider them to be reasonable.

Post-employment
benefit obligations (group)

Refer to the
Report of the Audit Committee and note 13 – Post-employment benefits

The group has
approximately 40 defined benefit post-employment plans. The total present
value of obligations is £9,716 million at 30^th June 2017, which is
significant in the context of the overall balance sheet of the group. The
group’s most significant plans are in the UK, Ireland and North America.

The valuation of
pension plan liabilities requires judgement in determining appropriate
assumptions such as salary increases, mortality rates, discount rates,
inflation levels and the impact of any changes in individual pension plans.
Movements in these assumptions can have a material impact on the
determination of the liability. Management uses external actuaries to assist
in determining these assumptions.

We evaluated the
design and implementation of controls in respect of post-employment benefit
obligations, which we found to be satisfactory for the purposes of our audit.

We used our
actuarial specialists to assess whether the assumptions used in calculating
the liabilities for the United Kingdom, Ireland and North America pension
plans were reasonable, by performing the following:

u Assessing
whether salary increases and mortality rate assumptions were consistent with
the specifics of each plan and, where applicable, with relevant national and
industry benchmarks;

u Verifying that the discount and inflation
rates used were consistent with our internally developed benchmarks and in
line with other companies’ recent external reporting; and

u Reviewing the calculations prepared by
external actuaries to assess the consistency of the assumptions used.

Based on our
procedures, we noted no exceptions and considered management’s key
assumptions to be within reasonable ranges.

How we tailored
the audit scope

We tailored the
scope of our audit to ensure that we performed enough work to be able to give
an opinion on the financial statements as a whole, taking into account the
structure of the group and the company, the accounting processes and
controls, and the industry in which the group operates.

The group operates
as 21 geographically based markets across five regions, together with the
supply and corporate functions. These markets report through a significant
number of individual reporting components, which are supported by the group’s
five principal shared service centres in Hungary, Kenya, Colombia, India and
the Philippines. The outputs from these shared service centres are included
in the financial information of the reporting components they service, and
therefore are not separate reporting components. In establishing the overall
approach to the group audit, we determined the type of work that needed to be
performed at reporting components by us, as the group engagement team, or
component auditors from either other PwC network firms or non-PwC firms
operating under our instruction. This included consideration of the
procedures required to be performed by our audit teams at the group’s shared
service centres to support our component auditors.

We identified two
reporting components which, in our view, required an audit of their complete
financial information, due to their financial significance to the group.
Those reporting components were North America and USL (India). A further 12
reporting components had an audit of their complete financial information,
either due to their size or their risk characteristics, which included six
operating and three treasury reporting components. We audited specific
balances and transactions at a further six reporting components, obtaining
reporting over the financial information of Moet Hennessy, the group’s
principal associate, from its auditor, primarily to ensure appropriate audit
coverage. The work performed at each of the five shared services centres,
including testing of transaction processing and controls, supported the
financial information of the reporting components they serve.

Certain specific
audit procedures over central corporate functions and areas of significant
judgement, including goodwill and intangible assets, taxation, and material
provisions and contingent liabilities, were performed at the group’s head
office. We also performed work centrally on systems and IT general controls,
consolidation journals and the one-off transactions undertaken by the group
during the year.

Together, the
central and component locations at which work was performed by the group
engagement team and component auditors accounted for 72% of consolidated net
sales, 84% of the consolidated total assets, and 64% of the consolidated
profit before tax and exceptional items, with work performed by the group
engagement team over exceptional items contributing a further 1% coverage
over the consolidated profit before tax (total of 65%). At the group level,
we also carried out analytical and other procedures on the reporting
components not covered by the procedures described above.

Where the work was
performed by component auditors, including by our shared service centre
auditors, we determined the level of involvement we needed to have in the
audit work at those locations to be able to conclude whether sufficient
appropriate audit evidence had been obtained as a basis for our opinion on
the group financial statements as a whole. We issued formal, written
instructions to component auditors setting out the work to be performed by
each of them and maintained regular communication throughout the audit cycle.
These interactions included attending component clearance meetings and
holding regular conference calls, as well as reviewing and assessing matters
reported.

Senior members of
the group engagement team also visited eleven component locations (in six
countries) in scope for an audit of their complete financial information, as
well as four of the shared centre locations and six of the component
locations (in four countries) where audits of specific balances and
transactions took place. The team also met with the Moet Hennessy audit team.
These visits included meetings with local management and with the component
auditors, as well as certain operating site tours. The group engagement
partners also attended the year-end clearance meetings for North America and
USL, and the group engagement team reviewed the audit working papers for
these components and certain other components.