Final Results - Part 5 of 8

abrdn PLC

27 February 2024

 

abrdn plc

Full Year Results 2023

Part 5 of 8

Independent auditor's report to the members of abrdn plc

1. Our opinion is unmodified

In our opinion:

-   The financial statements of abrdn plc give a true and fair view of the state of the Group's and of the Parent Company's affairs as of 31 December 2023, and of the Group's profit for the year then ended.

-   The Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards.

-   The Parent Company financial statements have been properly prepared in accordance with UK accounting standards, including FRS 101 Reduced Disclosure Framework.

-   The Group and Parent Company financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

What our opinion covers

We have audited the Group and Parent Company financial statements of abrdn plc ('the Parent Company' or 'the Company') for the year ended 31 December 2023 (FY23) included in the Annual report and accounts, which comprise:

Group	Parent Company (abrdn plc)
Consolidated income statement Consolidated statement of comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Notes 1 to 42(a) and 43 to 44 to the Group financial statements, including the accounting policies in those notes and in the Presentation of consolidated financial statements section.	Company statement of financial position Company statement of changes in equity Notes A to R to the Parent Company financial statements, including the accounting policies in the Company accounting policies section.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion and matters included in this report are consistent with those discussed and included in our reporting to the Audit Committee (AC).

We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities.

2. Overview of our audit

Factors driving our view of risks	Following our prior year (FY22) audit and considering developments affecting the abrdn plc Group since then, we have updated our risk assessment. Much of the uncertainty in the macro-economic environment that existed at the end of FY22 remains. Increased market turbulence and continued performance challenges within the Investments business have negatively contributed to fee-based revenue and profit during the financial year. This has been offset in part by the first full year inclusion of the interactive investor results and the increased contribution of that component to the overall Group's results. As a result, fee-based revenue has remained broadly flat year on year and our materiality levels have remained at a similar level. Our consideration in respect of Key Audit Matters identified are in large part consistent with the prior year and are explained below. -    During FY22, given the challenging global economic environment as well as the Group's wider financial performance, we identified that the risks around the recoverability of certain of the Group's goodwill balances and certain of the Parent Company's investments in subsidiaries had increased. Due to continued market uncertainty and performance challenges in FY23, we believe that the risk of impairments to both Investment in Subsidiaries or Goodwill balances remains significant. We identified the risks associated with the key assumptions used in determining the estimated recoverable amount for the applicable cash generating units supporting certain recognised goodwill and the estimated recoverable amount of certain investments in subsidiaries (including forecast cash flows, market multiples (and applicable premiums/discounts) and discount rates (as applicable)) as significant. -    As part of our risk assessment, we maintained our focus on future economic and operational assumptions used by the Group in estimates. The most significant area that these could impact the financial statements (outside of goodwill and investment in subsidiaries as noted above) is in the valuation of the defined benefit pension obligation. As a result, this was maintained as a Key Audit Matter. -    Revenue from contracts with customers is comprised of various different revenue streams. The area of revenue which had the greatest effect on our overall Group audit and audit effort in the current period is management fee income (institutional, retail wealth and insurance partners). In our view, the nature and complexity of management fee calculations has remained consistent year on year, while market volatility and uncertainty continue to drive an increased revenue focus for users of the financial statements. -    The FY22 Key Audit Matter over the Accounting implications of the acquisition of interactive investor was event driven and as such is no longer relevant during FY23. While not reported as Key Audit Matters, we also identified that the Group's ongoing cost control transformation programme and corporate transactions would have financial reporting implications that would require consideration in the Group and Parent Company financial statements.				Key audit matters	vs FY22		Item
					Recoverability of certain goodwill and certain of the Parent Company's investments in subsidiaries	é		4.1
					Valuation of the principal UK defined benefit pension scheme present value of funded obligation	çè		4.2
					Revenue recognition: management fee revenue from contracts with customers	çè		4.3
Audit Committee interaction	During the year, the AC met six times. KPMG are invited to attend all AC meetings and are provided with an opportunity to meet with the AC in private sessions without the Executive Directors being present. The Group engagement partner met with the Audit Committee Chair privately before each AC and also attended all Risk and Capital Committee meetings held during the year. For each Key Audit Matter, we have set out communications with the AC in section 6, including matters that required particular judgement for each. The matters included in the Audit Committee Chair's report on pages 98 to 106 are materially consistent with our observations of those meetings.
Our Independence	We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities. We have not performed any non-audit services during FY23 or subsequently which are prohibited by the FRC Ethical Standard. We were first appointed as auditor by the shareholders for the year ended 31 December 2017. The period of total uninterrupted engagement is for the seven financial years ended 31 December 2023. The Group engagement partner is required to rotate every five years. As these are the second set of the Group's financial statements signed by Richard Faulkner, he will be required to rotate off after the FY26 audit. The average tenure of partners responsible for component audits as set out in section 7 below is 2 years, with the shortest being one year and the longest being four years.		Total audit fee				£7.2m
			Audit related fees (including interim review)				£2.8m
			Other services				£1.0m
			Non-audit fee as a % of total audit and audit related fee %				10%
			Date first appointed				16 May 2017
			Uninterrupted audit tenure				7 years
			Next financial period which requires a tender				FY27
			Tenure of Group engagement partner				2 years
			Average tenure of component signing partners				2 years
Materiality (item 6 below)	The scope of our work is influenced by our view of materiality and our assessed risk of material misstatement. We have determined overall materiality for the Group financial statements as a whole at £13.7m (FY22: £14.0m) and for the Parent Company financial statements as a whole at £13.0m (FY22: £5.6m). Consistent with FY22, we determined that total revenue remains the benchmark for the Group as underlying performance is such that a normalised profit benchmark would indicate materiality which is inappropriate for the size and scale of the Group. As such, we based our Group materiality on total revenue, of which it represents 0.9% (FY22: 0.9%). Materiality for the parent company financial statements was determined with reference to a benchmark of parent company total assets, limited to be less than materiality for the group financial statements as a whole. In 2022, we applied the component materiality to our audit of the parent company balance sheet. Our materiality in both periods was lower than we would have determined with reference to a benchmark of parent company total assets. It represents 0.2% (2022: 0.1%) of the stated benchmark.		Diagram removed for the purposes of this announcement.  However it can be viewed in full in the pdf document
Group Scope (Item 7 Below)		We have performed risk assessment and planning procedures to determine which of the Group's components are likely to include risks of material misstatement to the Group financial statements, the type of procedures to be performed at these components and the extent of involvement required from our component auditors around the world. Of the Group's 313 (FY22: 311) reporting components, we subjected 13 (FY22: 19) to full scope audits for Group purposes, and 6 (FY22: 2) to specified risk focused audit procedures. The latter were not financially significant enough to require an audit for Group reporting purposes but did present specific individual risks that needed to be addressed. The components within the scope of our work accounted for the percentages illustrated opposite. In addition, we have performed Group level analysis on the remaining components to determine whether further risks of material misstatement exist in those components. We consider the scope of our audit, as communicated to the Audit Committee, to be an appropriate basis for our audit opinion.		Diagram removed for the purposes of this announcement.  However it can be viewed in full in the pdf document
The impact of climate change on our audit		In planning our audit we have considered the potential impacts of climate change on the Group's business and its financial statements. Climate change impacts the Group in a number of ways: through its own operations (including potential reputational risk associated with the Group's delivery of its climate related initiatives), through its portfolio of investments and its stewardship role, and the greater emphasis on climate related narrative and disclosure in the Annual report and accounts. As disclosed in note 31, the Group's direct exposure to climate change in the financial statements is primarily through its investment holdings, as the key valuation assumptions and estimates may be impacted by climate risks. As part of our audit, we have made enquiries of Directors and the Group's Corporate Sustainability team to understand the extent of the potential impact of climate change risk on the Group's financial statements and the Group's preparedness for this. We have performed a risk assessment of how the impact of climate change may affect the financial statements and our audit, in particular with respect to investment holdings. We consider that the impact of climate risk on level 1 and level 2 investments is already reflected in the market prices used to value these holdings at year end. As such, the impact of climate change was limited to the valuation of level 3 investment holdings; taking into account the relative size of the level 3 investments balance, we assessed that the impact of climate change was not a significant risk for our audit nor does it constitute a key audit matter. We did not consider the potential impact of climate change on the sustainability of earnings or cashflow forecasts to be material. We held discussions with our own climate change professionals to challenge our risk assessment. We have also read the Group's disclosure of climate related information in the front half of the Annual report and accounts as set out on pages 38 to 47 and considered consistency with the financial statements and our audit knowledge.

3. Going concern, viability and principal risks and uncertainties

The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the Parent Company or to cease their operations, and as they have concluded that the Group's and the Parent Company's financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the financial statements (the going concern period).

Going Concern

We used our knowledge of the Group, its industry and operating model, and the general economic environment to identify the inherent risks to its business model and analysed how those risks might affect the Group's and the Parent Company's financial resources or ability to continue operations over the going concern period. The risk that we considered most likely to adversely affect the Group's and Parent Company's available financial resources over this period was increased market volatility. We considered whether these risks could plausibly affect the liquidity in the going concern period by assessing the degree of downside assumption that, individually and collectively, could result in a liquidity issue, taking into account the Group's and Parent Company's current and projected cash and facilities (a reverse stress test). We also assessed the completeness of the going concern disclosure. Accordingly, based on those procedures, we found the Directors' use of the going concern basis of accounting without any material uncertainty for the Group and Parent Company to be acceptable. However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Group or the Parent Company will continue in operation.

Our conclusions -    We consider that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate; -    We have not identified, and concur with the Directors' assessment that there is not, a material uncertainty related to events or conditions that, individually or collectively, may cast significant doubt on the Group's or Parent Company's ability to continue as a going concern for the going concern period; -    We have nothing material to add or draw attention to in relation to the Directors' statement in section (a)(v) of the presentation of consolidated financial statements on the use of the going concern basis of accounting with no material uncertainties that may cast significant doubt over the Group's and Parent Company's use of that basis for the going concern period, and we found the going concern disclosure in section (a)(v) to be acceptable; and   -    The related statement under the Listing Rules set out on page 140 is materially consistent with the financial statements and our audit knowledge.

Disclosures of emerging and principal risks and longer-term viability

Our responsibility We are required to perform procedures to identify whether there is a material inconsistency between the Directors' disclosures in respect of emerging and principal risks and the viability statement, and the financial statements and our audit knowledge. Based on those procedures, we have nothing material to add or draw attention to in relation to: -    The Directors' confirmation within the Risk Management disclosures on page 77 that they have carried out a robust assessment of the emerging and principal risks facing the Group, including those that would threaten its business model, future performance, solvency and liquidity; -    The Risk Management disclosures describing these risks and how emerging risks are identified and explaining how they are being managed and mitigated; and -    The Directors' explanation in the Viability Statement of how they have assessed the prospects of the Group, over what period they have done so and why they considered that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. We are also required to review the Viability Statement set out on page 74 under the Listing Rules. Our work is limited to assessing these matters in the context of only the knowledge acquired during our financial statements audit. As we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the absence of anything to report on these statements is not a guarantee as to the Group's and Parent Company's longer-term viability.

Our reporting We have nothing material to add or draw attention to in relation to these disclosures. We have concluded that these disclosures are materially consistent with the financial statements and our audit knowledge.

4. Key audit matters

What we mean

Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: -   The overall audit strategy. -   The allocation of resources in the audit. -   Directing the efforts of the engagement team.

We summarise below the Key Audit Matters in decreasing order of audit significance, in arriving at our audit opinion above, together with our key audit procedures to address those matters and our findings from those procedures in order that the Company's members, as a body, may better understand the process by which we arrived at our audit opinion. These matters were addressed, and our findings are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters.

4.1 Recoverability of certain goodwill (Group) and of certain of the Parent Company's investments in subsidiaries (Parent Company)

Financial Statement Elements			Our assessment of risk vs FY22			Our findings
	FY23	FY22	é	Our assessment is that the risk has slightly increased relative to FY22. This reflects the continued market volatility and resulting impact on the performance of the Group, in addition to the wider performance challenges the Group continues to face (in particular within the Investments business)		FY23: Balanced FY22: Balanced
Goodwill of:	£843m	£879m
Impairment of goodwill1	(£36m)	(£0m)
Investment in subsidiaries:	£3,594m	£3,843m
Impairment of investments in subsidiaries2	(£261m)	(£923m)
1.      Financial planning business impairment: £36m (FY22: £nil). 2.      aHL impairment: £40m (FY22: £847m); aIHL impairment: £169m (FY22: £51m); aFPL impairment: £52m (FY22: £25m
Description of the Key Audit Matter					Our response to the risk
As noted in the Strategic report, the results in the Investments business have been impacted by the external market environment in addition to wider performance challenges. Subsidiaries aligned to that business experienced indicators of impairment (abrdn Holdings Limited FY23: £1,218m, FY22: £1,258m; abrdn Investment Holdings Limited FY23: £819m, FY22: £988m). In addition to the Investments business, there is focus on the following businesses: -   interactive investor (FY23: £1,512m, FY22: £1,512m), given the size of the acquisition which occurred in the prior period and its significance to Group strategy going forward. -   The financial planning business (abrdn Financial Planning Limited, FY23: £45m, FY22: £85m), given its performance. Further, the net assets attributable to equity holders of the Parent Company exceeded the Group's market capitalisation at the balance sheet date. These factors mean there is an increased risk associated with the recoverability of the associated Parent Company investments in these subsidiaries and, in relation to interactive investor and the financial planning business, goodwill balances allocated to the corresponding cash generating units (CGUs) in the Group financial statements (interactive investor goodwill FY23: £819m, FY22: £819m; financial planning business goodwill FY23: £24m, FY22: £60m). In the prior year, this Key Audit Matter included recoverability of the goodwill associated with the Finimize CGU. The impairment recognised in that period reduced the carrying value of this goodwill to a level at which we have determined that the recoverability of this balance is no longer part of the Key Audit Matter. Goodwill and Investment in Subsidiaries - subjective estimate Goodwill is tested for impairment at least annually whether or not indicators of impairment exist. For goodwill, the impairment assessment is performed by comparing the carrying amount of each CGU or group of CGUs to which goodwill is allocated with its recoverable amount being the higher of its value in use (VIU) or fair value less costs of disposal (FVLCD). Similarly, for investments in subsidiaries the carrying value of the investment in the subsidiary is compared with the recoverable amount of that investment being the higher of its VIU or FVLCD. In determining the FVLCD the key assumptions are forecast cashflows, market multiples (including applicable premiums/discounts) and discount rates (as applicable). In determining the VIU, which is calculated using a discounted cash flow method, the key assumptions are forecast cash flows and discount rates. The resulting recoverable amounts, in particular for the CGUs, groups of CGUs and investments in subsidiaries set out above, are subjective due to the inherent uncertainty in determining these assumptions and are therefore also susceptible to management bias. The effect of these matters is that, as part of our risk assessment, we determined that the recoverable amount of certain goodwill and of certain investments in subsidiaries have a high degree of estimation uncertainty, with a potential range of reasonable outcomes greater than our materiality for the financial statements as a whole and possibly many times that amount. The financial statements (notes 13 and A) disclose the sensitivity estimated by the Group and Parent Company.					We performed the procedures below rather than seeking to rely on any of the Group's controls because the nature of the balances are such that we would expect to obtain audit evidence primarily through the detailed procedures described. Our procedures included: Our sector expertise: We critically assessed the Group's assessment of whether there were any impairment indicators for the Parent Company's investment in subsidiaries, including comparing the carrying value of Parent Company's net assets with the Group's market capitalisation and considering the subsidiaries' business performance. Our sector expertise: We assessed the appropriateness of the Group's conclusion that the recoverable amount of goodwill and investment in subsidiaries should be based on FVLCD. Our valuation expertise: Using our own valuation specialists, we assessed the appropriateness of the Group's FVLCD methodology and the appropriateness of the input assumptions used in calculating the FVLCD of the CGUs or groups of CGUs to which certain goodwill is allocated and of certain of the Parent Company's investment in subsidiaries. Benchmarking assumptions: We compared the Group's assumptions to externally derived data in relation to key inputs such market multiples and discount rates. Sensitivity analysis: We performed our own sensitivity analysis which included assessing the effect of reasonable alternative assumptions in respect of forecast cash flows, market multiples (and applicable premiums/discounts) and discount rates (as applicable) to evaluate the impact on the FVLCD of the CGUs or groups of CGUs to which certain goodwill is allocated and of certain of the Parent Company's investment in subsidiaries. Assessing transparency: We assessed whether the Group's disclosures (in respect of goodwill) and the Parent Company's disclosures (in respect of investment in subsidiaries) about the sensitivity of the outcome of the impairment assessment to changes in key assumptions reflect the risks inherent in the recoverable amount of goodwill and investment in subsidiaries.
Communications with the abrdn plc Audit Committee Our discussions with and reporting to the Audit Committee included: -    Our definition of the key audit matter relating to the recoverability of certain goodwill and certain investments in subsidiaries including our assessment of the risks associated with individual goodwill balances. -    Our audit response to the key audit matter which included the use of specialists to challenge key aspects of the Group's and Parent Company's determination of the recoverable amount and level of impairment. -    The findings of our procedures. Areas of particular auditor judgement We identified the following as the areas of particular auditor judgement: -    Subjective and complex auditor judgement was required in evaluating the key assumptions used by the Group and Parent Company (including forecast cash flows, market multiples (and applicable premiums/discounts) and discount rates (as applicable)). Our findings We found the Group's estimated recoverable amount of certain goodwill and the related impairment charges to be balanced (FY22: balanced) with proportionate (FY22: proportionate) disclosures of the related assumptions and sensitivities. We found the Parent Company's estimated recoverable amount of certain of its investments in subsidiaries and the related impairment charges to be balanced (FY22: balanced) with proportionate (FY22: proportionate) disclosures of the related assumptions and sensitivities.

Further information in the Annual Report and Accounts: See the Audit Committee Report on pages 98 to 106 for details on how the Audit Committee considered the Group's goodwill and the Parent Company's Investment in Subsidiaries as areas of significant attention, pages 196 to 202 for the accounting policy on goodwill and financial disclosures, page 275 for the investment in subsidiaries accounting policy and pages 276 to 279 for the investment in subsidiaries financial disclosures.

4.2 Valuation of the principal UK defined benefit pension scheme present value of funded obligation (Group)

Financial Statement Elements			Our assessment of risk vs FY22		Our findings
	FY23	FY22	çè	Our assessment is that the risk is similar to FY22. Market volatility remains high and the risk associated with the selection of economic assumptions remains similar to FY22.	FY23: Balanced FY22: Balanced
Present value of funded obligation:	£1,784m	£1,755m

Description of the Key Audit Matter	Our response to the risk
Subjective valuation The present value of the Group's funded obligation for the principal UK defined benefit pension scheme ("abrdn UK Group (SLSPS) plan") is an area that involves significant judgement over the uncertain future settlement value. The Group is required to use judgement in the selection of key assumptions covering both operating assumptions and economic assumptions. The key operating assumptions are base mortality and mortality improvement. The key economic assumptions are the discount rate and inflation. The risk is that inappropriate assumptions are used in determining the present value of the funded obligation. The effect of these matters is that, as part of our risk assessment, we determined that the valuation of the pension scheme obligation has a high degree of estimation uncertainty, with a potential range of reasonable outcomes greater than our materiality for the financial statements as a whole and possibly many times that amount. The financial statements (note 31) disclose the sensitivity estimated by the Group.	We performed the procedures below rather than seeking to rely on any of the Group's controls because the nature of the balance is such that we would expect to obtain audit evidence primarily through the detailed procedures described. Our procedures included: Assessing actuaries' credentials: We evaluated the competency and objectivity of the Group's experts who assisted them in determining the actuarial assumptions used to calculate the defined benefit obligation. Benchmarking assumptions: We considered, with the support of our own actuarial specialists, the appropriateness of the base mortality assumption by reference to scheme and industry data on historical mortality experience and the outcome of the latest triennial report. We considered, with the support of our own actuarial specialists, the appropriateness of the mortality improvement assumptions by reference to industry-based expectations of future mortality improvements and the appropriateness of the discount rate and inflation assumptions by reference to industry practice. Assessing transparency: In conjunction with our own actuarial specialists, we considered whether the Group's disclosures in relation to the assumptions used in the calculation of the present value of the funded obligation appropriately represent the sensitivities of the obligation to the use of alternative assumptions.
Communications with the abrdn plc Audit Committee Our discussions with and reporting to the Audit Committee included: -    Our identification of the key audit matter relating to the valuation of the defined benefit pension obligation. -    Our audit response to the key audit matter which included the use of our own specialists to challenge key aspects of the Group's actuarial valuation. -    The findings of our procedures. Areas of particular auditor judgement We identified the following as the areas of particular auditor judgement: -    Subjective and complex auditor judgement was required in evaluating the key assumptions used by the Group (including the discount rate, inflation and mortality assumptions). Our findings We found the Group's valuation of the UK defined benefit pension scheme obligation to be balanced (FY22: balanced) with proportionate (FY22: proportionate) disclosures of the related assumptions and sensitivities.

Further information in the Annual report and accounts: See the Audit Committee Report on pages 98 to 106 for details on how the Audit Committee considered the valuation of the UK defined benefit pension scheme obligation as an area of significant attention, page 226 for the accounting policy on the valuation of the UK defined benefit pension scheme obligation, and note 31 for the financial disclosures.

 

4.3 Revenue recognition: management fee revenue from contracts with customers (Group)

Financial Statement Elements			Our assessment of risk vs FY22		Our findings
Management fee revenue from contracts with customers:	FY23	FY22	çè	Our assessment is that the risk is similar to FY22. The nature and complexity of management fee calculations remains at a similar level to last year whilst market volatility and uncertainty mean a continued revenue focus.	FY23 and FY22: We found no significant items, either unadjusted or adjusted for.
	£901m	£1,068m

Description of the Key Audit Matter	Our response to the risk
Data capture and calculation error Revenue from contracts with customers is the most significant item in the consolidated statement of comprehensive income and represents one of the areas that had the greatest effect on the overall Group audit. In addition, market volatility and uncertainty has driven increased revenue focus. The balance comprises various different revenue streams as outlined in note 3. The area of revenue which had the greatest effect on our overall Group audit and audit effort in the current period is management fee income (institutional, retail wealth and insurance partners) which is the most significant and, in certain areas, for example for segregated account management fee calculations, complex item. The nature and complexity of management fee calculations has largely remained stable year on year. The two key components in calculating management fee income are fee rates to be applied and the amount of assets under management (AUM) resulting in the following key risks: -    Fee rates: There is a risk that fee rates have not been entered appropriately into the fee calculation and billing systems when the Group's clients are onboarded or agreements are amended. -    AUM: There is a risk that AUM from third-party service providers or client appointed administrators and/or custodians does not exist and/or is inaccurate. -   Calculation: There is a risk that management fee income, including accrued income balances, is incorrectly calculated.	Our procedures included: Procedures in relation to fee rates We performed the detailed procedures below in relation to fee rates rather than seeking to rely on the Group's controls as our knowledge indicated that we would be unlikely to obtain the required evidence to support reliance on the controls. Test of details: We agreed a selection of fee rates used in the calculation to the investment management agreements (IMAs), fee letters or fund prospectuses outlining the effective fee rates. Procedures in relation to AUM Control design and operation: We assessed the design and operating effectiveness of controls at third party service providers over the production of AUM data that is used in calculating management fees. This included inspecting the internal controls reports prepared by relevant outsourced service organisations covering the design and operation of key controls over the production of AUM data used in the calculation of management fees. Enquiry of clients: Where AUM data is produced by a client appointed administrator and/or custodian we obtained AUM data directly from the client, client appointed administrator or custodian and used this in our management fee recalculations and tests of detail below. Calculation Procedures Tests of details and substantive analytical procedures: Where AUM data was obtained from third party service organisations (and where we had tested the controls over the AUM data) we independently recalculated management fees. Where AUM data was obtained from a client appointed administrator and/or custodian (and so we could not test controls over the AUM data) we independently recalculated management fees and/or agreed a selection of amounts billed and received to invoice and bank statements.
Communications with the abrdn plc Audit Committee Our discussions with and reporting to the Audit Committee included: -    Our definition of the key audit matter relating to revenue recognition: management fee revenue from contracts with customers. -    Our audit response to the key audit matter which included use of data and analytics technology to complete certain of the recalculations. -    The findings of our procedures. Our findings -   We found no significant items, either unadjusted or adjusted for, in the Group's management fee revenue from contracts with customers (FY22: no significant items either unadjusted or adjusted for).

Further information in the Annual report and accounts: See page 182 for the accounting policy on revenue from contracts with customers and note 3 for the financial disclosures.

We continue to perform procedures over the recoverable value of the investment in subsidiary (Parent Company) and goodwill (Group) balances recognised on the acquisition of interactive investor. However, as the acquisition occurred in the prior year we do not need to perform procedures this year over the fair value of intangible assets recognised on the acquisition of interactive investor and as a result, the accounting implications of the acquisition of interactive investor are not separately identified as a Key Audit Matter in our report this year.

5. Our ability to detect irregularities, and our response

Fraud - identifying and responding to risks of material misstatement due to fraud
Fraud risk assessment	To identify risks of material misstatement due to fraud (fraud risks) we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included: -    Enquiring of the Directors, the Group Audit Committee, Group Internal Audit and the Group's Legal team and inspection of policy documentation as to the Group's high-level policies and procedures to prevent and detect fraud, including the internal audit function, and the Group's channel for 'whistleblowing', as well as whether they have knowledge of any actual, suspected or alleged fraud. -    Reading Board and certain other committee minutes and attending Group Audit Committee and Risk and Capital Committee meetings. -    Considering the findings of Group Internal Audit's reviews covering the financial year. -    Considering remuneration incentive schemes and performance targets for management and the Directors.
Risk communications	We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit. This included communication from the Group audit team to full scope component audit teams of relevant fraud risks identified at the Group level and request to full scope component audit teams to report to the Group audit team any instances of fraud that could give rise to a material misstatement at the Group level.
Fraud risks	As required by auditing standards, and taking into account possible pressures to meet profit targets and our overall knowledge of the control environment, we perform procedures to address the risk of management override of controls, in particular the risk that Group and component management may be in a position to make inappropriate accounting entries, and the risk of bias in accounting estimates and judgements such as impairment and pension assumptions. On this audit we do not believe there is a fraud risk related to revenue recognition, given the relative simplicity of the most significant revenue streams and the segregation of duties between management and third party service providers. We also identified fraud risks related to: -    The recoverability of certain of the Group's goodwill and certain of the Parent Company's investment in subsidiaries in response to the high degree of estimation uncertainty due to increased market volatility and business performance in the year, and the impact of these on the profit or loss of the Group, and the susceptibility of these estimates to management bias. -    The classification of certain expenses as restructuring, given the extent of restructuring in the Group's cost base, and the level of market interest in the delivery of both transformation programmes and cost savings, the impact of these on both the incentive to classify items as restructuring expenses and the consequences of an error or deliberate misstatement in classification on the adjusted operating profit reported.
Link to KAMs	Further detail in respect of the risk of fraud over the recoverability of certain of the Group's goodwill and certain of the Parent Company's investment in subsidiaries, including our procedure to compare certain key input assumptions to external market data, is set out in the key audit matter disclosures in section 4.1 of this report.
Procedures to address fraud risks	Our audit procedures included evaluating the design, implementation, and where relevant operating effectiveness of internal controls relevant to mitigate these risks. To address the risk of fraud over the classification of restructuring expenses we tested a sample of expenses and challenged finance management in relation to the classification of those selected expenses against the Group's adjusted profit methodology. Based on the evidence obtained, we assessed whether each sampled expense related to a transaction or event that met the definition of restructuring, to determine whether there were indications of inconsistent classification or indicators of management bias. We also performed substantive audit procedures including: -    Identifying journal entries and other adjustments to test for all Group components based on risk criteria and comparing the identified entries to supporting documentation. These included journal entries posted by senior finance management and those posted to unusual accounts, as well as those which comprised unexpected posting combinations. -    Evaluating the business purpose of significant unusual transactions. -    Assessing significant accounting estimates for bias, including whether the judgements made in making accounting estimates are indicative of a potential bias.

Laws and regulations - identifying and responding to risks of material misstatement relating to compliance with laws and regulations
Laws and regulations risk assessment	We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements. For this risk assessment matters considered included the following: -    Our general commercial and sector experience. -    Discussion with the Directors and other management (as required by auditing standards). -    Inspection of the Group's regulatory and legal correspondence. -    Inspection of the policies and procedures regarding compliance with laws and regulation. As the Group and many of its subsidiaries are regulated, our assessment of risks involved gaining an understanding of the control environment including the entity's procedures for complying with regulatory requirements, how they analyse identified breaches and assessing whether there were any implications of identified breaches on our audit.
Risk communications	We communicated identified laws and regulations throughout the audit team and remained alert to any indications of non-compliance throughout the audit. This included communication from the Group audit team to full scope component audit teams of relevant laws and regulations identified at Group level, and a request for full scope component auditors to report to the Group audit team any instances of non-compliance with laws and regulations that could give rise to a material misstatement at the Group level. The potential effect of these laws and regulations on the financial statements varies considerably.
Direct laws context and link to audit	Firstly, the Group is subject to laws and regulations that directly affect the financial statements including financial reporting legislation (including related companies legislation), distributable profits legislation, taxation legislation and pensions regulations and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
Most significant indirect law/ regulation areas	Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation. We identified the following areas as those most likely to have such an effect: -    Specific areas of regulatory capital and liquidity. -    Conduct, including Client Assets. -    Anti-money laundering, and market abuse regulations. -    Certain aspects of company legislation recognising the financial and regulated nature of the Group's activities and its legal form. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the Directors and other management and inspection of regulatory and legal correspondence, if any. Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach.
Actual or suspected breaches discussed with AC	We discussed with the Audit Committee matters related to actual or suspected breaches of laws or regulations, for which disclosure is not necessary, and considered any implications for our audit.
Context
Context of the ability of the audit to detect fraud or breaches of law or regulation	Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a higher risk of non-detection of fraud, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.

 

6. Our determination of materiality

The scope of our audit was influenced by our application of materiality. We set quantitative thresholds and overlaid qualitative considerations to help us determine the scope of our audit and the nature, timing and extent of our procedures, and in evaluating the effect of misstatements, both individually and in the aggregate, on the financial statements as a whole.

£13.7m (FY22: £14.0m) Materiality for the group financial statements as a whole	What we mean A quantitative reference for the purpose of planning and performing our audit.
	Basis for determining materiality and judgements applied Materiality for the Group financial statements as a whole was set at £13.7m (FY22: £14.0m). This was determined with reference to a benchmark of total revenue. Consistent with FY22, we determined that total revenue remains the benchmark for the Group given the performance is such that a normalised profit benchmark would indicate materiality which is inappropriate for the size and scale of the Group. Our Group materiality of £13.7m was determined by applying a percentage to the total revenue. When using a benchmark of total revenue to determine overall materiality, KPMG's approach for listed entities considers a guideline range of 0.5% to 1% of the measure. In setting overall Group materiality, we applied a percentage of 0.9% (FY22: 0.9%) to the benchmark. Materiality for the Parent Company financial statements as a whole was set at £13.0m (FY22: £5.6m), determined with reference to a benchmark of parent company total assets, limited to be less than materiality for the group financial statements as a whole. In 2022, we applied the component materiality to our audit of the parent company balance sheet. Our materiality in both periods was lower than we would have determined with reference to a benchmark of parent company total assets. It represents 0.2% (2022: 0.1%) of the stated benchmark.
£6.9m (FY22: £9.1m) Performance materiality	What we mean Our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across the financial statements as a whole.
	Basis for determining performance materiality and judgements applied We have considered performance materiality at a level of 50% (FY22: 65%) of materiality for abrdn plc's Group financial statements as a whole to be appropriate. The Parent Company performance materiality was set at £6.5m (FY22: £3.6m), which equates to 50% (FY22: 65%) of materiality for the Parent Company financial statements as a whole. We applied this reduced percentage in our determination of performance materiality for the Group and Parent Company financial statements in the current year as we identified specific factors indicating an elevated level of aggregation risk. These factors included the ongoing level of restructuring and change impacting the Group.
£0.69m (FY22: £0.7m) Audit misstatement posting threshold	What we mean This is the amount below which identified misstatements are considered to be clearly trivial from a quantitative point of view. We may become aware of misstatements below this threshold which could alter the nature, timing and scope of our audit procedures, for example if we identify smaller misstatements which are indicators of fraud. This is also the amount above which all misstatements identified are communicated to abrdn plc's Audit Committee.
	Basis for determining the audit misstatement posting threshold and judgements applied We set our audit misstatement posting threshold at 5% (FY22: 5%) of our materiality for the Group financial statements. We also report to the Audit Committee any other identified misstatements that warrant reporting on qualitative grounds.

The overall materiality for the Group financial statements of £13.7m (FY22: £14.0m) compares as follows to the main financial statement caption amounts:

	Total Group revenue		Group profit/(loss) before tax1		Total Group assets1
	FY23	FY22	FY23	FY22	FY23	FY22
Financial statement caption	£1,474m	£1,538m	(£6m)	(£612m)	£8,031m	£9,212m
Group materiality as % of caption	0.9%	0.9%	(228.3%)	2.3%	0.2%	0.2%

1. Comparatives for FY22 have been restated for the implementation of IFRS 17.

7. Scope of our audit

Group scope	What we mean How the Group audit team determined the procedures to be performed across the Group.
	The Group has 313 (FY22: 311) reporting components. In order to determine the work performed at the reporting component level, we identified those components that we considered to be of individual financial significance, those which were significant due to risk and those remaining components on which we required procedures to be performed to provide us with the evidence we required in order to conclude on the Group financial statements as a whole. We determined individually financially significant components as those contributing at least 10% (FY22: 10%) of Group total revenue, Group net assets or total profits and losses that made up Group loss before tax. We selected these metrics because these are the most representative of the relative size of the components. We identified 8 (FY22: 7) components as individually financially significant components and performed full scope audits on all of these components. In addition to the individually financially significant components, we identified 2 (FY22: 2) components as significant, owing to significant risks of material misstatement affecting the Group financial statements. We performed full scope audits for these 2 components (FY22: 2). In addition, to enable us to obtain sufficient appropriate audit evidence for the Group financial statements as a whole, we selected 9 (FY22: 12) further components on which to perform procedures. Of these components, we performed full scope audits for 3 components (FY22: 10) and performed specific risk-focused audit procedures over revenue on 2 components (FY22: 1) and over investment and unit-linked liability valuation and fair value gains and losses on 4 components (FY22: 1). The components within the scope of our work accounted for the following percentages of the Group's results, with the prior year comparatives indicated in brackets: Scope Number of components Range of  materiality applied Group revenue Total profits and losses that made up Group PBT Group net assets Full scope audit 13 (19) £2.7m - £6.9m (£0.7m - £8.6m) 80% (83%) 80% (82%) 84% (89%) Specific audit procedures 6 (2) £5.5m - £1.4m (£1.4m - £2.8m) 4% (3%) 4% (2%) 6% (4%) Total 19 (21) 84% (86%) 84% (84%) 90% (93%) In addition, we instructed one component team to perform specific procedures to inform our risk assessment of accounting adjustments required for the first-year implementation of IFRS 17 by a Joint Venture. As these procedures did not identify material risks to our audit we did not scope the component in for further audit procedures. The remaining 16% (FY22: 14%) of total Group revenue, 16% (FY22: 16%) of total profits and losses that made up Group profit before tax and 10% (FY22: 7%) of Group net assets is represented by 294 (FY22: 290) reporting components, none of which individually represented more than 2.5% (FY22: 2.0%) of any of total Group revenue, total profits and losses that made up Group profit before tax or Group net assets. For these components, we performed analysis at an aggregated Group level to re-examine our assessment that there were no significant risks of material misstatement within these. The work on 11 of the 19 components (FY22: 17 of the 21 components) was performed by component auditors and the rest, including the audit of the Parent Company, was performed by the Group team. Testing over all KAMs included in Section 4 was performed by the Group team, with the exception of testing over management fee revenue from contracts with customers, which is performed by our component auditors. In addition, the Group team has also performed audit procedures on the following key areas on behalf of the components: -    Testing of IT Systems in those instances where Group and components use common systems. -    Testing over the completeness of journal postings in the period in those instances where Group and components use common systems. -    Testing of cash bonus and deferred bonus award charges in the period. These items were audited by the Group team because the consistency of these systems and processes meant that this was the most effective way to obtain audit evidence. The Group team communicated the results of these procedures to the component teams. The Group team instructed component auditors as to the significant areas to be covered, including the relevant risks detailed above and the information to be reported back. The Group team approved the component materialities, as detailed in the table above, having regard to the mix of size and risk profile of the Group across the components. The scope of the audit work performed was predominately substantive as we placed limited reliance upon the Group's internal control over financial reporting.
Group audit team oversight	What we mean The extent of the Group audit team's involvement in component audits. In working with component auditors, the Group audit team: -   Held a virtual global planning and risk assessment meeting led by the Group audit engagement partner to discuss key audit risks and obtain input from component teams. -   Held planning calls and meetings with component audit teams to discuss the significant areas of the audit relevant to the components, including the key audit matter identified in respect of recognition of management fee revenue from contracts with customers. -   Issued Group audit instructions to component auditors, on the scope of their work, including specifying the minimum procedures to perform in their audit of revenue within the Investments business and cash. -   Visited four (FY22: three) of the four (FY22: four) component teams not located in the UK, to assess the audit risk and strategy. Video and telephone conference meetings were also held with these component auditors. At these subsequent virtual meetings, the findings reported to the Group team were discussed in more detail, and any further work required by the Group team was then performed by the component audit teams. -    Inspected component audit team's key working papers within component audit files (using remote technology capabilities) to understand and challenge the audit approach and audit findings of each component.

8. Other information in the Annual report and accounts

The Directors are responsible for the other information presented in the Annual report together with the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon.

All other information
Our responsibility Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge.	Our reporting Based solely on that work we have not identified material misstatements or inconsistencies in the other information.
Strategic report and Directors' report
Our responsibility and reporting Based solely on our work on the other information described above we report to you as follows: -    We have not identified material misstatements in the Strategic report and the Directors' report. -    In our opinion the information given in those reports for the financial year is consistent with the financial statements. -    In our opinion those reports have been prepared in accordance with the Companies Act 2006.

Directors' remuneration report
Our responsibility We are required to form an opinion as to whether the part of the Directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.	Our reporting In our opinion the part of the Directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.
Corporate governance disclosures
Our responsibility We are required to perform procedures to identify whether there is a material inconsistency between the financial statements and our audit knowledge, and: -    The Directors' statement that they consider that the annual report and financial statements taken as a whole is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy. -    The section of the annual report describing the work of the Audit Committee, including the significant issues that the Audit Committee considered in relation to the financial statements, and how these issues were addressed. -    The section of the annual report that describes the review of the effectiveness of the Group's risk management and internal control systems.	Our reporting Based on those procedures, we have concluded that each of these disclosures is materially consistent with the financial statements and our audit knowledge.
We are also required to review the part of the Corporate Governance Statement relating to the Group's compliance with the provisions of the UK Corporate Governance Code specified by the Listing Rules for our review.	We have nothing to report in this respect.

Other matters on which we are required to report by exception

Our responsibility Under the Companies Act 2006, we are required to report to you if, in our opinion: -    Adequate accounting records have not been kept by the Parent Company or returns adequate for our audit have not been received from branches not visited by us; or -    The Parent Company financial statements and the part of the Directors' remuneration report to be audited are not in agreement with the accounting records and returns; or -    Certain disclosures of Directors' remuneration specified by law are not made; or -    We have not received all the information and explanations we require for our audit.

Our reporting We have nothing to report in these respects.

9. Respective responsibilities

Directors' responsibilities

As explained more fully in their statement set out on page 141, the Directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and Parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor's report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC's website at www.frc.org.uk/auditorsresponsibilities.

The Company is required to include these financial statements in an annual financial report prepared under Disclosure Guidance and Transparency Rule 4.1.17R and 4.1.18R. This auditor's report provides no assurance over whether the annual financial report has been prepared in accordance with those requirements.

10. The purpose of our audit work and to whom we owe our responsibilities

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and the terms of our engagement by the Company. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report, and the further matters we are required to state to them in accordance with the terms agreed with the Company, and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.

Richard Faulkner (Senior Statutory Auditor)

for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants

Saltire Court

20 Castle Terrace

Edinburgh

EH1 2EG

26 February 2024

Group financial statements

Consolidated income statement

For the year ended 31 December 2023

		2023	2022
			restated1
	Notes	£m	£m
Revenue from contracts with customers	3	1,474	1,538
Cost of sales	3	(76)	(82)
Net operating revenue		1,398	1,456
Restructuring and corporate transaction expenses	5	(152)	(214)
Impairment of intangibles acquired in business combinations and through the purchase of customer contracts	5	(63)	(369)
Amortisation of intangibles acquired in business combinations and through the purchase of customer contracts	5	(126)	(125)
Staff costs and other employee-related costs	5	(529)	(549)
Other administrative expenses	5	(593)	(662)
Total administrative and other expenses		(1,463)	(1,919)
Net gains or losses on financial instruments and other income
Fair value movements and dividend income on significant listed investments	4	(114)	(119)
Other net gains or losses on financial instruments and other income	4	116	(3)
Total net gains or losses on financial instruments and other income		2	(122)
Finance costs		(25)	(29)
Profit on disposal of subsidiaries and other operations	1	79	-
Profit on disposal of interests in associates	1	-	6
Reversal of impairment/(impairment) of interests in associates and joint ventures	14	2	(9)
Share of profit or loss from associates and joint ventures	14	1	5
Loss before tax		(6)	(612)
Tax credit	9	18	66
Profit/(loss) for the year		12	(546)
Attributable to:
Equity shareholders of abrdn plc		1	(558)
Other equity holders	28	11	11
Non-controlling interests - ordinary shares	28	-	1
		12	(546)
Earnings per share
Basic (pence per share)	10	0.1	(26.6)
Diluted (pence per share)	10	0.1	(26.6)

1. Comparatives for 2022 have been restated for the implementation of IFRS 17. Refer Basis of preparation.

The Notes on pages 167 to 270 are an integral part of these consolidated financial statements.

Consolidated statement of comprehensive income

For the year ended 31 December 2023

		2023	2022
			restated1
	Notes	£m	£m
Profit/(loss) for the year		12	(546)
Items that will not be reclassified subsequently to profit or loss:
Remeasurement losses on defined benefit pension plans	31	(139)	(793)
Share of other comprehensive income of associates and joint ventures	14	(4)	-
Total items that will not be reclassified subsequently to profit or loss		(143)	(793)
Items that may be reclassified subsequently to profit or loss:
Fair value (losses)/gains on cash flow hedges	18	(40)	85
Exchange differences on translating foreign operations		(35)	36
Share of other comprehensive income of associates and joint ventures	14	(27)	(57)
Items transferred to the consolidated income statement
Fair value losses/(gains) on cash flow hedges	18	28	(78)
Realised foreign exchange (gains)	1	(1)	-
Equity holder tax effect of items that may be reclassified subsequently to profit or loss	9	3	(2)
Total items that may be reclassified subsequently to profit or loss		(72)	(16)
Other comprehensive income for the year		(215)	(809)
Total comprehensive income for the year		(203)	(1,355)
Attributable to:
Equity shareholders of abrdn plc		(214)	(1,367)
Other equity holders	28	11	11
Non-controlling interests - ordinary shares	28	-	1
		(203)	(1,355)

1. Comparatives for 2022 have been restated for the implementation of IFRS 17. Refer Basis of preparation.

The Notes on pages 167 to 270 are an integral part of these consolidated financial statements.

Consolidated statement of financial position

As at 31 December 2023

		2023	2022
			restated1
	Notes	£m	£m
Assets
Intangible assets	13	1,578	1,619
Pension and other post-retirement benefit assets	31	740	831
Investments in associates and joint ventures accounted for using the equity method	14	229	232
Property, plant and equipment	15	163	201
Deferred tax assets	9	215	212
Financial investments	17	2,047	2,939
Receivables and other financial assets	19	1,071	907
Current tax recoverable	9	10	7
Other assets	20	77	92
Assets of operations held for sale	21	19	87
Cash and cash equivalents	22	1,196	1,133
		7,345	8,260
Assets backing unit linked liabilities	23
Financial investments		669	924
Receivables and other unit linked assets		4	5
Cash and cash equivalents		13	23
		686	952
Total assets		8,031	9,212

		2023	2022
			restated1
	Notes	£m	£m
Liabilities
Third party interest in consolidated funds	29	187	242
Subordinated liabilities	30	599	621
Pension and other post-retirement benefit provisions	31	12	12
Deferred tax liabilities	9	129	211
Current tax liabilities	9	6	11
Derivative financial liabilities	29	9	1
Other financial liabilities2	32	1,241	1,201
Provisions	33	66	97
Other liabilities	33	4	8
Liabilities of operations held for sale	21	2	14
		2,255	2,418
Unit linked liabilities	23
Investment contract liabilities		684	773
Third party interest in consolidated funds		-	173
Other unit linked liabilities		2	6
		686	952
Total liabilities		2,941	3,370
Equity
Share capital	24	257	280
Shares held by trusts	25	(141)	(149)
Share premium reserve	24	640	640
Retained earnings	26	4,449	4,986
Other reserves	27	(327)	(129)
Equity attributable to equity shareholders of abrdn plc		4,878	5,628
Other equity	28	207	207
Non-controlling interests - ordinary shares	28	5	7
Total equity		5,090	5,842
Total equity and liabilities		8,031	9,212

1. Comparatives for 2022 have been restated for the implementation of IFRS 17. Refer Basis of preparation.

2. The Group has made a presentational change to show Deferred income within Other financial liabilities. Refer Note 32.

The Notes on pages 167 to 270 are an integral part of these consolidated financial statements.

The consolidated financial statements on pages 160 to 270 were approved by the Board and signed on its behalf by the following Directors:

Sir Douglas Flint	Jason Windsor
Chairman 26 February 2024	Chief Financial Officer 26 February 2024

Consolidated statement of changes in equity

For the year ended 31 December 2023

		Share capital	Shares held by trusts	Share premium reserve	Retained earnings1	Other reserves	Total equity attributable to equity shareholders of abrdn plc1	Other equity	Non-controlling interests - ordinary shares	Total equity1
	Notes	£m	£m	£m	£m	£m	£m	£m	£m	£m
31 December 2022		280	(149)	640	4,986	(129)	5,628	207	7	5,842
Effect of application of IFRS 9 on Investments in associates and joint ventures accounted for using the equity method1		-	-	-	51	-	51	-	-	51
1 January 2023		280	(149)	640	5,037	(129)	5,679	207	7	5,893
Profit for the year		-	-	-	1	-	1	11	-	12
Other comprehensive income for the year		-	-	-	(170)	(45)	(215)	-	-	(215)
Total comprehensive income for the year	26, 27	-	-	-	(169)	(45)	(214)	11	-	(203)
Issue of share capital	24	-	-	-	-	-	-	-	-	-
Dividends paid on ordinary shares	12	-	-	-	(279)	-	(279)	-	-	(279)
Interest paid on other equity	28	-	-	-	-	-	-	(11)	-	(11)
Share buyback	24, 26, 27	(23)	-	-	(302)	23	(302)	-	-	(302)
Other movements in non-controlling interests in the year	28	-	-	-	-	-	-	-	(2)	(2)
Reserves credit for employee share-based payments	27	-	-	-	-	24	24	-	-	24
Transfer to retained earnings for vested employee share-based payments	26, 27	-	-	-	31	(31)	-	-	-	-
Transfer between reserves on impairment of subsidiaries	26, 27	-	-	-	169	(169)	-	-	-	-
Shares acquired by employee trusts	25	-	(27)	-	-	-	(27)	-	-	(27)
Shares distributed by employee and other trusts and related dividend equivalents	25, 26	-	35	-	(38)	-	(3)	-	-	(3)
31 December 2023		257	(141)	640	4,449	(327)	4,878	207	5	5,090

1. The Group implemented IFRS 9 in 2019. However, as permitted under a temporary exemption granted to insurers in IFRS 4 Insurance Contracts, the Group's insurance joint venture, Heng An Standard Life Insurance Company Limited, applied IFRS 9 at 1 January 2023 following the implementation of the new insurance standard, IFRS 17. Refer Basis of preparation.

		Share capital	Shares held by trusts	Share premium reserve	Retained earnings restated1, 2	Other reserves2	Total equity attributable to equity shareholders of abrdn plc restated1	Other equity	Non-controlling interests - ordinary shares	Total equity restated1
	Notes	£m	£m	£m	£m	£m	£m	£m	£m	£m
1 January 2022		305	(171)	640	5,766	1,094	7,634	207	6	7,847
(Loss)/profit for the year		-	-	-	(558)	-	(558)	11	1	(546)
Other comprehensive income for the year		-	-	-	(850)	41	(809)	-	-	(809)
Total comprehensive income for the year		-	-	-	(1,408)	41	(1,367)	11	1	(1,355)
Issue of share capital	24	-	-	-	-	-	-	-	-	-
Dividends paid on ordinary shares	12	-	-	-	(307)	-	(307)	-	-	(307)
Interest paid on other equity		-	-	-	-	-	-	(11)	-	(11)
Share buyback	24, 26, 27	(25)	-	-	(302)	25	(302)	-	-	(302)
Cancellation of capital redemption reserve	26, 27	-	-	-	1,059	(1,059)	-	-	-	-
Other movements in non-controlling interests in the year		-	-	-	-	-	-	-	-	-
Reserves credit for employee share-based payments	27	-	-	-	-	24	24	-	-	24
Transfer to retained earnings for vested employee share-based payments	26, 27	-	-	-	63	(63)	-	-	-	-
Transfer between reserves on disposal of subsidiaries		-	-	-	1	(1)	-	-	-	-
Transfer between reserves on impairment of subsidiaries	26, 27	-	-	-	207	(207)	-	-	-	-
Shares acquired by employee trusts	25	-	(46)	-	-	-	(46)	-	-	(46)
Shares distributed by employee and other trusts and related dividend equivalents	25, 26	-	68	-	(70)	-	(2)	-	-	(2)
Other movements2	26, 27	-	-	-	(23)	17	(6)	-	-	(6)
31 December 2022		280	(149)	640	4,986	(129)	5,628	207	7	5,842

1. Comparatives for 2022 have been restated for the implementation of IFRS 17. Refer Basis of preparation.

2. Other movements for 2022 included the transfer of (£17m) previously recognised in the foreign currency translation reserve (which is part of Other reserves) to Retained earnings. In prior periods we had considered the functional currency of an intermediate subsidiary holding the Group's investment in HDFC Life to be US Dollars. We now consider that the functional currency should have been GBP, resulting in the transfer between reserves. Prior periods were not restated as the impact on prior periods was not considered material. There was no impact on net assets for any period presented.

The Notes on pages 167 to 270 are an integral part of these consolidated financial statements.

Consolidated statement of cash flows

For the year ended 31 December 2023

		2023	2022
			restated1
	Notes	£m	£m
Cash flows from operating activities
Loss before tax		(6)	(612)
Change in operating assets	37	157	916
Change in operating liabilities	37	(109)	(725)
Adjustment for non-cash movements in investment income		3	-
Other non-cash and non-operating items	37	210	567
Taxation paid2		(34)	(36)
Net cash flows from operating activities		221	110
Cash flows from investing activities
Purchase of property, plant and equipment		(18)	(21)
Acquisition of subsidiaries and unincorporated businesses net of cash acquired	1(b)	(108)	(1,378)
Disposal of subsidiaries net of cash disposed of	37	139	-
Acquisition of investments in associates and joint ventures	14	(2)	(20)
Proceeds in relation to contingent consideration	36	21	18
Payments in relation to contingent consideration	36	(12)	(7)
Disposal of investments in associates and joint ventures	1(c)	-	6
Purchase of financial investments		(445)	(297)
Proceeds from sale or redemption of financial investments	17	1,029	1,633
Taxation paid on sale or redemption of financial investments2		(41)	(28)
Prepayment in respect of potential acquisition of customer contracts	39(b)	20	14
Acquisition of intangible assets		(41)	(6)
Net cash flows from investing activities		542	(86)
Cash flows from financing activities
Repayment of subordinated liabilities	30	-	(92)
Payment of lease liabilities - principal		(24)	(46)
Payment of lease liabilities - interest		(6)	(6)
Shares acquired by trusts		(27)	(46)
Interest paid on subordinated liabilities and other equity		(20)	(34)
Other interest paid		(3)	(2)
Cash received relating to collateral held in respect of derivatives hedging subordinated liabilities		(50)	74
Share buyback	24	(302)	(302)
Ordinary dividends paid	12	(279)	(307)
Net cash flows from financing activities		(711)	(761)
Net increase/(decrease) in cash and cash equivalents		52	(737)
Cash and cash equivalents at the beginning of the year		1,166	1,875
Effects of exchange rate changes on cash and cash equivalents		(8)	28
Cash and cash equivalents at the end of the year	22	1,210	1,166
Supplemental disclosures on cash flows from operating activities
Interest received		85	38
Dividends received		91	110
Rental income received on investment property		3	2

1. Comparatives for 2022 have been restated for the implementation of IFRS 17. Refer Basis of preparation.

2. Total taxation paid was £75m in 2023 (2022: £64m).

The Notes on pages 167 to 270 are an integral part of these consolidated financial statements.

Presentation of consolidated financial statements

The Group's significant accounting policies are included at the beginning of the relevant notes to the consolidated financial statements. This section sets out the basis of preparation, a summary of the Group's critical accounting estimates and judgements in applying accounting policies, and other significant accounting policies which have been applied to the financial statements as a whole.

(a)                   Basis of preparation

These consolidated financial statements have been prepared in accordance with UK-adopted international accounting standards. The consolidated financial statements have been prepared on a going concern basis and under the historical cost convention, as modified by the revaluation of owner-occupied property, derivative instruments and other financial assets and financial liabilities at fair value through profit or loss (FVTPL).

Climate risks have been taken into consideration in the preparation of the consolidated financial statements, primarily in relation to fair value calculations and impairment assessments. Refer Note 34(a) for further details of our consideration of climate impact including our current assessment that the impact on the consolidated financial statements is not material.

The current inflationary environment has also been taken into consideration in the preparation of the consolidated financial statements. Again this primarily relates to fair value calculations and impairment assessments. The impact of inflation has been factored into budgeted cash flows used in these calculations and assessment. However, terminal growth rates are still based on longer term inflation expectations which are largely unchanged.

The principal accounting policies set out in these consolidated financial statements have been consistently applied to all financial reporting periods presented except as described below.

(a)(i)          New standards, interpretations and amendments to existing standards that have been adopted by the Group

The Group has adopted the following new International Financial Reporting Standards (IFRSs), interpretations and amendments to existing standards, which are effective for annual periods beginning on or after 1 January 2023.

IFRS 17 Insurance Contracts

On 1 January 2023, the Group adopted IFRS 17 Insurance Contracts. IFRS 17 replaces IFRS 4 Insurance Contracts which was an interim standard which permitted the continued application of accounting policies, for insurance contracts and contracts with discretionary participation features, which were being used at transition to IFRS except where a change satisfied criteria set out in IFRS 4. IFRS 17 introduces new required measurement and presentation accounting policies for such contracts which reflect the view that these contracts combine features of a financial instrument and a service contract.

IFRS 17's measurement model, which applies to groups of contracts, combines a risk-adjusted present value of future cash flows and an amount representing unearned profit. IFRS 17 introduces a new approach to presentation in the income statement and statement of comprehensive income in relation to direct exposure to insurance contracts.

The Group has no material direct exposure to insurance contracts and contracts with discretionary participating features and the adoption of this standard has had no significant direct impact on the measurement or presentation of insurance contracts and therefore no restatement of prior periods was required in relation to direct exposure.

However, the results of the Group's joint venture Heng An Standard Life Insurance Company Limited (HASL) have been impacted by the adoption of IFRS 17 on 1 January 2023. HASL has also applied IFRS 9 Financial Instruments on 1 January 2023. While the Group had adopted IFRS 9 on 1 January 2019 following the sale of its UK and European insurance in 2018, HASL had continued to take the permitted temporary exemption granted to insurers in IFRS 4 to defer the implementation of IFRS 9 until the implementation of IFRS 17.

IFRS 17 must be applied retrospectively, however as permitted by the standard, HASL has applied IFRS 9 prospectively. Consequently, the combined impact of the change of accounting policy comes through at 1 January 2023. The net impact of the changes is an increase in the carrying value of HASL, the Group's retained earnings and net assets of £16m, comprising a decrease of £35m for IFRS 17 offset by an increase of £51m for IFRS 9.

IFRS 17 has three main measurement models: the general measurement model; the variable fee approach and the premium allocation approach. HASL is primarily using the general measurement model for its traditional insurance business and the variable fee approach for its direct participating contracts and investment contracts with direct participation features with some use of the premium allocation approach. The results reflect the election to take the other comprehensive income (OCI) options under IFRS 17 to take elements of the movements in the measurement of insurance contract through OCI to minimise income statement volatility.

The impact of the restatement in 2022 below partly reflects that the measurement of investment contracts under the variable fee approach reflect the fair value of the underlying assets from 1 January 2022 but a number of these assets were not accounted for at fair value until 1 January 2023 upon HASL's adoption of IFRS 9 (see below). The measurement of the insurance contracts is also impacted by the use of lower discount rates to discount liabilities under IFRS 17 as compared to those used under IFRS 4 and higher liabilities for financial related guarantees within some products.

In relation to IFRS 9, the largest impact relates to its debt investments which were classified as held to maturity under IAS 39 and subsequently accounted for at amortised cost but are now classified as fair value through OCI under IFRS 9.

As noted above, IFRS 17 is applied retrospectively. However, it was not practicable for HASL to apply a full retrospective approach. Depending on the nature and start date of the insurance contract, HASL has applied either a modified retrospective approach or a fair value approach. The choice of transition approach is not expected to have a significant impact on future periods.

The carrying value of the joint venture and opening retained earnings as at 1 January 2022 have been restated for IFRS 17.

	31 December 2021 as previously presented	Impact  of IFRS 17	1 January 2022 as restated
	£m	£m	£m
Consolidated statement of financial position
Carrying value of HASL	258	(9)	249
Investments in associates and joint ventures accounted for using the equity method	274	(9)	265
Total assets	11,418	(9)	11,409
Retained earnings	5,775	(9)	5,766
Total equity attributable to equity shareholders of abrdn plc	7,643	(9)	7,634
Total equity	7,856	(9)	7,847
Total equity and liabilities	11,418	(9)	11,409

The carrying value of HASL and the movements in the carrying value as at 31 December 2022 have also been restated.

	2022 as previously presented	Impact  of IFRS 17	2022 as restated
	£m	£m	£m
Consolidated income statement
Share of profit or loss from associates and joint ventures	2	3	5
Loss before tax	(615)	3	(612)
Loss for the year	(549)	3	(546)
Attributable to:
Equity shareholders of abrdn plc	(561)	3	(558)
Earnings per share
Basic (pence per share)	(26.8)	0.2	(26.6)
Diluted (pence per share)	(26.8)	0.2	(26.6)
Consolidated statement of comprehensive income
Loss for the year	(549)	3	(546)
Share of other comprehensive income of associates and joint ventures	(28)	(29)	(57)
Total items that may be reclassified subsequently to profit or loss	13	(29)	(16)
Other comprehensive income for the year	(780)	(29)	(809)
Total comprehensive income for the year	(1,329)	(26)	(1,355)
Attributable to:
Equity shareholders of abrdn plc	(1,341)	(26)	(1,367)
Analysis of adjusted profit
Adjusted for the following items
Share of profit or loss from associates and joint ventures	2	3	5
Total adjusting items including results of associates and joint ventures	(868)	3	(865)
Loss for the year attributable to equity shareholders of abrdn plc	(561)	3	(558)
Loss for the year	(549)	3	(546)

	31 December 2022 as previously presented	Impact  of IFRS 17	31 December 2022 as restated
	£m	£m	£m
Consolidated statement of financial position
Carrying value of HASL	245	(35)	210
Investments in associates and joint ventures accounted for using the equity method	267	(35)	232
Total assets	9,247	(35)	9,212
Retained earnings	5,021	(35)	4,986
Total equity attributable to equity shareholders of abrdn plc	5,663	(35)	5,628
Total equity	5,877	(35)	5,842
Total equity and liabilities	9,247	(35)	9,212
Consolidated statement of changes in equity
Opening retained earnings	5,775	(9)	5,766
Loss for the year	(561)	3	(558)
Other comprehensive income for the year	(821)	(29)	(850)
Total comprehensive income for the year	(1,382)	(26)	(1,408)
Closing retained earnings	5,021	(35)	4,986
Opening total equity attributable to equity shareholders of abrdn plc	7,643	(9)	7,634
Loss for the year	(561)	3	(558)
Other comprehensive income for the year	(780)	(29)	(809)
Total comprehensive income for the year	(1,341)	(26)	(1,367)
Closing total equity attributable to equity shareholders of abrdn plc	5,663	(35)	5,628
Opening total equity	7,856	(9)	7,847
Loss for the year	(549)	3	(546)
Other comprehensive income for the year	(780)	(29)	(809)
Total comprehensive income for the year	(1,329)	(26)	(1,355)
Closing total equity	5,877	(35)	5,842

The restatement has no overall impact on the cash flows of the Group but does impact certain line items in the consolidated statement of cash flows:

	31 December 2022 as previously presented	Impact  of IFRS 17	31 December 2022 as restated
	£m	£m	£m
Consolidated statement of cash flows
Loss before tax	(615)	3	(612)
Other non-cash and non-operating items	570	(3)	567

In line with the approach adopted by the Group on its implementation of IFRS 9 on 1 January 2019 and as permitted by IFRS 9, the comparatives have not been restated for HASL's adoption of IFRS 9. The impact of HASL adopting IFRS 9 is recognised in retained earnings at 1 January 2023.

	31 December 2022 as restated for IFRS 17	Impact  of IFRS 9	1 January 2023
	£m	£m	£m
Consolidated statement of financial position
Carrying value of HASL	210	51	261
Investments in associates and joint ventures accounted for using the equity method	232	51	283
Total assets	9,212	51	9,263
Retained earnings	4,986	51	5,037
Total equity attributable to equity shareholders of abrdn plc	5,628	51	5,679
Total equity	5,842	51	5,893
Total equity and liabilities	9,212	51	9,263

Amendments to existing standards

International Tax Reform - Organization for Economic Cooperation and Development (OECD) Pillar Two Model Rules - Amendments to IAS 12

In May 2023, amendments to IAS 12 were issued which were endorsed by the UK endorsement board on 19 July 2023. The amendments were effective immediately.

The amendments clarify that IAS 12 applies to income taxes arising from tax law enacted or substantively enacted to implement the Pillar Two Model Rules published by the OECD, including tax law that implements qualified domestic minimum top-up taxes. However, the amendments also introduce a mandatory exception in IAS 12 from recognising and disclosing deferred tax assets and liabilities related to Pillar Two income taxes which the Group has applied.

The amendments introduce new disclosure requirements in relation to Pillar Two income taxes including qualitative and quantitative information about Group's exposure to Pillar Two income taxes in relation to Pillar Two legislation enacted or substantively enacted but not yet effective at the end of the reporting period. Refer Note 9(e) for the information on this exposure.

Other amendments

-  Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2.

-  Definition of Accounting Estimates - Amendments to IAS 8.

-  Deferred Tax related to Assets and Liabilities arising from a Single Transaction - Amendments to IAS 12.

The Group's accounting policies have been updated to reflect these other amendments. Management considers the implementation of the above amendments to existing standards has had no significant impact on the Group's financial statements.

(a)(ii)         Standards, interpretations and amendments to existing standards that are not yet effective and have not been early adopted by the Group

Certain new standards, interpretations and amendments to existing standards have been published that are mandatory for the Group's annual accounting periods beginning after 1 January 2023. The Group has not early adopted the standards, amendments and interpretations described below.

There are no other new standards, interpretations and amendments to existing standards that have been published that are expected to have a significant impact on the consolidated financial statements of the Group.

(a)(iii) Critical accounting estimates and judgements in applying accounting policies

The preparation of financial statements requires management to exercise judgements in applying accounting policies and make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses arising during the year. Judgements and sources of estimation uncertainty are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The areas where judgements have the most significant effect on the amounts recognised in the consolidated financial statements are as follows:

Financial statement area	Critical judgements in applying accounting policies	Related note
Defined benefit pension plans	Assessment of whether the Group has an unconditional right to a refund of the surplus. Treatment of tax relating to the surplus.	Note 31
Intangible assets	Identification and valuation of intangible assets arising from business combinations, and the determination of useful lives    .	Note 13

The following changes have been made to the Group's critical judgements:

-  In addition to identification and valuation of the intangible assets, the allocation to cash generating units of goodwill arising from the acquisition was considered a critical judgement during 2022 in relation to the acquisition of ii (refer Note 1(b)(ii)). This is not considered as a critical judgement in relation to the 2023 acquisition of the healthcare fund management capabilities of Tekla Capital Management LLC (Tekla) (refer Note 1(b)(i)).

-  Following the final release of the Group's separation costs provision (refer Note 33 for further details), determining whether a provision is required for separation costs is not considered as a critical judgement.

There are no other changes to critical judgements in applying accounting policies from the prior year.

The areas where assumptions and other sources of estimation uncertainty at the end of the reporting period have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows:

Financial statement area	Critical accounting estimates and assumptions	Related note
Intangible assets	Determination of the recoverable amount in relation to the impairment of goodwill.	Note 13
Financial instruments at fair value through profit or loss	Determination of the fair value of contingent consideration liabilities relating to the acquisition of Tritax.	Notes 34 and 36
Defined benefit pension plans	Determination of principal UK pension plan assumptions for mortality, discount rate and inflation.	Note 31

All other critical accounting estimates and assumptions are the same as the prior year.

Further detail on critical accounting estimates and assumptions is provided in the relevant note.

(a)(iv)        Foreign currency translation

The consolidated financial statements are presented in million pounds Sterling.

The statements of financial position of Group entities, including associates and joint ventures accounted for using the equity method, that have a different functional currency than the Group's presentation currency are translated into the presentation currency at the year end exchange rate and their income statements and cash flows are translated at average exchange rates for the year. All resulting exchange differences arising are recognised in other comprehensive income and the foreign currency translation reserve in equity. On disposal of a Group entity the cumulative amount of any such exchange differences recognised in other comprehensive income is reclassified to profit or loss.

Foreign currency transactions are translated into the functional currency at the exchange rate prevailing at the date of the transaction. Gains and losses arising from such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the relevant line in the consolidated income statement.

Translation differences on non-monetary items, such as equity securities held at fair value through profit or loss, are reported as part of the fair value gain or loss within Net gains or losses on financial instruments and other income in the consolidated income statement. Translation differences on financial assets and liabilities held at amortised cost are included in the relevant line in the consolidated income statement.

(a)(v)         Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and financial position, are set out in the Strategic report. This includes details on our liquidity and capital management and our viability statement in the Chief Financial Officer's overview section and our principal risks in the Risk management section including the impacts of the macroeconomic environment and global and regional geopolitical events on these principal risks. In addition, these financial statements include notes on the Group's subordinated liabilities (Note 30), management of its risks including market, credit and liquidity risk (Note 34), its contingent liabilities and commitments (Notes 38 and 39), and its capital structure and position (Note 42).

In preparing these financial statements on a going concern basis, the Directors have considered the following matters and have taken into account market uncertainty.

-  The Group has cash and liquid resources of £1.8bn at 31 December 2023. In addition, the Company has a revolving credit facility of £400m as part of our contingency funding plans which is due to mature in 2026 and remains undrawn.

-  The Group's indicative regulatory Common Equity Tier 1 (CET1) capital surplus on an IFPR basis was £876m in excess of capital requirements at 31 December 2023. The regulatory CET1 capital surplus does not include the value of the Group's significant listed investment in Phoenix Group Holdings (Phoenix).

-  The Group performs regular stress and scenario analysis as described in the Annual report and accounts 2023 Viability statement. The diverse range of management actions available meant the Group was able to withstand these extreme stresses.

-  The Group's operational resilience processes have operated effectively during the period including the provision of services by key outsource providers.

Based on a review of the above factors the Directors are satisfied that the Group and Company have and will maintain sufficient resources to enable them to continue operating for at least 12 months from the date of approval of the financial statements. Accordingly, the financial statements have been prepared on a going concern basis. There were no material uncertainties relating to this going concern conclusion.

(b)      Basis of consolidation

The Group's financial statements consolidate the financial statements of the Company and its subsidiaries.

Subsidiaries are all entities (including investment vehicles) over which the Group has control. Control arises when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. For operating entities this generally accompanies a shareholding of 50% or more in the entity. For investment vehicles, including structured entities, the control assessment also considers the removal rights of other investors and whether the Group acts as principal or agent in assessing the link between power and variable returns. In determining whether the Group acts as principal, and therefore controls the entity, the removal rights of other investors and the magnitude of the variability associated with the returns are also taken into account. As a result, the Group often is considered to control investment vehicles in which its shareholding is less than 50%.

Where the Group is considered to control an investment vehicle, such as an open-ended investment company, a unit trust or a limited partnership, and it is therefore consolidated, the interests of parties other than the Group are assessed to determine whether they should be classified as liabilities or as non-controlling interests. The liabilities are recognised in the third party interest in consolidated funds line in the consolidated statement of financial position and any movements are recognised in the consolidated income statement. The financial liability is designated at fair value through profit or loss (FVTPL) as it is implicitly managed on a fair value basis as its value is directly linked to the market value of the underlying portfolio of assets. The interests of parties other than the Group in all other types of entities are recorded as non-controlling interests.

All intra-group transactions, balances, income and expenses are eliminated in full.

The Group uses the acquisition method to account for acquisitions of businesses. At the acquisition date the assets and liabilities of the business acquired and any non-controlling interests are identified and initially measured at fair value on the consolidated statement of financial position.

When the Group acquires or disposes of a subsidiary, the profits and losses of the subsidiary are included from the date on which control was transferred to the Group until the date on which it ceases, with consistent accounting policies applied across all entities throughout.

Notes to the Group financial statements

1.      Group structure

(a)       Composition

The following diagram is an extract of the Group structure at 31 December 2023 and gives an overview of the composition of the Group.

Diagram removed for the purposes of this announcement.  However it can be viewed in full in the pdf document

A full list of the Company's subsidiaries is provided in Note 44.

(b)      Acquisitions

(b)(i)          Current year acquisitions of subsidiaries and other operations

Healthcare fund management capabilities of Tekla Capital Management

On 27 October 2023, abrdn Inc. purchased the healthcare fund management capabilities of Tekla Capital Management LLC (Tekla) through a purchase agreement. Tekla's investment team transferred to the Group as part of the agreement. The assets under management at the acquisition date were £2.3bn. The acquisition further strengthens abrdn's closed-end fund business and allows the Group to draw on Tekla's expertise in investing in the healthcare sector as it looks to build out its offering in this area.

At the acquisition date the consideration, net assets acquired and resulting goodwill were as follows:

27 October 2023		£m
Cash consideration		108
Fair value of deferred and contingent consideration		11
Consideration		119
Fair value of net assets acquired
Intangible assets
Customer relationships and investment management contracts		78
Total assets		78
Total liabilities		-
Goodwill		41

The fair value of the deferred and contingent consideration of £11m comprises:

-  A guaranteed deferred consideration of £7m which is payable in equal instalments on the first, second and third anniversaries of the closing date.

-  A contingent consideration with a fair value at acquisition of £4m. This has been calculated by reference to fee revenue and could range from US$nil to US$20m. It is measured on the first, second and third anniversaries of the closing date.

The seller has elected that a portion of deferred and contingent consideration will be payable to employees that transferred from Tekla to abrdn who are still employed by the Group at each anniversary date. Any consideration that was allocated to employees that have left revert to the seller so this arrangement has no impact on the total value of the consideration for the business acquired.

Intangible assets acquired in the business combination consist of investment management contract intangibles for the four NYSE listed funds which were managed by Tekla. Refer Note 13 for details of the key assumptions used in measuring the fair value of these intangibles at the acquisition date.

The goodwill arising on acquisition is mainly attributable to:

-  The ability to develop and evolve the acquired product suite through the launch of other vehicles.

-  The specialist knowledge in the equities and fixed income healthcare sector that the Tekla's investment team brings to the Group. This will generate market leading research and insights, which can be used by portfolio managers across our Investments segment.

The goodwill has been allocated to the abrdn Inc. cash generating unit. The goodwill is expected to be deductible for tax purposes.

The amounts of revenue from contracts with customers and profit after tax contributed to the Group's consolidated income statement for the year ended 31 December 2023 from the acquired Tekla business were £4m and £2m respectively. The profit contributed excludes amortisation of intangible assets acquired through business combinations. If the acquisition had occurred on 1 January 2023, the Group's total revenue from contracts with customers for the year would have increased by £21m to £1,495m and the profit after tax would have increased by £13m to £25m.

Corporate transaction deal costs amounted to £2m of which were included within Restructuring and corporate transaction expenses in the year ended 31 December 2023.

(b)(ii) Prior year acquisitions of subsidiaries

Interactive Investor (ii)

On 27 May 2022, abrdn plc purchased 100% of the issued share capital of Antler Holdco Limited (Antler), the parent company for the Interactive Investor group of companies. The cash outflow at the completion of the acquisition was £1,496m, which comprised consideration of £1,485m and payments of £11m made by abrdn to fund the settlement of ii transaction liabilities as part of the transaction. The acquisition of ii provides abrdn with direct entry to the high-growth digitally enabled direct investing market, accessing new customer segments and capabilities. This allows abrdn customers to choose from a wide spectrum of wealth services, spanning self-directed investing through to high-touch financial advice, depending on their specific needs over their financial life.

On 1 September 2022, Antler made a dividend in specie to abrdn plc of its investment in Interactive Investor Limited which is now a direct subsidiary of abrdn plc. Refer Note A of the Company financial statements for further details.

(c)       Disposals

(c)(i) Current year disposal of subsidiaries and other operations

During 2023, the Group made two material disposals of subsidiaries and other operations:

-  On 1 September 2023, the Group completed the sale of abrdn Capital Limited (aCL), its discretionary fund management business, to LGT UK Holdings Limited.

-  On 2 October 2023, the Group completed the sale of its US Private Equity and Venture Capital capabilities to HighVista Strategies LLC.

aCL and the Group's US Private Equity and Venture Capital capabilities were reported in the ii (previously named Personal) and Investments segments respectively.

Other disposals included the sale of abrdn Australia Ltd to Melbourne Securities Corporation Limited on 1 July 2023. The disposal is not considered material to the Group.

Profit on disposal of subsidiaries and other operations for the year ended 31 December 2023 have been summarised below.

	2023 £m
Disposal of aCL	58
Disposal of US Private Equity and Venture Capital capabilities	22
Other disposals	(1)
Profit on disposal of subsidiaries and other operations for the year ended 31 December 2023	79

On disposal, a net gain of £1m was recycled from the translation reserve and was included in determining the profit on disposal of subsidiaries and other operations for the year ended 31 December 2023.

aCL

The gain on sale, which is included in profit on disposals of subsidiaries and other operations in the consolidated income statement for the year ended 31 December 2023 for aCL was calculated as follows:

1 September 2023	£m
Total assets of operations disposed of	(85)
Total liabilities of operations disposed of	10
Net assets of operations disposed of	(75)
Cash consideration (less transaction costs) and amount receivable from aCL1	133
Gain on sale before tax	58

1. Following the completion of the sale, an intercompany receivable due from aCL to abrdn Investments (Holdings) Limited of £3m which previously eliminated on consolidation is now recognised as an asset of the Group.

Prior to the completion of the sale, aCL was classified as an operation held for sale (refer Note 21).

US Private Equity and Venture Capital capabilities

The gain on sale, which is included in profit on disposals of subsidiaries and other operations in the consolidated income statement for the year ended 31 December 2023 for US Private Equity and Venture Capital capabilities was calculated as follows:

2 October 2023	£m
Total assets of operations disposed of	(1)
Total liabilities of operations disposed of	2
Net assets of operations disposed of	1
Cash consideration (less transaction costs)	17
Fair value of earn-out payments and retained interest1	2
Gain recycled from the translation reserve	2
Gain on sale before tax	22

1. Following the sale, the Group has retained certain carried interest entitlements which was been recognised in the consolidated statement of financial position at fair value.

(c)(ii) Prior year disposal of associates

Profit on disposal of interests in associates for the year ended 31 December 2022 of £6m relates to the sale of the Group's interest in Origo Services Limited in May 2022.

2.      Segmental analysis

The Group's reportable segments have been identified in accordance with the way in which the Group is structured and managed. IFRS 8 Operating Segments requires that the information presented in the financial statements is based on information provided to the 'Chief Operating Decision Maker' which for the Group is the executive leadership team.

(a)       Basis of segmentation

(a)(i) Current reportable segments

Investments

Our global asset management business which provides investment solutions for Institutional, Retail Wealth (previously named Wholesale) and Insurance Partners (previously named Insurance) clients.

Adviser

Our UK financial adviser business which provides platform services to wealth managers and advisers.

ii (previously named Personal)

ii, our direct investing platform, following its acquisition in 2022 (refer Note 1(b)(ii) for further details) and our financial planning business, abrdn Financial Planning and Advice. It also included the Group's discretionary fund management business until the completion of the sale of aCL on 1 September 2023. Refer Note 1 (c)(i) for further details.

These are all reported to the level of adjusted operating profit.

In addition to the Group's reportable segments above, the analysis of adjusted profit in Section b(i) below also reports the following:

Other business operations and corporate costs (Other)

Other comprises of Finimize and our digital innovation group along with certain corporate costs.

(a)(ii) Changes to basis of segmentation

As noted above, the Group now reports Other in addition to its reportable segments. Previously the Group only reported certain corporate costs in addition to its reportable segments (reported as Corporate/strategic). These costs are now reported within Other along with Finimize and our digital innovation group which were previously reported within Investments. Including Finimize and our digital innovation group within Other rather than the Investments reportable segment is considered to provide a clearer depiction of business structure and performance. Comparative amounts for the year ended 31 December 2022 have been prepared on a consistent basis.

In addition, from January 2023 and May 2023 respectively, threesixty and our Managed Portfolio Service (MPS) business have been reported within Adviser, both of which were previously reported within ii. Moving threesixty to Adviser brings together our businesses which provide services to wealth managers and advisers and prior to the completion of the sale of aCL, our MPS business, which was retained, moved from aCL to the Adviser business in order to maximise opportunities available through the Adviser distribution model. The impact of these changes on the Adviser and ii segments is not material and comparative amounts for the year ended 31 December 2022 have not been restated.

(b)      Reportable segments - adjusted profit and revenue information

(b)(i)          Analysis of adjusted profit

Adjusted operating profit is presented by reportable segment in the table below.

		Investments	Adviser	ii1	Other	Total
31 December 2023	Notes	£m	£m	£m	£m	£m
Net operating revenue		878	224	287	9	1,398
Adjusted operating expenses		(828)	(106)	(173)	(42)	(1,149)
Adjusted operating profit		50	118	114	(33)	249
Adjusted net financing costs and investment return						81
Adjusted profit before tax						330
Tax on adjusted profit						(50)
Adjusted profit after tax						280
Adjusted for the following items
Restructuring and corporate transaction expenses	5					(152)
Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts	5					(189)
Profit on disposal of subsidiaries and other operations	1					79
Change in fair value of significant listed investments	4					(178)
Dividends from significant listed investments	4					64
Share of profit or loss from associates and joint ventures2	14					1
Reversal of impairment of interests in joint ventures	14					2
Other	11					37
Total adjusting items including results of associates and joint ventures						(336)
Tax on adjusting items						68
Profit attributable to other equity holders						(11)
Profit attributable to non-controlling interests - ordinary shares						-
Profit for the year attributable to equity shareholders of abrdn plc						1
Profit attributable to other equity holders						11
Profit attributable to non-controlling interests - ordinary shares						-
Profit for the year						12

1. Previously named Personal.

2. Share of associates' and joint ventures' profit or loss primarily comprises the Group's share of results of HASL, Virgin Money Unit Trust Managers (Virgin Money UTM) and Tenet Group Limited (Tenet).

Net operating revenue is reported as the measure of revenue in the analysis of adjusted operating profit and relates to revenues generated from external customers.

In the year ended 31 December 2023, transactions with one external customer amounted to more than 10% of net operating revenue (2022: one). This net operating revenue of £150m (2022: £180m) is included in the Investments and Adviser segments.

Adjusted operating expenses includes depreciation and amortisation of £33m (2022: £41m); £26m (2022: £36m) for the Investments segment; £2m (2022: £2m) for the Adviser segment; and £5m (2022: £3m) for the ii segment. Interest income, interest expense and income tax expense are not analysed by segment in the information provided to the executive leadership team.

Assets and liabilities by segment is not required to be presented as such information is not presented on a regular basis to the executive leadership team.

		Investments	Adviser	ii2	Other	Total
		restated1			restated1	restated3
31 December 2022	Notes	£m	£m	£m	£m	£m
Net operating revenue		1,060	185	201	10	1,456
Adjusted operating expenses		(930)	(99)	(129)	(35)	(1,193)
Adjusted operating profit		130	86	72	(25)	263
Adjusted net financing costs and investment return						(10)
Adjusted profit before tax						253
Tax on adjusted profit						(22)
Adjusted profit after tax						231
Adjusted for the following items
Restructuring and corporate transaction expenses	5					(214)
Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts	5					(494)
Profit on disposal of interests in associates	1					6
Change in fair value of significant listed investments	4					(187)
Dividends from significant listed investments	4					68
Share of profit or loss from associates and joint ventures3,4	14					5
Impairment of interests in associates	14					(9)
Other	11					(40)
Total adjusting items including results of associates and joint ventures						(865)
Tax on adjusting items						88
Profit attributable to other equity holders						(11)
Profit attributable to non-controlling interests - ordinary shares						(1)
Loss for the year attributable to equity shareholders of abrdn plc						(558)
Profit attributable to other equity holders						11
Profit attributable to non-controlling interests - ordinary shares						1
Loss for the year						(546)

1. The breakdown of net operating revenue, adjusted operating expenses and adjusted operating profit for the year ended 31 December 2022 have been restated in line with the changes to the Group's reportable segments (refer Section (a)(ii) above).

2. Previously named Personal.

3. Comparatives for 2022 have been restated for the implementation of IFRS 17 (refer Basis of preparation).

4. Share of associates' and joint ventures' profit or loss comprises the Group's share of results of HASL, Virgin Money UTM and Tenet.

(b)(ii)         Reconciliation to the Consolidated income statement

Net operating revenue

The reconciliation of net operating revenue, as presented in the analysis of Group adjusted profit by segment to revenue from contracts with customers, as presented in the Consolidated income statement, is included in Note 3.

Adjusted operating expenses

The following table provides a reconciliation of adjusted operating expenses, as presented in the analysis of Group adjusted profit by segment, to total administrative and other expenses, as presented in the Consolidated income statement.

	2023	2022
	£m	£m
Total administrative and other expenses as presented in the Consolidated income statement	(1,463)	(1,919)
Restructuring and corporate transaction expenses included in adjusting items	152	214
Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts included in adjusting items	189	494
Administrative and other expenses relating to the unit linked business	1	1
Other differences	(28)	17
Adjusted operating expenses as presented in the analysis of Group adjusted profit by segment	(1,149)	(1,193)

Other differences relate to items presented in adjusted net financing costs and investment return for segment reporting (see commentary under table below) and other items classified as adjusting items (refer Note 11).

Adjusted net financing costs and investment return

The following table provides a reconciliation of adjusted net financing costs and investment return, as presented in the analysis of Group adjusted profit by segment, to Net gains or losses on financial instruments and other income, as presented in the Consolidated income statement.

	2023	2022
	£m	£m
Net gains or losses on financial instruments and other income as presented in the Consolidated income statement	2	(122)
Finance costs separately disclosed in the Consolidated income statement	(25)	(29)
Change in fair value of significant listed investments included in adjusting items	178	187
Dividends from significant listed investments included in adjusting items	(64)	(68)
Net gains or losses on financial instruments and other income relating to the unit linked business	(4)	(5)
Other differences	(6)	27
Adjusted net financing costs and investment return as presented in the analysis of Group adjusted profit by segment	81	(10)

Other differences primarily relate to amounts presented in a different line item of the Consolidated income statement and other items classified as adjusting items. This includes the net interest credit relating to the staff pension schemes of £34m (2022: £29m) which is presented in total administrative and other expenses in the Consolidated income statement and in adjusted net financing costs and investment return in the analysis of Group adjusted profit by segment.

(c)       Total net operating revenue by geographical location

Total net operating revenue¹ split by geographical location is as follows:

	2023	2022
	£m	£m
UK	1,037	1,041
Europe, Middle East and Africa	107	114
Asia Pacific	137	164
Americas	117	137
Total	1,398	1,456

1. Net operating revenue is allocated based on legal entity revenue recognition.

(d)                   Non-current non-financial assets by geographical location

	2023	2022
	£m	£m
UK	1,565	1,745
Europe, Middle East and Africa	33	10
Asia Pacific	13	8
Americas	130	57
Total	1,741	1,820

Non-current non-financial assets for this purpose consist of property, plant and equipment and intangible assets.

3.      Net operating revenue

Net operating revenue represents revenue from contracts with customers after deduction of cost of sales.

Revenue from contracts with customers is recognised as services are provided i.e. as the performance obligation is satisfied. Performance fees and carried interest are only recognised once it is highly probable that a significant reversal will not occur in future periods. Where revenue is received in advance (front-end fees), this income is deferred and recognised as a deferred income liability (refer Note 32) and released to the Consolidated income statement over the period services are provided.

Where revenue received relates to performance obligations whose fulfilment involves another external party, for example fund accounting or custodian services, the Group assesses if it is acting as a principal with full responsibility for the performance obligation and control over its fulfilment or solely responsible for arranging for the third party to fulfil the performance obligation i.e. acting as an agent. Where the Group is acting as an agent, only its share of the revenue for the arrangement of the relevant service is recognised within revenue from contracts from customers, therefore the revenue is recognised net of the revenue passed on to the third party.

Commission and other fee expenses which relate directly to revenue are presented as cost of sales. These expenses include ongoing commission expenses payable to financial institutions, investment platform providers and financial advisers that distribute the Group's products which are generally based on an agreed percentage of AUM and are recognised in the income statement as the service is received. Other cost of sales also includes amounts payable to employees and others relating to carried interest and performance fee revenue.

(a)       Revenue from contracts with customers

The following table provides a breakdown of total revenue from contracts with customers.

	2023	2022 restated1
	£m	£m
Investments
Management fee income - Institutional and Retail Wealth2,3	769	901
Management fee income - Insurance Partners2,4	132	167
Performance fees and carried interest	18	41
Other revenue from contracts with customers	27	28
Revenue from contracts with customers for the Investments segment	946	1,137
Adviser
Platform charges	184	176
Treasury income	31	11
Other revenue from contracts with customers	11	-
Revenue from contracts with customers for the Adviser segment	226	187
ii5
Fee income - Advice and Discretionary	57	87
Account fees	54	32
Trading transactions	48	27
Treasury income	134	58
Revenue from contracts with customers for the ii segment5	293	204
Revenue from contracts with customers for Other	9	10
Total revenue from contracts with customers	1,474	1,538

1. The breakdown of revenue from contracts with customers for the year ended 31 December 2022 has been restated in line with the changes to the Group's reportable segments. Refer Note 2 for further details.

2. In addition to revenues earned as a percentage of AUM, management fee income includes certain other revenues not based on a percentage of AUM.

3. Previously named Institutional and Wholesale.

4. Previously named Insurance.

5. Previously named Personal.

Investments

Through a number of its subsidiaries, the Group provides asset management services to its customers. This performance obligation is performed over time with the revenue recognised as the obligation is performed. The Group generally receives asset management fees based on the percentage of the assets under management. The percentage varies depending on the level and nature of assets under management. Asset management fees are either deducted from assets or invoiced. Deducted fees are generally calculated, recognised and collected on a daily basis. Other asset management fees are invoiced to the customer either monthly or quarterly with receivables recognised for unpaid invoices. The payment terms for invoiced revenue vary but are typically 30 days from receipt of invoice. Accrued income is recognised to account for income earned but not yet invoiced which is not dependent on any future performance.

There is also some use of performance fees and carried interest arrangements. Performance fees and carried interest are earned from some investment mandates when contractually agreed performance levels are exceeded within specified performance measurement periods. Performance fees and carried interest are only recognised once it is highly probable that a significant reversal will not occur in future periods. Given the unpredictability of future performance, the risk of a significant reversal occurring will typically only be considered low enough to make recognition appropriate upon the crystallisation event occurring.

Adviser

Through a number of its subsidiaries, the Group offers customers access to fund platforms. The platforms give customers the ongoing functionality to manage and administer their investments. This performance obligation is performed over time with the revenue recognised as the obligation is performed. Customers pay a platform charge which is generally calculated as a percentage of their assets. The percentage varies depending on the level of assets on the specific platform. The main platform charges are calculated either daily or monthly and are collected and recognised monthly. The charges are collected directly from assets on the platform. There are no significant payment terms.

In addition, Adviser receives treasury income for providing management and administration of cash held in platform cash accounts. The performance obligation for cash management and administration is performed over time with the revenue recognised as the obligation is performed. The customer receives interest on their cash balances after deduction of a cash management administration charge which is generally calculated as a percentage of their cash held in relevant accounts. The percentage varies depending on the interest received from the banks used to provide the cash accounts. There are no significant payment terms.

ii

Through a number of its subsidiaries, the Group also offers financial planning and discretionary fund management services. The sale of the Group's primary discretionary fund management business completed on 1 September 2023 (refer Note 1(c)(i) for further details) and the Managed Portfolio Service business has been reported within Adviser from May 2023 since its transfer from aCL.

Financial planning is either provided on a one-off basis or on an ongoing basis. The performance obligation for one-off advice is performed at a point in time with the revenue recognised when the advice is provided. The performance obligation for ongoing financial planning is performed over time with the revenue recognised as the obligation is performed. The Group generally receives ongoing financial planning fees based on the percentage of the assets under advice. One-off financial planning fees are invoiced to the customer following delivery of the advice. Ongoing financial planning fees are invoiced to the customer or a designated financial provider either monthly or quarterly. Receivables are recognised for unpaid invoices. The payment terms for invoiced revenue vary but are typically 30 days from receipt of invoice. Accrued income is recognised to account for income earned but not yet invoiced which is not dependent on any future performance. The performance obligation for discretionary fund management services is also performed over time with the revenue recognised as the obligation is performed. The Group generally receives discretionary fund management services fees based on the percentage of the assets under management. The percentage varies depending on the level and nature of assets under management. Discretionary fund management services fees are deducted from assets. Deducted fees are generally calculated, recognised and collected on a daily basis.

Through its subsidiary Interactive Investor Services Limited (ii), the Group offers a subscription-based trading and direct investing platform. The services that ii offers are provided on both a point in time and an over time basis.

Customers pay monthly account fees as part of ii's subscription model. Account fees are invoiced monthly and are payable immediately from the customer's account, with receivables recognised if there are insufficient funds available. The account fees cover the performance obligation to provide the customer with access to the platform and custody services. For certain subscription levels, the account fee also entitles the customer to receive trading credits which can be redeemed against future trades. For these subscription levels, the account fees also cover ii's performance obligation to perform these future trades. In accordance with IFRS 15, the account fees are allocated to the two performance obligations. Access to the platform and custody services is provided over time and the account fees revenue allocated to this performance obligation is recognised over the calendar month as the customer receives the benefit of these services. Trading credits need to be used by the customer within 31 days of the credit arising, therefore the revenue is recognised over the calendar month as a reasonable approximation of when the performance obligation is satisfied at a point in time within the month.

In addition, ii performs additional trades and foreign exchange transactions for its customers. These are performed at a point in time with the revenue recognised at the trade date of the transaction. Trading fees for transactions not covered by trading credits are generally charged on a flat fee basis with larger international share trades charged based on a percentage of the trade value. These are added to the cost of purchasing shares or deducted from the proceeds from the sale of shares with receivables recognised for unsettled trades. For foreign exchange trades, ii receives a margin (varying depending on the size of the transaction) via a third party in the month following the transaction, with receivables recognised prior to the payment.

In addition, ii is entitled to receive treasury income in relation to its performance obligations to the customer. Treasury income is the interest earned on cash balances less the interest paid to customers based on the client money balances held with third party banks and by reference to the applicable interest rates. Treasury income is recognised on an over time basis with accrued income recognised for unpaid interest.

(b)      Cost of sales

The following table provides a breakdown of total cost of sales.

	2023	2022
	£m	£m
Cost of sales
Commission expenses	64	66
Other cost of sales	12	16
Total cost of sales	76	82

Other cost of sales includes amounts payable to employees and others relating to carried interest and performance fee revenue. Cost of sales for each of the Group's reportable segments is disclosed in Section (c) below.

(c)       Reconciliation of revenue from contracts with customers to net operating revenue as presented in the analysis of adjusted operating profit

The following table provides a reconciliation of revenue from contracts with customers as presented in the consolidated income statement to net operating revenue as presented in the analysis of adjusted operating profit (see Note 2(b) for each of the Group's reportable segments).

	Investments	Adviser	ii	Other	Total
2023	£m	£m	£m	£m	£m
Revenue from contracts with customers	946	226	293	9	1,474
Cost of sales	(68)	(2)	(6)	-	(76)
Net operating revenue	878	224	287	9	1,398

	Investments restated1	Adviser	ii	Other restated1	Total
2022	£m	£m	£m	£m	£m
Revenue from contracts with customers	1,137	187	204	10	1,538
Cost of sales	(77)	(2)	(3)	-	(82)
Net operating revenue	1,060	185	201	10	1,456

1. The breakdown for the year ended 31 December 2022 has been restated in line with the changes to the Group's reportable segments. Refer Note 2 for further details.

There are no differences between net operating revenue as presented in the Consolidated income statement and the analysis of Group adjusted profit by segment.

(d)      Contract receivables, assets and liabilities

The Group has recognised the following receivables, assets and liabilities in relation to contracts with customers.

		31 December 2023	31 December 2022	1 January 2022
	Notes	£m	£m	£m
Amounts receivable from contracts with customers	19	110	161	135
Accrued income from contracts with customers	19	306	273	260
Cost of obtaining customer contracts	13	48	27	37
Deferred acquisition costs	20	-	1	3
Total contract receivables and assets		464	462	435

		31 December 2023	31 December 2022	1 January 2022
	Notes	£m	£m	£m
Deferred Income	32	4	3	5
Total contract liabilities		4	3	5

4.      Net gains or losses on financial instruments and other income

Gains and losses resulting from changes in both market value and foreign exchange on investments classified as fair value through profit or loss are recognised in the consolidated income statement in the period in which they occur. The gains and losses include investment income received such as interest payments and dividend income. Dividend income is recognised when the right to receive payment is established.

Interest income on financial instruments measured at amortised cost is separately recognised in the consolidated income statement using the effective interest rate method. The effective interest rate method allocates interest and other finance costs at a constant rate over the expected life of the financial instrument, or where appropriate a shorter period, by using as the interest rate the rate that exactly discounts the future cash receipts over the expected life to the net carrying value of the instrument.

Other income includes income related to vacant property and fair value movements in contingent consideration.

			2023	2022
		Notes	£m	£m
Fair value movements and dividend income on significant listed investments
Fair value movements on significant listed investments (other than dividend income)			(178)	(187)
Dividend income from significant listed investments			64	68
Total fair value movements and dividend income on significant listed investments			(114)	(119)
Non-unit linked business - excluding significant listed investments
Net gains or losses on financial instruments at fair value through profit or loss			6	(83)
Interest and similar income from financial instruments at amortised cost			76	25
Foreign exchange gains or losses on financial instruments at amortised cost			(7)	9
Other income			37	41
Net gains or losses on financial instruments and other income - non-unit linked business - excluding significant listed investments			112	(8)
Unit linked business
Net gains or losses on financial instruments at fair value through profit or loss
Net gains or losses on financial assets at fair value through profit or loss			69	(130)
Change in non-participating investment contract financial liabilities			(65)	112
Change in liability for third party interests in consolidated funds			(1)	23
Total net gains or losses on financial instruments at fair value through profit or loss			3	5
Interest and similar income from financial instruments at amortised cost			1	-
Net gains or losses on financial instruments and other income - unit linked business1		23	4	5
Total other net gains or losses on financial instruments and other income			116	(3)
Total net gains or losses on financial instruments and other income			2	(122)

1. In addition to the Net gains or losses on financial instruments and other income - unit linked business of £4m (2022: £5m), there are administrative expenses and policyholder tax of £1m (2022: £1m) and £3m (2022: £4m) respectively relating to unit linked business for the account of policyholders so the result attributable to unit linked business for the year is £nil (2022: £nil). Refer Note 23 for further details.

Fair value movements on significant listed investments (other than dividend income) of losses of £178m (2022: losses of £187m) comprises losses of £5m relating to HDFC Life (2022: losses of £38m), losses of £96m relating to HDFC Asset Management (2022: losses of £105m) and losses of £77m relating to Phoenix (2022: losses of £44m).

Dividend income from significant listed investments of £64m (2022: £68m) comprises £54m (2022: £52m) relating to Phoenix, £10m (2022: £15m) relating to HDFC Asset Management and £nil (2022: £1m) relating to HDFC Life.

5.      Administrative and other expenses

		2023	2022
	Notes	£m	£m
Restructuring and corporate transaction expenses	8	152	214
Impairment of intangibles acquired in business combinations and through the purchase of customer contracts
Impairment of intangibles acquired in business combinations	13	63	368
Impairment of intangibles acquired through the purchase of customer contracts	13	-	1
Total impairment of intangibles acquired in business combinations and through the purchase of customer contracts		63	369
Amortisation of intangibles acquired in business combinations and through the purchase of customer contracts
Amortisation of intangibles acquired in business combinations	13	115	115
Amortisation of intangibles acquired through the purchase of customer contracts	13	11	10
Total amortisation of intangibles acquired in business combinations and through the purchase of customer contracts		126	125
Staff costs and other employee-related costs	6	529	549
Other administrative expenses1,2		593	662
Total administrative and other expenses3		1,463	1,919

1. Other administrative expenses in 2022 included expense relating to a single process execution event provision. Other administrative expenses in 2023 includes a related credit for the recovery from the Group's liability insurance for this provision which was received in 2023. Refer Note 33 for further details.

2. Other administrative expenses includes interest expense of £4m (2022: £2m). In addition, interest expense of £19m (2022: £23m) was incurred in respect of subordinated liabilities and the related cash flow hedge (refer Note 18) and interest expense of £6m (2022: £6m) in respect of lease liabilities (refer Note 16) which are included in Finance costs in the consolidated income statement.

3. Total administrative and other expenses includes £1m (2022: £1m) relating to unit linked business. Refer Note 23 for further details.

6.      Staff costs and other employee-related costs

		2023	2022
	Notes	£m	£m
The aggregate remuneration payable in respect of employees:
Wages and salaries		443	452
Social security costs		51	50
Pension costs
Defined benefit plans		(39)	(29)
Defined contribution plans		55	56
Employee share-based payments and deferred fund awards	40	19	20
Total staff costs and other employee-related costs		529	549

In addition, wages and salaries of £18m (2022: £25m), social security costs of £4m (2022: £3m), pension costs - defined benefit plans of £nil (2022: less than £1m), pension costs - defined contribution plans of less than £1m (2022: £1m), employee share-based payments and deferred fund awards relating to transformation, leavers and corporate transactions of £12m (2022: £6m) and termination benefits of £44m (2022: £53m) have been included in restructuring and corporate transaction expenses. Refer Note 8. A further £4m (2022: £11m) of expenses are included in other cost of sales in relation to amounts payable to employees and former employees relating to carried interest and performance fee revenue. Refer Note 3.

The following table provides an analysis of the average number of staff employed by the Group during the year.

	2023	2022
Investments	2,132	2,344
Adviser	536	658
ii (previously named Personal)	1,138	928
IT and support functions1	1,252	1,369
Total employees	5,058	5,299

1. Previously named Operations, IT and support functions. All roles classified as Operations have been allocated directly to the reportable segment since 2022.

Information in respect of Directors' remuneration is provided in the Directors' remuneration report on pages 115 to 134. In addition to the total remuneration disclosed as paid to the Director for the prior year are amounts paid to those Directors who stepped down from the Board during 2022 being £50,000 to Martin Pike, £42,000 to Jutta af Rosenberg and £81,000 to Cecilia Reyes. This is as disclosed in the 2022 Directors' remuneration report.

7.      Auditors' remuneration

The following table shows the auditors' remuneration during the year.

	2023	2022
	£m	£m
Fees payable to the Company's auditors for the audit of the Company's individual and consolidated financial statements	2.1	1.5
Fees payable to the Company's auditors for other services
The audit of the Company's consolidated subsidiaries pursuant to legislation	5.1	4.7
Audit related assurance services	2.8	2.3
Total audit and audit related assurance fees	10.0	8.5
Other assurance services	1.0	1.0
Other non-audit fee services	-	0.3
Total non-audit fees	1.0	1.3
Total auditors' remuneration	11.0	9.8

Auditors' remuneration disclosed above excludes audit and non-audit fees payable to the Group's principal auditor by Group managed funds which are not controlled by the Group, and therefore not consolidated in the Group's financial statements.

During the year ended 31 December 2023 no audit fees were payable in respect of defined benefit plans to the Group's principal auditor (2022: £nil).

For more information on non-audit services, refer to the Audit Committee report in the Corporate governance statement.

8.      Restructuring and corporate transaction expenses

Total restructuring and corporate transaction expenses during the year were £152m (2022: £214m). Restructuring expenses of £121m (2022: £169m) mainly consisting of property related impairments, severance, platform transformation and specific costs to effect savings in Investments. This was partly offset by a £32m release of the provision for separation costs. Refer Note 33 for further details. Corporate transaction expenses were £31m (2022: £45m) and include deal costs relating to acquisitions for the year ended 31 December 2023 of £2m (2022: £14m). Further information on restructuring and corporate transaction expenses can be found in Section 1.1 of Supplementary information.

9.      Taxation

The Group's tax expense comprises both current tax and deferred tax expense.

Current tax is the expected tax payable on taxable profit for the year and is calculated using tax rates and laws substantively enacted at the balance sheet date.

A deferred tax asset represents a tax deduction that is expected to arise in a future period. It is only recognised to the extent that it is probable that the tax deduction will be capable of being offset against taxable profits and gains in future periods. A deferred tax liability represents taxes which will become payable in a future period as a result of a current or prior year transaction. Where local tax law allows, deferred tax assets and liabilities are netted off on the statement of financial position. The tax rates used to determine deferred tax are those enacted or substantively enacted at the balance sheet date that are expected to apply when the deferred tax asset or liability are realised. Any tax consequences of distributions on other equity instruments are credited to the statement in which the profit distributed originally arose.

Deferred tax is recognised on temporary differences arising from investments in subsidiaries and associates unless the timing of the reversal is in our control and it is expected that the temporary difference will not reverse in the foreseeable future.

The Group applies the exception to recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes.

Current tax and deferred tax are recognised in the consolidated income statement except when it relates to items recognised in other comprehensive income or directly in equity, in which case it is credited or charged to other comprehensive income or directly to equity respectively.

The Group operates in a number of territories and during the normal course of business will be subject to audit or enquiry by local tax authorities. At any point in time the Group will also be engaged in commercial transactions the tax outcome of which may be uncertain due to their complexity or uncertain application of tax law. Tax provisions, therefore, are subjective by their nature and require management judgement based on the interpretation of legislation, management experience and professional advice. As such, this may result in the Group recognising provisions or disclosing contingent liabilities for uncertain tax positions. Management will provide for uncertain tax positions where they judge that it is probable there will be a future outflow of economic benefits from the Group to settle the obligation. Where a future outflow of economic benefits is judged as less than probable but more than remote, a contingent liability will be disclosed, where material. In assessing uncertain tax positions management considers each issue on its own merits using their judgement as to the estimate of the most likely outcome. When making estimates, management considers all available evidence. This may include forecasts of future profitability, the frequency and severity of any losses, and statutory carry forward and carry back provisions as well as management experience of tax attributes expiring without use. Where the final outcome differs from the amount provided this difference will impact the tax charge in future periods. Management re-assesses provisions at each reporting date based upon latest available information.

(a)       Tax charge in the consolidated income statement

(a)(i) Current year tax expense

		2023	2022
		£m	£m
Current tax:
UK		17	5
Overseas		51	45
Adjustment to tax expense in respect of prior years		(2)	(8)
Total current tax		66	42
Deferred tax:
Deferred tax credit arising from the current year		(69)	(104)
Adjustment to deferred tax in respect of prior years		(15)	(4)
Total deferred tax		(84)	(108)
Total tax credit 1		(18)	(66)

1. The tax credit of £18m (2022: £66m) includes a tax expense of £3m (2022: £4m) relating to unit linked business. Refer Note 23 for further details.

In 2023 unrecognised tax losses from previous years were used to reduce the current tax expense by £2m (2022: £3m).

Current tax recoverable and current tax liabilities at 31 December 2023 were £10m (2022: £7m) and £6m (2022: £11m) respectively. In addition current tax recoverable and current tax liabilities in relation to unit linked business were £nil (2022: less than £1m) and £nil (2022: less than £1m) respectively. Current tax assets and liabilities are expected to be recoverable or payable in less than 12 months at both 31 December 2023 and 31 December 2022.

(a)(ii)         Reconciliation of tax expense

		2023	2022
			restated1
		£m	£m
Loss before tax		(6)	(612)
Tax at 23.5% (2022: 19%)		(1)	(116)
Remeasurement of deferred tax due to rate changes		(5)	(15)
Permanent differences		1	1
Non-taxable dividends from significant listed investments		(13)	(13)
Non-taxable fair value movements on significant listed investments		18	21
Tax effect of accounting for Share of profit or loss from associates and joint ventures		-	(2)
Tax effect of distributions on other equity instruments		(3)	(2)
Impairment losses on goodwill		15	65
Impairment of investment in associates and joint ventures		-	2
Differences in overseas tax rates		4	5
Adjustment to current tax expense in respect of prior years		(2)	(8)
Recognition of previously unrecognised deferred tax credit		(1)	(3)
Deferred tax not recognised		2	4
Adjustment to deferred tax expense in respect of prior years		(15)	(4)
Non-taxable profit or loss on sale of subsidiaries, associates and significant listed investments		(18)	(5)
Other		-	4
Total tax credit for the year		(18)	(66)

1. Comparatives for 2022 have been restated for the implementation of IFRS 17. Refer Basis of preparation.

The standard UK Corporation Tax rate for the accounting period is 23.5%. The rate of UK Corporation Tax increased from 19% to 25% with effect from 1 April 2023.

The accounting for certain items in the consolidated income statement results in certain reconciling items in the table above, the values of which vary from year to year depending upon the underlying accounting values.

Details of significant reconciling items are as follows:

-  Dividend income and fair value movements from our investments in Phoenix not being subject to tax.

-  Movements in the fair value of our investment in HDFC Asset Management being tax effected at the Indian long-term capital gains tax rate, which is lower than the UK Corporation Tax rate.

-  Profit on the sale of abrdn Capital not being subject to tax.

-  Goodwill impairments not deductible for tax purposes.

-  Prior year adjustments to deferred tax liabilities on intangibles.

(b)      Tax relating to components of other comprehensive income

Tax relating to components of other comprehensive income is as follows:

		2023	2022
		£m	£m
Tax relating to fair value gains and losses recognised on cash flow hedges		(10)	21
Tax relating to cash flow hedge gains and losses transferred to consolidated income statement		7	(19)
Equity holder tax effect relating to items that may be reclassified subsequently to profit or loss		(3)	2
Tax relating to other comprehensive income		(3)	2

All of the amounts presented above are in respect of equity holders of abrdn plc.

(c)       Deferred tax assets and liabilities

(c)(i)          Analysis of recognised deferred tax

		2023	2022
		£m	£m
Deferred tax assets comprise:
Losses carried forward		160	170
Depreciable assets		35	33
Employee benefits		20	26
Provisions and other temporary timing differences		7	5
Gross deferred tax assets		222	234
Less: Offset against deferred tax liabilities		(7)	(22)
Deferred tax assets		215	212
Deferred tax liabilities comprise:
Unrealised gains on investments		4	60
Deferred tax on intangible assets acquired through business combinations		124	162
Other		8	11
Gross deferred tax liabilities		136	233
Less: Offset against deferred tax assets		(7)	(22)
Deferred tax liabilities		129	211
Net deferred tax asset at 31 December		86	1

A deferred tax asset of £160m (2022: £170m) has been recognised by the Group in respect of losses of the parent company and various subsidiaries. The decrease in this deferred tax asset in 2023 reflects the utilisation of brought forward losses against taxable profits in the year.

Deferred tax assets are recognised to the extent that it is probable that the losses will be capable of being offset against taxable profits and gains in future periods. The value attributed to them takes into account the certainty or otherwise of their recoverability. Their recoverability is measured against the reversal of deferred tax liabilities and anticipated taxable profits and gains based on business plans. The deferred tax asset recognised on losses relates to UK entities where there is currently no restriction on the period of time over which losses can be utilised. Recognition of this deferred tax asset requires that management must consider if it is more likely than not that this asset will be recoverable in future periods against future profits arising in the UK. In making this assessment management have considered future operating plans and forecast taxable profits and are satisfied that, following completion of transformation activities, forecast taxable profits will be sufficient to enable recovery of the UK tax losses. The financial forecasts considered were consistent with those used for the assessment of the Group's intangible assets (refer Note 13). Based upon the level of forecast taxable profits management do not consider there is significant risk of a material adjustment to the carrying amount of the deferred tax asset on UK tax losses within the next financial year. Management expect the deferred tax asset to be utilised over a period of between five and seven years.

Deferred tax liabilities relating to unrealised gains on investments at 31 December 2022 of £60m included £52m relating to the Group's investment in HDFC Asset Management. This investment was sold in 2023 (refer Note 11(a) for further details).

Deferred tax assets of £215m (2022: £212m) and liabilities of £129m (2022: £211m) are expected to be recovered or settled after more than 12 months.

(c)(ii)         Movements in deferred tax assets and liabilities

	Losses carried forward	Depreciable assets	Employee benefits	Provisions and other temporary timing differences	Unrealised gains on investments	Deferred tax on intangible assets acquired through business combinations	Other	Net deferred tax asset
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2023	170	33	26	5	(60)	(162)	(11)	1
Amounts (expensed) in/credited to the consolidated income statement	(10)	2	(6)	2	56	38	2	84
Tax on cash flow hedge	-	-	-	-	-	-	3	3
Other	-	-	-	-	-	-	(2)	(2)
At 31 December 2023	160	35	20	7	(4)	(124)	(8)	86

	Losses carried forward	Depreciable assets	Employee benefits	Provisions and other temporary timing differences	Unrealised gains on investments	Deferred tax on intangible assets acquired through business combinations	Other	Net deferred tax asset
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2022	129	25	30	4	(104)	(72)	(9)	3
Acquired through business combinations	-	5	-	-	-	(114)	-	(109)
Amounts (expensed) in/credited to the consolidated income statement	41	3	(5)	1	44	24	-	108
Tax on cash flow hedge	-	-	-	-	-	-	(2)	(2)
Other	-	-	1	-	-	-	-	1
At 31 December 2022	170	33	26	5	(60)	(162)	(11)	1

(d)       Unrecognised deferred tax

Due to uncertainty regarding recoverability, deferred tax assets have not been recognised in respect of the following:

-  Cumulative losses carried forward of £91m (2022: £81m) in the UK and losses and other temporary differences of £360m (2022: £275m) in the US, losses of £10m in China (2022: £11m), losses of £10m in Japan (2022: £13m) and losses of £9m (2022: £19m) in other overseas jurisdictions.

Of these unrecognised deferred tax assets, certain losses have expiry dates as follows:

-  US losses of £140m with expiry dates between 2035-2037 (2022: £79m).

-  Other overseas losses of £21m with expiry dates between 2024-2033 (2022: £27m).

The following table provides an analysis of the losses with expiry dates for unrecognised deferred tax assets.

	2023	2022
	£m	£m
Less than 1 year	4	5
Greater than or equal to 1 year and less than 5 years	9	11
Greater than or equal to 5 years and less than 10 years	8	11
Greater than 10 years	140	79
Total losses with expiry dates	161	106

There is unrecognised deferred tax of £18m (2022: £nil) relating to temporary timing differences associated with investments in subsidiaries, branches and associates and interests in joint arrangements.

(e) Pillar Two taxes

The Group is within the scope of the OECD Pillar Two model rules. Pillar Two legislation was enacted in the UK, the jurisdiction in which abrdn plc is incorporated, and came into effect from 1 January 2024. The Group expects to be subject to top-up taxes in relation to its operations in Guernsey, where the statutory rate is below 15% and in Singapore where certain qualifying income is subject to a concessionary tax rate of 10% under the Singapore Financial Sector Incentive for Fund Managers. The Group also expects to be subject to top up taxes in the UK, in relation to its overseas joint ventures with a local effective tax rate below 15%. However, since the newly enacted tax legislation is only effective from 1 January 2024, there is no current tax impact for the year ended 31 December 2023.

As noted above, the Group has applied a temporary mandatory relief from deferred tax accounting for the impacts of the top-up tax and accounts for it as a current tax when it is incurred.

If the top-up tax had applied in 2023, then the associated profits relating to the Group's operations for the year ended 31 December 2023 that would be subject to it amount to £48.6m, with the average effective tax rate applicable to those profits during 2023 being 12 percent.

10.    Earnings per share

Basic earnings per share is calculated by dividing profit or loss attributable to ordinary equity holders by the weighted average number of ordinary shares in issue during the period excluding shares owned by the employee trusts that have not vested unconditionally to employees.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue during the period to assume the conversion of all dilutive potential ordinary shares, such as share options granted to employees. Details of the share options and awards issued under the Group's employee plans are provided in Note 40.

Adjusted earnings per share is calculated on adjusted profit after tax attributable to ordinary equity holders of the Company.

Basic earnings per share was 0.1p (2022: 26.6p) and diluted earnings per share was 0.1p (2022: 26.6p) for the year ended 31 December 2023. The following table shows details of basic, diluted and adjusted earnings per share.

	2023	2022
		restated1
	£m	£m
Adjusted profit before tax	330	253
Tax on adjusted profit	(50)	(22)
Adjusted profit after tax	280	231
Attributable to:
Other equity holders	(11)	(11)
Non-controlling interests - ordinary shares	-	(1)
Adjusted profit after tax attributable to equity shareholders of abrdn plc	269	219
Total adjusting items including results of associates and joint ventures	(336)	(865)
Tax on adjusting items	68	88
Profit/(loss) attributable to equity shareholders of abrdn plc	1	(558)

	2023	2022
	Millions	Millions
Weighted average number of ordinary shares outstanding	1,902	2,094
Dilutive effect of share options and awards	28	16
Weighted average number of diluted ordinary shares outstanding	1,930	2,110

In accordance with IAS 33, no share options and awards were treated as dilutive for the year ended 31 December 2022 due to the loss attributable to equity holders of abrdn plc in that period. This resulted in the diluted earnings per share and adjusted diluted earnings per share being calculated using the weighted average number of ordinary shares of 2,094 million.

	2023	2022
		restated1
	Pence	Pence
Basic earnings per share	0.1	(26.6)
Diluted earnings per share	0.1	(26.6)
Adjusted earnings per share	14.1	10.5
Adjusted diluted earnings per share	13.9	10.5

1. Comparatives for 2022 have been restated for the implementation of IFRS 17. Refer Basis of preparation.

11.    Adjusted profit and adjusting items

Adjusted profit excludes the impact of the following items:

-  Restructuring and corporate transaction expenses. Restructuring includes the impact of major regulatory change.

-  Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts.

-  Profit or loss arising on the disposal of a subsidiary, joint venture or equity accounted associate.

-  Change in fair value of/dividends from significant listed investments (see (a) below).

-  Share of profit or loss from associates and joint ventures.

-  Impairment loss/reversal of impairment loss recognised on investments in associates and joint ventures accounted for using the equity method.

-  Fair value movements in contingent consideration.

-  Items which are one-off and, due to their size or nature, are not indicative of the long-term operating performance of the Group.

The tax charge or credit allocated to adjusting items is based on the tax treatment of each adjusting item.

The operating, investing and financing cash flows presented in the consolidated statement of cash flows are for both adjusting and non-adjusting items.

(a)       Significant listed investments

During 2020 and 2021, the Group's investments in HDFC Life, Phoenix and HDFC Asset Management were reclassified from associates to equity securities and considered significant listed investments of the Group. Fair value movements on these investments are included as adjusting items, which is aligned with our treatment of gains on disposal for these holdings when they were classified as associates. Dividends from significant listed investments are also included as adjusting items, as these result in fair value movements.

During the year ended 31 December 2023:

-  The Group's holding in HDFC Life reduced by 1.7% following the sale of 35,694,105 equity shares through a Bulk Sale on 31 May 2023 and the Group now has no remaining shareholding in HDFC Life. The total consideration net of taxes, expenses and related foreign exchange hedging was £198m.

-  The Group's holding in HDFC Asset Management reduced by 10.2% following the sale of 21,778,305 equity shares through a Bulk Sale on 20 June 2023 and the Group now has no remaining shareholding in HDFC Asset Management. The total consideration net of taxes, expenses and related foreign exchange hedging was £337m.

Following the sales, the Group has one remaining significant listed investment, Phoenix.

(b)      Other

Other adjusting items for the year ended 31 December 2023 include:

-  £36m for an insurance liability recovery in relation to the single process execution event in 2022. The £41m provision expense was included in other adjusting items for the year ended 31 December 2022. Refer Note 33.

-  A £23m gain (2022: £35m gain) for net fair value movements in contingent consideration.

-  £21m for provision expense relating to a potential tax liability. Refer Note 33.

-  A £5m fair value loss (2022: £11m loss) on a financial instrument liability related to a prior period acquisition.

-  A gain of £4m (2022: loss of £13m) in relation to market gains and losses on the investments held by the abrdn Financial Fairness Trust which is consolidated by the Group. The assets of the abrdn Financial Fairness Trust are restricted to be used for charitable purposes.

12.    Dividends on ordinary shares

Dividends are distributions of profit to holders of abrdn plc's share capital and as a result are recognised as a deduction in equity. Final dividends are announced with the Annual report and accounts and are recognised when they have been approved by shareholders. Interim dividends are announced with the Half year results and are recognised when they are paid.

	2023		2022
	Pence per share	£m1	Pence per share	£m
Prior year's final dividend paid	7.30	142	7.30	154
Interim dividend paid	7.30	137	7.30	153
Total dividends paid on ordinary shares		279		307
Current year final recommended dividend	7.30	130	7.30	142

1. Estimated for current year final recommended dividend.

The final recommended dividend will be paid on 30 April 2024 to shareholders on the Company's register as at 15 March 2024, subject to approval at the 2024 Annual General Meeting. After the current year final recommended dividend, the total dividend in respect of the year ended 31 December 2023 is 14.60p (2022: 14.60p).

13.    Intangible assets

Goodwill is created when the Group acquires a business and the consideration exceeds the fair value of the net assets acquired. In determining the net assets acquired in business combinations, intangible assets are recognised where they are separable or arise from contractual or legal rights. Intangible assets acquired by the Group through business combinations consist mainly of customer relationships and investment management contracts, technology and brands. Any remaining value that cannot be identified as a separate intangible asset on acquisition forms part of goodwill.

In addition to intangible assets acquired through business combinations, the Group recognises as intangible assets software which has been developed internally and other purchased technology which is used in managing and executing our business. Costs to develop software internally are capitalised after the research phase and when it has been established that the project is technically feasible and the Group has both the intention and ability to use the completed asset.

Intangible assets are recognised at cost and amortisation is charged to the income statement over the length of time the Group expects to derive benefits from the asset. The allocation of the income statement charge to each reporting period is dependent on the expected pattern over which future benefits are expected to be derived. Where this pattern cannot be determined reliably the charge is allocated on a straight-line basis.

Goodwill is not charged to the income statement unless it becomes impaired.

The Group also recognises the cost of obtaining customer contracts (refer Note 3) as an intangible asset. These costs primarily relate to the cost of acquiring existing investment management contracts from other asset managers and commission costs for initial investors into new closed-end funds where these are borne by the Group. For the cost of obtaining customer contracts, the intangible asset is amortised on the same basis as the transfer to the customer of the services to which the intangible asset relates.

		Acquired through business combinations
		Goodwill	Brand	Customer relationships and investment management contracts	Technology and other	Internally developed software1	Purchased software and other	Cost of obtaining customer contracts	Total
		£m	£m	£m	£m	£m	£m	£m	£m
Gross amount
At 1 January 2022		3,721	94	1,088	69	131	5	104	5,212
Reclassified as held for sale during the year		(49)	-	(28)	-	-	-	-	(77)
Disposals and adjustments		-	-	2	-	-	-	1	3
Additions - ii		993	16	421	32	-	-	-	1,462
Additions - other		-	-	-	-	6	-	-	6
At 31 December 2022		4,665	110	1,483	101	137	5	105	6,606
Disposals and adjustments		-	1	(4)	-	2	-	-	(1)
Additions		41	-	78	-	8	-	33	160
Foreign exchange adjustment		(2)	-	(4)	-	-	-	(1)	(7)
At 31 December 2023		4,704	111	1,553	101	147	5	137	6,758
Accumulated amortisation and impairment
At 1 January 2022		(3,390)	(82)	(774)	(64)	(127)	(4)	(67)	(4,508)
Reclassified as held for sale during the year		-	-	19	-	-	-	-	19
Amortisation charge for the year2		-	(14)	(91)	(10)	(3)	(1)	(10)	(129)
Impairment losses recognised3		(340)	-	(28)	-	-	-	(1)	(369)
At 31 December 2022		(3,730)	(96)	(874)	(74)	(130)	(5)	(78)	(4,987)
Amortisation charge for the year2		-	(4)	(99)	(12)	(2)	-	(11)	(128)
Impairment losses recognised3		(62)	-	(1)	-	(2)	-	-	(65)
At 31 December 2023		(3,792)	(100)	(974)	(86)	(134)	(5)	(89)	(5,180)
Carrying amount
At 1 January 2022		331	12	314	5	4	1	37	704
At 31 December 2022		935	14	609	27	7	-	27	1,619
At 31 December 2023		912	11	579	15	13	-	48	1,578

1. Included in the internally developed software of £13m (2022: £7m) is £10m (2022: £5m) relating to intangible assets not yet ready for use.

2. For the year ended 31 December 2023, £126m (2022: £125m) of the amortisation charge is recognised in Amortisation of intangibles acquired in business combinations and through the purchase of customer contracts with £2m (2022: £4m) recognised in Other administrative expenses.

3. For the year ended 31 December 2023, £63m (2022: £369m) of impairment is recognised in Impairment of intangibles acquired in business combinations and through the purchase of customer contracts with £2m (2022: £nil) recognised in Restructuring and corporate transaction expenses.

At 31 December 2023, there was:

-  £39m (2022: £nil) of goodwill attributable to the abrdn Inc. cash-generating unit (CGU) in the Investments segment in relation to the acquisition of the healthcare fund management capabilities of Tekla (refer Note 1(b)(i) for further details).

-  £819m (2022: £819m) and £24m (2022: £60m) of goodwill attributable to the ii CGU and abrdn financial planning business CGU respectively in the ii segment (previously named Personal). At 31 December 2022 goodwill of £49m relating to the ii segment was classified as held for sale in relation to the sale of aCL which completed in 2023 (refer Note 1(c)(i) for further details).

-  £25m (2022: £25m) of goodwill is attributable to an Adviser segment CGU. Prior to January 2023, this goodwill which relates to the acquisition of threesixty was attributable to a CGU in the ii segment.

-  £5m (2022: £31m) of goodwill attributable to the Finimize CGU which is reported within Other business operations and corporate costs. Finimize was previously included within the Investments segment.

Tekla investment management contract intangible assets

On acquisition of the healthcare fund management capabilities of Tekla, £78m of customer relationships and investment management contract intangibles were recognised. These assets primarily relate to investment management contracts with the four NYSE listed funds. The description of the individually material intangible assets including the estimated useful life at the acquisition date of 27 October 2023 were as follows:

Investment management contract intangible asset	Description	Useful life at acquisition date	Fair value on acquisition date	Carrying value 2023	Carrying value 2022
			£m	£m	£m
Tekla Healthcare Opportunities Fund	Investment management contract with Tekla Healthcare Opportunities Fund	12.1 years	28	26	N/A
Tekla Healthcare Investors	Investment management contract with Tekla Healthcare Investors	12.1 years	25	23	N/A

The key assumptions, other than the useful life, in measuring the fair value of the investment contract intangible assets at acquisition date were as follows:

-  Revenue growth - this assumption was based on past experience of growth for each fund in prior periods before reverting to a long term growth in line with inflation estimates. Management fee rates are assumed to stay in line with current rates.

-  Operating margin - this assumption was based on the expected EBITDA of each acquired investment management contract.

-  Discount rate - this assumption was based on a risk adjusted internal rate of return (IRR) of the transaction.

As with prior significant acquisitions, the Group made use of assistance from a third-party valuation specialist in determining the value of the customer intangibles.

As the investment management contracts relate to closed-end funds, the straight-line method of amortisation is considered appropriate for these intangibles. There has been no change to the useful lives and therefore the residual useful life of these investment management contract intangible assets is 11.9 years.

ii intangible assets

On acquisition of ii, customer relationships, brand and technology and other intangibles of £421m, £16m and £32m respectively were recognised. Identification and valuation of intangible assets acquired in business combinations is a key judgement. The description of the individually material intangible asset including the estimated useful life at the acquisition date of 27 May 2022 was as follows:

Customer relationship intangible asset	Description	Useful life at acquisition date	Fair value on acquisition date	Carrying value 2023	Carrying value 2022
			£m	£m	£m
Customer base	ii's customer base at the date of acquisition	15 years	421	340	390

The key assumptions in measuring the fair value of this intangible asset at acquisition date were as follows:

-   Revenue per customer growth - comprises expected growth in account fees, treasury income and trading transactions revenue from ii business plans. Treasury income is the interest earned on cash balances less the interest paid to customers and was assumed to grow in line with assets under administration. Market interest rates were assumed to remain at or above 1%.

-   Customer attrition - customer attrition represents the expected rate of existing customers leaving ii. This assumption was primarily based on historical attrition rates and was assumed to remain constant over time.

-   Operating margin - this assumption was based on the current operating margins adjusted for marketing costs which are not attributable to the servicing of existing customers. Expected future operating margins are adjusted to take into account that increased treasury income does not result in higher costs.

-   Discount rate - this assumption was based on a market participant weighted average cost of capital.

The above assumptions, and in particular the customer attrition assumption, were also used to determine the 15 year useful economic life at the acquisition date. There has been no change to the useful life and therefore the residual useful life of the customer relationships intangible asset is 13.4 years. The reducing balance method of amortisation is considered appropriate for this intangible, consistent with the attrition rate being constant over time.

The technology intangible asset relates to ii's internally generated technology which has been valued based on the replacement cost method. The brand intangible asset relates to the ii brand and has been valued based on applying an assumed royalty rate to revenue forecasts.

Following the valuation of the ii intangibles discussed above goodwill of £993m was recognised. The allocation of this goodwill to cash-generating units was a key judgement in 2022. The goodwill was allocated to cash-generating units based on expected earnings contribution, including in relation to revenue synergies, at the time of the transaction. We considered an earnings contribution method of allocation to be appropriate as earnings multiples are a primary valuation method for businesses such as ii. This resulted in the goodwill being primarily allocated to the ii cash-generating unit in the ii segment (£819m), with £132m and £42m allocated to the asset management group of cash-generating units in the Investments segment and a cash-generating unit in the ii segment respectively. As noted below, the £132m allocated to the asset management group of cash-generating units was subsequently impaired in 2022. The £42m allocated to a cash-generating unit in the ii segment was transferred to held for sale at 31 December 2022 and disposed of during 2023. Refer Note 21 for further details.

Tritax investment management contract intangible assets

On acquisition of Tritax, £71m of customer relationships and investment management contracts intangibles were recognised. These assets primarily relate to Tritax's investment management contracts with Tritax Big Box REIT plc and Tritax Euro Box plc which are listed closed-end real estate funds. The description of the individually material intangible asset including the estimated useful life at the acquisition date of 1 April 2021 was as follows:

Investment management contract intangible asset	Description	Useful life at acquisition date	Fair value on acquisition date	Carrying value 2023	Carrying value 2022
			£m	£m	£m
Tritax Big Box REIT plc	Investment management contract with Tritax Big Box REIT plc	13 years	50	40	43

The key assumptions, other than the useful life, in measuring the fair value of the investment contract intangible assets at acquisition date were as follows:

-  Revenue growth - this assumption was based on the fund growth (from markets and investment performance) included in the Tritax business plan as adjusted for the impact of fund raisings which commenced prior to the acquisition date. Management fee rates are assumed to stay in line with current rates.

-  Operating margin - this assumption was based on the current operating margins adjusted for expected cost synergies.

-  Discount rate - this assumption was based on a market participant weighted average cost of capital.

As the investment management contracts relate to closed-end funds, the straight-line method of amortisation is considered appropriate for these intangibles. There has been no change to the useful lives and therefore the residual useful life of these investment management contract intangible assets is 10.25 years.

abrdn Holdings Limited (aHL) intangibles

On the acquisition of aHL in 2017, we identified intangible assets in relation to customer relationships, brand and technology as being separable from goodwill. Identification and valuation of intangible assets acquired in business combinations is a key judgement.

The customer relationships acquired through aHL were grouped where the customer groups have similar economic characteristics and similar useful economic lives. This gave rise to three separate intangible assets which we termed Lloyds Banking Group, Open ended funds, and Segregated and similar.

In relation to the Open ended funds we considered that it was most appropriate to recognise an intangible asset relating to customer relationships between aHL and open ended fund customers, rather than an intangible asset relating to investment management agreements between aHL and aHL's open ended funds. Our judgement was that the value associated with the open ended fund assets under management was predominantly derived from the underlying customer relationships, taking into account that a significant proportion of these assets under management are from institutional clients.

The intangible asset for Lloyds Banking Group had a carrying value of £nil at the end of 2019. The description of the remaining two separate intangible assets including their estimated useful life at the acquisition date of 14 August 2017 was as follows:

Customer relationship intangible asset	Description	Useful life at acquisition date	Fair value on acquisition date	Carrying value 2023	Carrying value 2022
			£m	£m	£m
Open ended funds	Separate vehicle group - open ended investment vehicles	11 years	223	30	45
Segregated and similar	All other vehicle groups dominated by segregated mandates which represent 75% of this group	12 years	427	43	63

Measuring the fair value of intangible assets acquired in business combinations required further assumptions and judgements. Customer relationships were valued using discounted cash flow projections. The key assumptions in measuring the fair value of the customer relationships at the acquisition date were as follows:

-  Net attrition - net attrition represents the expected rate of outflows of assets under management net of inflows from existing customers. This assumption was primarily based on recent experience.

-  Market growth - a market growth adjustment was applied based on the asset class.

-  Operating margin - this assumption was consistent with forecast margins and included the impact of synergies that would be expected by any market participant and impacted the customer relationship cash flows.

-  Discount rate - this assumption was based on the internal rate of return (IRR) of the transaction and is consistent with a market participant discount rate.

The above assumptions, and in particular the net attrition assumption, were also used to determine the useful economic life at the acquisition date of each asset used for amortisation. The reducing balance method of amortisation is considered appropriate for these intangibles, consistent with the attrition pattern on customer relationships which means that the economic benefits delivered from the existing customer base will reduce disproportionately over time.

There has been no change to the useful lives of the Open ended funds and Segregated and similar customer relationship intangible assets. Therefore the residual useful life of the Open ended funds customer relationship intangible asset is 4.6 years and the residual life of the Segregated and similar customer relationship intangible asset is 5.6 years.

Estimates and assumptions

The key estimates and assumptions in relation to intangible assets are:

-  Determination of the recoverable amount of goodwill and customer intangibles.

-  Determination of useful lives.

The determination of the recoverable amount of the interactive investor CGU is a key area of estimation uncertainty at 31 December 2023, and further details of assumptions and sensitivities are disclosed in this section.

Determination of the recoverable amount of goodwill and customer intangibles

For all intangible assets including goodwill, an assessment is made at each reporting date as to whether there is an indication that the goodwill or intangible asset has become impaired. If any indication of impairment exists then the recoverable amount of the asset is determined. In addition, the recoverable amount for goodwill must be assessed annually.

The recoverable amounts are defined as the higher of fair value less costs of disposal (FVLCD) and the value in use (VIU) where the value in use is based on the present value of future cash flows. Where the carrying value exceeds the recoverable amount then the carrying value is written down to the recoverable amount.

In assessing value in use or FVLCD measured using a discounted cash flow approach, expected future cash flows are discounted to their present value using a pre-tax discount rate for VIU or a post-tax discount rate for FVLCD. Judgement is required in assessing both the expected cash flows and an appropriate discount rate which is based on current market assessments of the time value of money and the risks associated with the asset.

Goodwill

In 2023 impairments of goodwill of £62m (2022: £340m) have been recognised. The goodwill impairment for the year ended 31 December 2023 comprises £36m relating to the abrdn Financial Planning Limited (aFPL) CGU which is included in the ii segment and £26m relating to the Finimize CGU which is reported within Other business operations and corporate costs. The goodwill impairment for the year ended 31 December 2022 comprised £299m relating to the asset management group of CGUs and £41m relating to the Finimize CGU. Both impairments relate to assets which were included in the Investments segment. As noted above, the Finimize CGU is now reported within Other business operations and corporate costs.

The impairments are included within Impairment of intangibles acquired in business combinations and through the purchase of customer contracts in the consolidated income statement.

aFPL

The aFPL CGU comprises the Group's financial planning business. A total impairment of £36m has been recognised in the year ended 31 December 2023 of which £23m was initially recognised at 30 June 2023. The impairments resulted from lower projected revenues as a result of lower markets and macroeconomic conditions and the impact of business restructuring. Following the impairment, the goodwill allocated to the aFPL CGU was £24m (2022: £60m).

The recoverable amount of the aFPL CGU which was its FVLCD at 31 December 2023 was £45m. This was also the carrying value of the CGU at 31 December 2023. The FVLCD considered a number of valuation approaches, with the primary approach being a multiples approach based on price to revenue and price to assets under advice (AUAdv). Multiples were based on trading multiples for aFPL's peer companies, adjusted to take into account profitability where appropriate, and were benchmarked against recent transactions. Revenue was based on actual 2023 and forecast 2024 revenue and AUAdv were based on forecast 2024 AUAdv. The expected cost of disposal was based on past experience of previous transactions. This is a level 3 measurement as they are measured using inputs which are not based on observable market data.

As the carrying value of the CGU is equal to the recoverable amount any downside sensitivity will lead to a further future impairment loss. A 20% reduction in recurring revenue and AUAdv would result in a further impairment of £11m. A 20% reduction in multiples would result in a further impairment of £11m.

No impairment of this goodwill was recognised in 2022. At 31 December 2022, the carrying value of this CGU was equal to the recoverable amount. As above, the recoverable amount was based on FVLCD which similarly considered a number of valuation approaches, with the primary approach being a multiples approach based on price to revenue and price to AUAdv.

Finimize

The Finimize CGU comprises the Finimize business. A total impairment of £26m has been recognised in the year ended 31 December 2023 of which £14m was initially recognised at 30 June 2023. The impairments resulted from lower short-term projected growth following a strategic shift that prioritises profitability over revenue growth in the pursuit of a sustainable, resilient if lower growing business in the short term and broader market conditions. Following the impairment, the goodwill allocated to the Finimize CGU was £5m (2022: £31m).

The recoverable amount of the Finimize CGU at 31 December 2023 was £10m which was based on FVLCD. This was also the carrying value of the CGU at 31 December 2023. The FVLCD considered a number of valuation approaches, with the primary approach being a revenue multiple approach. The key assumptions used in determining the revenue multiple valuation were future revenue projections, which were based on management forecasts and assumed a continued level of revenue growth, and market multiples. Market multiples were based on broadly comparable listed companies, with appropriate discounts applied to take into account profitability, track record, revenue growth potential, and net premiums for control. This is a level 3 measurement as they are measured using inputs which are not based on observable market data.

The residual goodwill allocated to the Finimize CGU is not significant in comparison to the total carrying amount of goodwill.

The goodwill allocated to the Finimize CGU was also impaired in 2022 by £41m. The recoverable amount of the Finimize CGU at 31 December 2022 was £35m which was based on FVLCD. As above, the FVLCD considered a number of valuation approaches, with the primary approach being a revenue multiple approach.

Asset management

At 31 December 2023, there is no goodwill allocated to the asset management group of CGUs (2022: none). The goodwill of £41m in relation to the acquisition of healthcare fund management capabilities of Tekla has been allocated to the abrdn Inc. CGU (see below).

As noted above, an impairment of £299m was recognised in 2022 in relation to goodwill allocated to the asset management group of CGUs. The asset management group of CGUs comprised the Investments segment (excluding Finimize) which was the lowest group of CGUs to which the asset management goodwill had been allocated at this time. The goodwill prior to impairment of £299m included additions in 2022 of £132m allocated to the asset management group of CGUs for revenue synergies in our Investments segment in relation to the acquisition of ii. The recoverable amount of this group of CGUs at 31 December 2022 was £1,532m which was based on FVLCD. The FVLCD considered a number of valuation approaches, with the primary approach being a discounted cash flow approach.

interactive investor

Goodwill of £819m (2022: £819m) is allocated to the interactive investor CGU which comprises the interactive investor business in the ii segment. The recoverable amount of this CGU was determined based on FVLCD. The FVLCD was based on an earnings multiple approach. This is a level 3 measurement as it is measured using inputs which are not based on observable market data.

The key assumptions used in determining the earnings multiple valuation were future post tax adjusted earnings, which were based on management's business plan projections and reflected past experience and market price to earnings multiples, which were based on multiples of a peer group of comparable listed direct-to-consumer investment platform providers.

Sensitivities of key assumptions

The business plan projections used to determine the future earnings are based on macroeconomic forecasts including interest rates and inflation, and forecast levels of client activity, market pricing, the percentage of client funds held in cash and expenses. The projections are therefore sensitive to these assumptions. Given current macroeconomic uncertainties a 20% reduction in forecast earnings has been provided as a sensitivity.

The market price to earnings multiple used in the valuation is 16x based on multiples of a peer group of comparable listed direct-to-consumer investment platform providers. This assumption is sensitive to general equity market fluctuations and to market views on UK direct-to-consumer investment platform companies. Taking into account historic equity market fluctuations a 25% sensitivity to an earnings multiple has been provided as a sensitivity.

The recoverable amount at 31 December 2023 exceeds the carrying amount of the cash-generating unit by £398m. The impact of sensitivities to a single variable and the change required to reduce headroom to zero are shown in the tables below.

Reduction in headroom for illustrative sensitivities £m 20% reduction in forecast post tax adjusted earnings (346) 25% reduction in market multiple (433) Change required to reduce headroom to zero % Change in forecast post tax adjusted earnings (24) Reduction in market multiple (24) We consider the 24% reduction in market multiple assumption to 12x to reduce the headroom to zero to be a reasonably possible change. Other goodwill Goodwill of £39m (2022: £nil) is attributable to the abrdn Inc. CGU in the Investments segment. As noted above, this relates to the acquisition of healthcare fund management capabilities of Tekla. Refer Note 1(b)(i) for further details. No impairment of this goodwill has been identified since acquisition. Goodwill of £25m (2022: £25m) is attributable to an Adviser segment CGU (included in an ii segment CGU in 2022). These goodwill balances are not significant in comparison to the total carrying amount of goodwill. Customer relationship and investment management contract intangibles An impairment of customer relationship and investment management contract intangibles of £1m has been recognised in 2023. In 2022, an impairment of £28m was recognised in relation to customer relationship and investment management contract intangibles. The impairment was included within Impairment of intangibles acquired in business combinations and through the purchase of customer contracts in the consolidated income statement. The impairment related to the Phoenix Life business intangible asset which was recognised on the acquisition of Ignis Asset Management in 2014, and was part of the Investments segment. The recoverable of this intangible asset at 31 December 2022 was £nil which was based on its FVLCD, based on a discounted cash flow approach based on expected future cashflows for the Phoenix Life business. Determination of useful lives The determination of useful lives requires judgement in respect of the length of time that the Group expects to derive benefits from the asset and considers for example expected duration of customer relationships and when technology is expected to become obsolete for technology based assets. The amortisation period and method for each of the Group's intangible asset categories is as follows: -  Customer relationships acquired through business combinations - generally between 7 and 15 years, generally reducing balance method. -  Investment management contracts acquired through business combinations - between 10 and 17 years, straight-line. -  Brand acquired through business combinations - between 2 and 5 years, straight-line. -  Technology and other intangibles acquired through business combinations - between 1 and 6 years, straight-line. -  Internally developed software - between 2 and 6 years. Amortisation is on a straight-line basis and commences once the asset is available for use. -  Purchased software - between 2 and 6 years, straight-line. -  Costs of obtaining customer contracts - between 3 and 12 years, generally reducing balance method. Internally developed software There was an impairment of internally developed software of £2m in 2023 (2022: £nil).

14.    Investments in associates and joint ventures

Associates are entities where the Group can significantly influence decisions made relating to the financial and operating policies of the entity but does not control the entity. For entities where voting rights exist, significant influence is presumed where the Group holds between 20% and 50% of the voting rights. Where the Group holds less than 20% of voting rights, consideration is given to other indicators and entities are classified as associates where it is judged that these other indicators result in significant influence.

Joint ventures are strategic investments where the Group has agreed to share control of an entity's financial and operating policies through a shareholders' agreement and decisions can only be taken with unanimous consent.

Associates, other than those accounted for at fair value through profit or loss, and joint ventures are accounted for using the equity method from the date that significant influence or shared control, respectively, commences until the date this ceases with consistent accounting policies applied throughout.

Under the equity method, investments in associates and joint ventures are initially recognised at cost. When an interest is acquired at fair value from a third party, the value of the Group's share of the investee's identifiable assets and liabilities is determined applying the same valuation criteria as for a business combination at the acquisition date. This is compared to the cost of the investment in the investee. Where cost is higher the difference is identified as goodwill and the investee is initially recognised at cost which includes this component of goodwill. Where cost is lower a bargain purchase has arisen and the investee is initially recognised at the Group's share of the investee's identifiable assets and liabilities unless the recoverable amount for the purpose of assessing impairment is lower, in which case the investee is initially recognised at the recoverable amount.

Subsequently the carrying value is adjusted for the Group's share of post-acquisition profit or loss and other comprehensive income of the associate or joint venture, which are recognised in the consolidated income statement and other comprehensive income respectively. The Group's share of post-acquisition profit or loss includes amortisation charges based on the valuation exercise at acquisition. The carrying value is also adjusted for any impairment losses.

On partial disposal of an associate, a gain or loss is recognised based on the difference between the proceeds received and the equity accounted value of the portion disposed of. Indicators of significant influence are reassessed based on the remaining voting rights. Where significant influence is judged to have been lost, the investment in associate is reclassified to interests in equity securities and pooled investment funds measured at fair value. If an entity is reclassified, the difference between the fair value and the remaining equity accounted value is accounted for as a reclassification gain or loss on disposal.

Where the Group has an investment in an associate, a portion of which is held by, or is held indirectly through, a mutual fund, unit trust or similar entity, including investment-linked insurance funds, that portion of the investment is measured at FVTPL. In general, investment vehicles which are not subsidiaries are considered to be associates where the Group holds more than 20% of the voting rights.

The level of future dividend payments and other transfers of funds to the Group from associates and joint ventures accounted for using the equity method could be restricted by the regulatory solvency and capital requirements of the associate or joint venture, certain local laws or foreign currency transaction restrictions.

(a)       Investments in associates and joint ventures accounted for using the equity method

	2023			2022
	Associates	Joint ventures	Total	Associates	Joint ventures	Total
					restated1	restated1
	£m	£m	£m	£m	£m	£m
Opening balance carried forward	14	218	232	10	255	265
Effect of application of IFRS 92	-	51	51	-	-	-
Opening balance at 1 January	14	269	283	10	255	265
Reclassified as held for sale during the year	-	(9)	(9)	-	-	-
Exchange translation adjustments	-	(19)	(19)	-	8	8
Additions	2	-	2	18	2	20
Profit/(loss) after tax	(1)	2	1	(5)	10	5
Other comprehensive income	-	(31)	(31)	-	(57)	(57)
Reversal of impairment/(impairment)	-	2	2	(9)	-	(9)
At 31 December	15	214	229	14	218	232

1. Comparatives for 2022 have been restated for the implementation of IFRS 17. Refer Basis of preparation.

2. The Group implemented IFRS 9 in 2019. However, as permitted under a temporary exemption granted to insurers in IFRS 4 Insurance Contracts, HASL applied IFRS 9 at 1 January 2023 following the implementation of the new insurance standard, IFRS 17. Refer Basis of preparation.

The following joint venture is considered to be material to the Group as at 31 December 2023.

Name	Nature of relationship	Principal place of business	Measurement method	Interest held by the Group at 31 December 2023	Interest held by the Group at 31 December 2022
Heng An Standard Life Insurance Company Limited (HASL)	Joint venture	China	Equity accounted	50.00%	50.00%

The country of incorporation or registration is the same as the principal place of business. The interest held by the Group is the same as the proportion of voting rights held. HASL is not listed.

(b)       Investments in associates accounted for using the equity method

	2023	2022
	£m	£m
Carrying value of associates accounted for using the equity method	15	14
Share of profit/(loss) after tax	(1)	(5)

Investments in associates accounted for using the equity method primarily relates to the Group's interests in Archax Holdings Limited (Archax) and Tenet Group Limited (Tenet).

During the year ended 31 December 2023, the Group increased its interest in Archax from 9.8% to 11% following a further £2m investment. The classification of Archax as an associate reflects the Group's additional rights under Archax's articles of association as a large external investor. There are no indicators of impairment in relation to Archax at 31 December 2023.

During the year ended 31 December 2022, the Group recognised an impairment of £9m in relation to its interest in Tenet which reduced its value to £nil. There has been no further investment into Tenet in 2023 and no further impairment has been recognised.

(c)       Investments in joint ventures

	HASL		Other		Total
	2023	2022	2023	2022	2023	2022
		restated1				restated1
	£m	£m	£m	£m	£m	£m
Carrying value of joint ventures accounted for using the equity method	214	210	-	8	214	218
Dividends received	-	-	-	-	-	-
Share of profit/(loss) after tax	3	10	(1)	-	2	10

1. Comparatives for 2022 have been restated for the implementation of IFRS 17. Refer Basis of preparation.

HASL

The Group has a 50% share in HASL, one of China's leading life insurance companies offering life and health insurance products. HASL is an investment which gives the Group access to one of the world's largest markets. The table below provides summarised financial information for HASL, the joint venture which is considered to be material to the Group. HASL's year-end date is 31 December, however, HASL is not required to adopt IFRS 17 and IFRS 9 for its local reporting until 2026. Consequently, HASL has provided additional financial information on an IFRS 17 and IFRS 9 basis for the purposes of the preparation of the Group's consolidated financial statements.

For further details of HASL's implementation of IFRS 17 and IFRS 9, refer Basis of Preparation.

	HASL
	2023	2022
		restated1
	£m	£m
Summarised financial information of joint venture:
Revenue	154	162
Depreciation and amortisation	6	6
Interest income	97	93
Interest expense	2	2
Income tax (expense)/credit	(1)	6
Profit after tax	6	20
Other comprehensive income	(62)	(114)
Total comprehensive income	(56)	(94)
Total assets2	5,267	4,348
Total liabilities2	4,839	3,928
Cash and cash equivalents	179	130
Net assets	428	420
Attributable to investee's shareholders	428	420
Interest held	50%	50%
Share of net assets	214	210

1. Comparatives for 2022 have been restated for the implementation of IFRS 17. Refer Basis of preparation.

2. As a liquidity presentation is used by insurance companies when presenting their statement of financial position, an analysis of total assets and total liabilities between current and non-current has not been provided for HASL.

In relation to HASL, there are no indicators that the recoverable amount of the Group's investment in HASL is less than the Group's share of net assets.

Virgin Money UTM

The carrying value of joint ventures accounted for using the equity method for Other at 31 December 2022 primarily related to the Group's interest in Virgin Money UTM. As detailed in Note 43, the agreed sale of the Group's interest in Virgin Money UTM to its joint venture partner, Clydesdale Bank, has been announced. At 31 December 2023, a sale was considered as highly probable and the Group's interest in Virgin Money UTM was transferred to held for sale at this date at a carrying value of £9m (refer Note 21).

The sale was also considered as an indicator that there was a small reversal of the £45m impairment of the interest that was recognised in 2020. The carrying value prior to reversal of impairment was £7m. The recoverable amount of Virgin Money UTM prior to transfer was £20m which was based on FVLCD and determined based on the agreed sale price. However, as the Group had recognised £11m for its share of Virgin Money UTM's losses since the previous impairment, the reversal of impairment recognised prior to the transfer was limited to £2m. The reversal of impairment is included in Reversal of impairment/(impairment) of interests in associates and joint ventures in the consolidated income statement. The interest in Virgin Money UTM does not form part of the Group's reportable segments.

(d)      Investments in associates measured at FVTPL

The aggregate fair value of associates accounted for at FVTPL included in equity securities and interests in pooled investment funds (refer Note 17) at 31 December 2023 is £10m (2022: £46m) none of which are considered individually material to the Group.

15.    Property, plant and equipment

Property, plant and equipment consists primarily of property owned and occupied by the Group and the computer equipment used to carry out the Group's business along with right-of-use assets for leased property and equipment.

Owner occupied property: Owner occupied property is initially recognised at cost and subsequently revalued to fair value at each reporting date. Depreciation, being the difference between the carrying amount and the residual value of each significant part of a building, is charged to the consolidated income statement over its useful life. The useful life of each significant part of a building is estimated as being between 30 and 50 years. A revaluation surplus is recognised in other comprehensive income unless it reverses a revaluation deficit which has been recognised in the consolidated income statement.

Equipment: Equipment is initially recognised at cost and subsequently measured at cost less depreciation. Depreciation is charged to the income statement over 2 to 15 years depending on the length of time the Group expects to derive benefit from the asset.

Right-of-use asset: Refer Note 16 below for the accounting policies for right-of-use assets.

		Owner occupied property	Equipment	Right-of-use assets - property	Right-of-use assets - equipment	Total
		£m	£m	£m	£m	£m
Cost or valuation
At 1 January 2022		2	104	322	3	431
Reclassified as held for sale during the year		-	-	(1)	-	(1)
Additions		-	24	36	1	61
Disposals and adjustments1		-	(11)	(41)	-	(52)
Derecognition of right-of-use assets relating to subleases classified as finance leases		-	-	(6)	-	(6)
Foreign exchange adjustment		-	3	11	-	14
At 31 December 2022		2	120	321	4	447
Additions		-	18	30	1	49
Disposals and adjustments1		-	(8)	(10)	(1)	(19)
Derecognition of right-of-use assets relating to subleases classified as finance leases		-	-	(24)	-	(24)
Foreign exchange adjustment		-	(2)	(4)	-	(6)
At 31 December 2023		2	128	313	4	447
Accumulated depreciation and impairment
At 1 January 2022		(1)	(54)	(187)	(2)	(244)
Reclassified as held for sale during the year		-	-	1	-	1
Depreciation charge for the year2		-	(18)	(20)	(1)	(39)
Disposals and adjustments1		-	10	38	-	48
Derecognition of right-of-use assets relating to subleases classified as finance leases		-	-	3	-	3
Impairment3		-	-	(7)	-	(7)
Foreign exchange adjustment		-	(3)	(5)	-	(8)
At 31 December 2022		(1)	(65)	(177)	(3)	(246)
Depreciation charge for the year2		-	(15)	(16)	(1)	(32)
Disposals and adjustments1		-	7	9	-	16
Derecognition of right-of-use assets relating to subleases classified as finance leases		-	-	20	-	20
Impairment3		-	(11)	(39)	-	(50)
Reversal of impairment3		-	-	3	-	3
Foreign exchange adjustment		-	2	2	1	5
At 31 December 2023		(1)	(82)	(198)	(3)	(284)
Carrying amount
At 1 January 2022		1	50	135	1	187
At 31 December 2022		1	55	144	1	201
At 31 December 2023		1	46	115	1	163

1. For the year ended 31 December 2023, £5m (2022: £1m) of disposals and adjustments relates to equipment with net book value of £nil which is no longer in use.

2. Included in other administrative expenses.

3. Included in restructuring and corporate transaction expenses.

Included in property right-of-use assets, are right-of-use assets that meet the definition of investment property. Their carrying amount at 31 December 2023 is £31m (2022: £14m). This comprises a gross carrying value of £134m (2022: £49m) and accumulated depreciation and impairment of £103m (2022: £35m). Rental income received and direct operating expenses incurred to generate that rental income in the year to 31 December 2023 were £3m (2022: £3m) and £2m (2022: £3m) respectively. In addition, there were direct expenses of £1m (2022: £1m) in relation to investment properties not currently generating income.

The movements during the period of the carrying value of the Group's investment property is analysed below.

	2023	2022
	£m	£m
At start of period	14	21
Transfers to investment property	63	-
Transfers from investment property	(3)	-
Depreciation	(4)	(2)
Derecognition related to new subleases classified as finance leases	(3)	(1)
Impairments	(39)	(3)
Reversal of impairment	3	-
Disposals and adjustments	-	(1)
At end of period	31	14

The transfers to investment property relate to a number of properties in the UK and the US that will no longer be used operationally by the Group. The right-of-use assets were assessed for impairment at the point of transfer. Impairments of £39m have been recognised in the year ended 31 December 2023 in relation to these properties and one other property in the UK previously transferred to investment property. The right-of-use assets are related to the Investments segment (£27m impairment) ii segment (£1m impairment) and Other business operations and corporate costs (£11m impairment).

The recoverable amount for the properties in the UK, which was based on value in use, was £27m using a pre-tax discount rate of 6%. The recoverable amount for the properties in the US, which was based on value in use, was £4m using a pre-tax discount rate of 7%. The cash flows were based on the rental income expected to be received under subleases during the term of the lease and the direct expenses expected to be incurred in managing the leased property, discounted using a discount rate that reflects the risks inherent in the cash flow estimates. The assessment of the cash flows takes into consideration climate related factors such as the energy efficiency of the buildings. It is not based on valuations by an independent valuer.

The transfers from investment property relate to a property in the UK which was not being used operationally but following the review of properties in the UK is being brought back into operational use. The right-of-use asset was assessed for reversal of impairment at the point of transfer. The Group has recognised a reversal of impairment of £3m in the year ended 31 December 2023 in relation to this property. The recoverable amount for this property was its carrying value at 30 June 2023 if it had not previously been impaired. The right-of-use asset is also related to the Investments segment.

The fair value of investment property included within right-of-use assets at 31 December 2023 is £36m (2022: £14m). The valuation technique used to determine the fair value considers the rental income expected to be received under subleases during the term of the lease and the direct expenses expected to be incurred in managing the leased property, discounted using a discount rate that reflects the risks inherent in the cash flow estimates. It is not based on valuations by an independent valuer. This is a Level 3 valuation technique as defined in Note 36.

If owner occupied property was measured using the cost model, the historical cost before impairment would be £1m (2022: £1m). As the expected residual value of owner occupied property is in line with the current fair value, no depreciation is currently charged.

Further details on the leases under which the Group's right-of-use assets are recognised are provided in Note 16 below.

16.    Leases

A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. At inception of a contract, the Group assesses whether a contract is, or contains, a lease. In 2019, on adoption of IFRS 16 the Group used the practical expedient permitted to apply the new standard at transition solely to leases previously identified in accordance with IAS 17 and IFRIC 4 Determining whether an Arrangement Contains a Lease.

Right-of-use assets are measured at cost less accumulated depreciation and impairment losses and are presented in property, plant and equipment (refer Note 15). The Group does not revalue its right-of-use assets. This applies to all right-of-use assets, including those that are assessed as meeting the definition of investment property. The cost comprises the amount of the initial measurement of the lease liability plus any initial direct costs and expected restoration costs not relating to wear and tear. Costs relating to wear and tear are expensed over the term of the lease. Depreciation is charged on right-of-use assets on a straight -line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group assesses right-of-use assets for impairment when such indicators exist, and where required, reduces the value of the right-of-use asset accordingly.

The related lease liability (included in other financial liabilities - refer Note 32) is calculated as the present value of the future lease payments. The lease payments are discounted using the rate implicit within the lease where readily available or the Group's incremental borrowing rate where the implicit rate is not readily available. Interest is calculated on the liability using the discount rate and is charged to the consolidated income statement under finance costs.

In determining the value of the right-of-use assets and lease liabilities, the Group considers whether any leases contain lease extensions or termination options that the Group is reasonably certain to exercise.

Where a leased property has been sublet, the Group assesses whether the sublease has transferred substantially all the risk and rewards of the right-of-use asset to the lessee under the sublease. Where this is the case, the right-of-use asset is derecognised and a net investment in finance leases (included in Receivables and other financial assets - refer Note 19) is recognised, calculated as the present value of the future lease payments receivable under the sublease. Where a property is only partially sublet, only the portion of the right-of-use asset relating to the sublet part of the property is derecognised and recognised as a net investment in finance leases.

Any difference between the initial value of the net investment in finance leases and the right-of-use asset derecognised is recognised in the consolidated income statement (within other income or expenses). Interest is calculated on the net investment in finance lease using the discount rate and is recognised in the consolidated income statement as interest income.

Where the sublease does not transfer substantially all the risk and rewards of the right-of-use assets to the lessee under the sublease, the Group continues to recognise the right-of-use asset. The sublease is accounted for as an operating lease with the lease payments received recognised as property rental income in other income in the consolidated income statement. Lease incentives granted are recognised as an integral part of the property rental income and are spread over the term of the lease.

The Group does not recognise right-of-use assets and lease liabilities for short-term leases (less than one year from inception) and leases where the underlying asset is of low value.

(a)       Leases where the Group is lessee

The Group leases various offices and equipment used to carry out its business. Leases are generally for fixed periods but may be subject to extensions or early termination clauses. The remaining periods for current leases range from less than 1 year to 15 years (2022: less than 1 year to 16 years). A number of leases which are due to end in 2031 contain options that would allow the Group to extend the lease term. The Group reviews its property use on an ongoing basis and these extensions have not been included in the right-of-use asset or lease liability calculations. The Group has committed to one lease at 31 December 2023 which had not commenced at this date. The expected lease liability for these leases is not significant to the Group.

The Group has recognised the following assets and liabilities in relation to these leases where the Group is a lessee:

	2023	2022
	£m	£m
Right-of-use assets:
Property	115	144
Equipment	1	1
Total right-of-use assets	116	145
Lease liabilities	(223)	(224)

Details of the movements in the Group's right-of-use assets including additions and depreciation are included in Note 15.

The interest on lease liabilities is as follows:

	2023	2022
	£m	£m
Interest on lease liabilities	6	6

The total cash outflow for lease liabilities recognised in the consolidated statement of cash flows for the year ended 31 December 2023 was £30m (2022: £52m). Refer Note 37(f) for further details.

The following table provides a maturity analysis of the contractual undiscounted cash flows for the lease liabilities.

	2023	2022
	£m	£m
Less than 1 year	26	29
Greater than or equal to 1 year and less than 2 years	25	24
Greater than or equal to 2 years and less than 3 years	26	23
Greater than or equal to 3 years and less than 4 years	26	24
Greater than or equal to 4 years and less than 5 years	25	23
Greater than or equal to 5 years and less than 10 years	91	99
Greater than or equal to 10 years and less than 15 years	32	38
Greater than or equal to 15 years	-	4
Total undiscounted lease liabilities	251	264

The Group does not recognise right-of-use assets and lease liabilities for short-term leases and leases where the underlying asset is of low value. The expenses for these leases for the year ended 31 December 2023 were £1m (2022: £3m). The Group has no lease commitments for short-term leases at 31 December 2023 (2022: none).

(b)      Leases where the Group is lessor (subleases)

Where the Group no longer requires a leased property, the property may be sublet to a third party. The sublease may be for the full remaining term of the Group's lease or only part of the remaining term.

At 31 December 2023, the Group had a net investment in finance leases asset of £31m (2022: £29m) for subleases which had transferred substantially all the risk and rewards of the right-of-use assets to the lessee under the sublease. All other subleases are accounted for as operating leases.

(b)(i)          Finance leases

During the year ended 31 December 2023, the Group received finance income on the net investment in finance leases asset of less than £1m (2022: less than £1m). The Group recorded an initial gain of £6m in relation to new subleases entered into during the year ended 31 December 2023 (2022: £1m). The following table provides a maturity analysis of the future contractual undiscounted cash flows for the net investment in finance leases and a reconciliation to the net investment in finance leases asset.

	2023	2022
	£m	£m
Less than 1 year	3	3
Greater than or equal to 1 year and less than 2 years	4	3
Greater than or equal to 2 years and less than 3 years	4	4
Greater than or equal to 3 years and less than 4 years	4	4
Greater than or equal to 4 years and less than 5 years	4	4
Greater than or equal to 5 years and less than 10 years	14	12
Greater than or equal to 10 years and less than 15 years	1	2
Total contractual undiscounted cash flows under finance leases	34	32
Unearned finance income	(3)	(3)
Total net investment in finance leases	31	29

(b)(ii)         Operating leases

During the year ended 31 December 2023, the Group received property rental income from operating leases of £3m (2022: £3m).

The following table provides a maturity analysis of the future contractual undiscounted cash flows for subleases classified as operating leases.

	2023	2022
	£m	£m
Less than 1 year	2	1
Greater than or equal to 1 year and less than 2 years	2	1
Greater than or equal to 2 years and less than 3 years	1	1
Greater than or equal to 3 years and less than 4 years	-	1
Total contractual undiscounted cash flows under operating leases	5	4

17.    Financial assets

Financial assets are initially recognised at their fair value. Subsequently all equity securities and interests in pooled investment funds and derivative instruments are measured at fair value. All equity securities and interests in pooled investment funds are classified as FVTPL on a mandatory basis. Changes in their fair value are recognised in Net gains or losses on financial instruments and other income in the consolidated income statement. The classification of derivatives and the accounting treatment of derivatives designated as a hedging instrument are set out in Note 18. The subsequent measurement of debt instruments depends on whether their cash flows are solely payments of principal and interest and the nature of the business model they are held in as follows: SPPI1 test satisfied? Business model            Classification Yes A: Objective is to hold to collect contractual cash flows Amortised cost2 Yes B: Objective is achieved by both collecting contractual cash flows and selling Fair value through other comprehensive income (FVOCI)2 Yes C: Objective is neither A nor B FVTPL No N/A FVTPL 1. Solely payments of principal and interest. 2. May be classified as FVTPL if doing so eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as an 'accounting mismatch') that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases. The Group has no direct holding in debt instruments that are managed within a business model whose objective is achieved both by collecting contractual cash flows and selling and therefore there are no debt instruments classified as FVOCI. The Group's Chinese joint venture, HASL, does hold debt securities classified as FVOCI. Refer Basis of Preparation for further details. Debt instruments classified as FVTPL are classified as such due to the business model they are managed under, predominantly being held in consolidated investment vehicles. The methods and assumptions used to determine fair value of financial assets at FVTPL are discussed in Note 36. Amortised cost is calculated, and related interest is credited to the consolidated income statement, using the effective interest method. Impairment is determined using an expected credit loss impairment model which is applied to all financial assets measured at amortised cost. Financial assets measured at amortised cost attract a loss allowance equal to either: -  12 month expected credit losses (losses resulting from possible default within the next 12 months). -  Lifetime expected credit losses (losses resulting from possible defaults over the remaining life of the financial asset). Financial assets attract a 12 month ECL allowance unless the asset has suffered a significant deterioration in credit quality or the simplified approach for calculation of ECL has been applied. As permitted under IFRS 9 Financial Instruments, the Group has applied the simplified approach to calculate the ECL allowance for trade receivables and contract assets recognised under IFRS 15 Revenue from Contracts with Customers and lease receivables recognised under IFRS 16 Leases. Under the simplified approach the ECL is always equal to the lifetime expected credit loss.

The table below sets out an analysis of financial assets excluding those assets backing unit linked liabilities which are set out in Note 23.

		At fair value through profit or loss1		Cash flow hedge2		At amortised cost		Total
		2023	2022	2023	2022	2023	2022	2023	2022
	Notes	£m	£m	£m	£m	£m	£m	£m	£m
Derivative financial assets	18	2	19	41	85	-	-	43	104
Equity securities and interests in pooled investment funds	36	1,139	2,033	-	-	-	-	1,139	2,033
Debt securities	36	740	592	-	-	125	210	865	802
Financial investments		1,881	2,644	41	85	125	210	2,047	2,939
Receivables and other financial assets	19	11	19	-	-	1,060	888	1,071	907
Cash and cash equivalents	22	-	-	-	-	1,196	1,133	1,196	1,133
Total		1,892	2,663	41	85	2,381	2,231	4,314	4,979

1. All financial assets measured at fair value through profit or loss have been classified at FVTPL on a mandatory basis. The Group has not designated any financial assets as FVTPL.

2. Changes in fair value are recognised in the Cash Flow Hedges Reserve (refer Note 27) but may be reclassified subsequently to profit or loss.

The amount of debt securities expected to be recovered or settled after more than 12 months is £8m (2022: £2m). Due to the nature of equity securities and interests in pooled investment funds, there is no fixed term associated with these securities. The amount of equity securities and interests in pooled investment funds expected to be recovered or settled after more than 12 months is £1,139m (2022: £669m).

Included in Proceeds from sale or redemption of financial investments of £1,029m (2022: £1,633m) within the consolidated statement of cash flows are £576m (2022: £789m) in relation to sales of significant listed investments. Refer Note 11 for further details of the sales in 2023.

18.    Derivative financial instruments

A derivative is a financial instrument that is typically used to manage risk and whose value moves in response to an underlying variable such as interest or foreign exchange rates. The Group uses derivative financial instruments in order to match subordinated debt liabilities and to reduce the risk from potential movements in foreign exchange rates on seed capital and co-investments and potential movements in market rates on seed capital. Certain consolidated investment vehicles may also use derivatives to take and alter market exposure, with the objective of enhancing performance and controlling risk.

Management determines the classification of derivatives at initial recognition. All derivative instruments are classified as at FVTPL except those designated as part of a cash flow hedge or net investment hedge. Derivatives at FVTPL are measured at fair value with changes in fair value recognised in the consolidated income statement.

On adoption of IFRS 9 Financial instruments in 2019, the Group has elected to continue applying the hedge accounting requirements of IAS 39. The accounting treatment below applies to derivatives designated as part of a hedging relationship.

Using derivatives to manage a particular exposure is referred to as hedging. For a derivative to be considered as part of a hedging relationship its purpose must be formally documented at inception. In addition, the effectiveness of the hedge must be initially high and be able to be reliably measured on a regular basis. Derivatives used to hedge variability in future cash flows such as coupons payable on subordinated liabilities or revenue receivable in a foreign currency are designated as cash flow hedges, while derivatives used to hedge currency risk on investments in foreign operations are designated as net investment hedges.

Where a derivative qualifies as a cash flow or net investment hedge, hedge accounting is applied. The effective part of any gain or loss resulting from the change in fair value is recognised in other comprehensive income, and in the cash flow or net investment hedge reserve in equity, while any ineffective part is recognised immediately in the consolidated income statement. If a derivative ceases to meet the relevant hedging criteria, hedge accounting is discontinued.

For cash flow hedges, the amount recognised in the cash flow hedge reserve is transferred to the consolidated income statement (recycled) in the same period or periods during which the hedged item affects profit or loss and is transferred immediately if the cash flow is no longer expected to occur. For net investment hedges, the amount recognised in the net investment hedge reserve is transferred to the consolidated income statement on disposal of the investment.

		2023			2022
		Contract amount	Fair value assets	Fair value liabilities	Contract amount	Fair value assets	Fair value liabilities
	Notes	£m	£m	£m	£m	£m	£m
Cash flow hedges	17,29	588	41	-	623	85	-
FVTPL	17,29	628	2	9	638	19	1
Derivative financial instruments	36	1,216	43	9	1,261	104	1
Derivative financial instruments backing unit linked liabilities	23	2	-	-	258	1	2
Total derivative financial instruments		1,218	43	9	1,519	105	3

Derivative assets of £41m (2022: £85m) are expected to be recovered after more than 12 months. There are no derivative liabilities (2022: none) expected to be settled after more than 12 months.

(a)       Hedging strategy

The Group generally does not hedge the currency exposure relating to revenue and expenditure, nor does it hedge translation of overseas profits in the income statement. Where appropriate, the Group may use derivative contracts to reduce or eliminate currency risk arising from individual transactions or seed capital and co-investment activity.

(a)(i)          Cash flow hedges

On 18 October 2017, the Group issued subordinated notes with a principal amount of US$750m. In order to manage its foreign exchange risk relating to the principal and coupons payable on these notes the Group entered into a cross-currency swap which is designated as a cash flow hedge. The cash flow hedge was fully effective during the year. The cross-currency swap has the effect of swapping the 4.25% US Dollar fixed rate subordinated notes into 3.2% Sterling fixed rate subordinated notes with a principal amount of £569m. The cross-currency swap has a fair value asset position of £41m (2022: £85m asset). During the year ended 31 December 2023 fair value losses of £40m (2022: gains of £85m) were recognised in other comprehensive income in relation to the cross-currency swap. Losses of £35m (2022: gains of £70m) were transferred from other comprehensive income to Net gains or losses on financial instruments and other income in the consolidated income statement in relation to the cross-currency swap during the year. In addition, forward points of £6m (2022: £6m) and gains of £1m (2022: gains of £2m) were transferred from other comprehensive income to Finance costs in the consolidated income statement.

(a)(ii)         FVTPL

Derivative financial instruments classified as FVTPL include those that the Group holds as economic hedges of financial instruments that are measured at fair value. FVTPL derivative financial instruments are also held by the Group to match contractual liabilities that are measured at fair value or to achieve efficient portfolio management in respect of instruments measured at fair value.

	2023			2022
	Contract amount	Fair value assets	Fair value liabilities	Contract amount	Fair value assets	Fair value liabilities
	£m	£m	£m	£m	£m	£m
Equity derivatives:
Futures	130	-	5	137	3	-
Swaps	13	-	-	-	-	-
Bond derivatives:
Futures	46	-	2	-	-	-
Interest rate derivatives:
Swaps	21	1	-	18	1	-
Foreign exchange derivatives:
Forwards	339	1	-	678	16	3
Other derivatives:
Credit default swaps	81	-	2	63	-	-
Derivative financial instruments at FVTPL	630	2	9	896	20	3

(b)      Maturity profile

The maturity profile of the contractual undiscounted cash flows in relation to derivative financial instruments is as follows:

	Within 1 year		1-5 years		5-10 years		Total
	2023	2022	2023	2022	2023	2022	2023	2022
	£m	£m	£m	£m	£m	£m	£m	£m
Cash inflows
Derivative financial assets	339	569	677	107	-	637	1,016	1,313
Derivative financial liabilities	25	138	-	-	-	-	25	138
Total	364	707	677	107	-	637	1,041	1,451
Cash outflows
Derivative financial assets	(331)	(541)	(632)	(91)	-	(578)	(963)	(1,210)
Derivative financial liabilities	(25)	(141)	(2)	-	-	-	(27)	(141)
Total	(356)	(682)	(634)	(91)	-	(578)	(990)	(1,351)
Net derivative financial instruments cash inflows	8	25	43	16	-	59	51	100

Included in the above maturity profile are the following cash flows in relation to cash flow hedge assets:

	Within 1 year		1-5 years		5-10 years		Total
	2023	20222	2023	2022	2023	2022	2023	2022
	£m	£m	£m	£m	£m	£m	£m	£m
Cash inflows	25	26	676	106	-	637	701	769
Cash outflows	(18)	(18)	(632)	(91)	-	(578)	(650)	(687)
Net cash flow hedge cash inflows	7	8	44	15	-	59	51	82

Cash inflows and outflows are presented on a net basis where the Group is required to settle cash flows net.

19.    Receivables and other financial assets

		2023	2022
	Notes	£m	£m
Amounts receivable from contracts with customers	3(d)	110	161
Accrued income		310	278
Amounts due from counterparties and customers for unsettled trades and fund transactions		477	317
Net investment in finance leases		31	29
Collateral pledged in respect of derivative contracts	34	19	14
Contingent consideration assets	36	11	19
Other		113	89
Receivables and other financial assets		1,071	907

The carrying amounts disclosed above reasonably approximate the fair values as at the year end.

The amount of receivables and other financial assets expected to be recovered after more than 12 months is £67m
(2022: £34m).

Accrued income includes £306m (2022: £273m) of accrued income from contracts with customers (refer Note 3(d)).

20.    Other assets

	2023	2022
	£m	£m
Prepayments	75	89
Deferred acquisition costs	-	1
Other	2	2
Other assets	77	92

The amount of other assets expected to be recovered after more than 12 months is £24m (2022: £21m).

Prepayments includes £23m (2022: £43m) relating to the Group's future purchase of certain products in the Phoenix Group's savings business offered through abrdn's adviser platforms together with the Phoenix Group's trustee investment plan business for UK pension scheme clients. Refer Note 39(b) for further details.

All deferred acquisition costs above are costs deferred on investment contracts (deferred origination costs) which relate to contracts with customers (refer Note 3(d)). The amortisation charge for deferred origination costs relating to contracts with customers for the year was £1m (2022: £2m).

21.    Assets and liabilities held for sale

Assets and liabilities held for sale are presented separately in the consolidated statement of financial position and consist of operations and individual non-current assets whose carrying amount will be recovered principally through a sale transaction (expected within one year) and not through continuing use.

Operations held for sale, being disposal groups, and investments in associates accounted for using the equity method are measured at the lower of their carrying amount and their fair value less disposal costs. No depreciation or amortisation is charged on assets in a disposal group once it has been classified as held for sale.

Operations held for sale include newly established investment vehicles which the Group has seeded but is actively seeking to divest from. For these investment funds, which do not have significant liabilities or non-financial assets, financial assets continue to be measured based on the accounting policies that applied before they were classified as held for sale. The Group classifies seeded operations as held for sale where the intention is to dispose of the investment vehicle in a single transaction. Where disposal of a seeded investment vehicle will be in more than one tranche the operations are not classified as held for sale in the consolidated statement of financial position.

Certain amounts seeded into funds are classified as interests in pooled investment funds. Investment property and owner occupied property held for sale relates to property for which contracts have been exchanged but the sale had not completed during the current financial year. Interests in pooled investment funds and investment property held for sale continue to be measured based on the accounting policies that applied before they were classified as held for sale.

		2023	2022
		£m	£m
Assets of operations held for sale
abrdn Capital Limited		-	87
European-headquartered Private Equity business		10	-
Investments in joint ventures accounted for using the equity method
Virgin Money UTM	14, 43	9	-
Assets held for sale		19	87
Liabilities of operations held for sale
abrdn Capital Limited		-	14
European-headquartered Private Equity business		2	-
Liabilities of operations held for sale		2	14

(a)       European-headquartered Private Equity business

On 16 October 2023, the Group announced the proposed sale of its European-headquartered Private Equity business which is in the Investments segment. The sale is expected to complete in the first half of 2024 and this business has been classified as an operation held for sale. At 31 December 2023, this disposal group was measured at its carrying amount and comprised the following assets and liabilities:

	2023
	£m
Assets of operations held for sale
Receivables and other financial assets	9
Cash and cash equivalents	1
Total assets of operations held for sale	10
Liabilities of operations held for sale
Other financial liabilities	2
Total liabilities of operations held for sale	2
Net assets of operations held for sale	8

Net assets of operations held for sale were net of intercompany balances between the European-headquartered Private Equity business and other group entities, the net assets on a gross basis as at 31 December 2023 were £8m.

(b)      abrdn Capital Limited (aCL)

On 1 September 2023, the Group completed the sale of aCL. Refer Note 1 (c)(i). aCL was reported in the ii segment (previously named Personal).

At 31 December 2022, this disposal group was measured at its carrying amount and comprised the following assets and liabilities:

	2022
	£m
Assets of operations held for sale
Intangible assets	58
Property, plant and equipment	-
Receivables and other financial assets	15
Other assets	1
Cash and cash equivalents	13
Total assets of operations held for sale	87
Liabilities of operations held for sale
Other financial liabilities	14
Total liabilities of operations held for sale	14
Net assets of operations held for sale	73

Net assets of operations held for sale were net of intercompany balances between abrdn Capital Limited and other group entities, the net assets of abrdn Capital Limited on a gross basis as at 31 December 2022 were £70m.

22.    Cash and cash equivalents

Cash and cash equivalents include cash at bank, money at call and short notice with banks, money market funds and any highly liquid investments with less than three months to maturity from the date of acquisition. For the purposes of the consolidated statement of cash flows, cash and cash equivalents also include bank overdrafts which are included in other financial liabilities on the consolidated statement of financial position where the overdraft is repayable on demand and forms an integral part of the Group's cash management.

Where the Group has a legally enforceable right of set off and intention to settle on a net basis, cash and overdrafts are offset in the consolidated statement of financial position.

	2023	2022
	£m	£m
Cash at bank and in hand	704	783
Money at call, term deposits, reverse repurchase agreements and debt instruments with less than three months to maturity from acquisition	301	236
Money market funds	191	114
Cash and cash equivalents	1,196	1,133

		2023	2022
	Notes	£m	£m
Cash and cash equivalents		1,196	1,133
Cash and cash equivalents backing unit linked liabilities	23	13	23
Cash and cash equivalents classified as held for sale	21	1	13
Bank overdrafts	32	-	(3)
Total cash and cash equivalents for consolidated statement of cash flows		1,210	1,166

Cash at bank, money at call and short notice and deposits are subject to variable interest rates.

Cash and cash equivalents in respect of unit linked funds (including third party interests in consolidated funds) are held in separate bank accounts and are not available for general use by the Group.

23.    Unit linked liabilities and assets backing unit linked liabilities

The Group operates unit linked life assurance businesses through an insurance subsidiary. This subsidiary provides investment products through a life assurance wrapper. These products do not contain any features which transfer significant insurance risk and therefore are classified as investment contracts. Unit linked non-participating investment contracts are separated into two components being an investment management services component and a financial liability. All fees and related administrative expenses are deemed to be associated with the investment management services component (refer Note 3). The financial liability component is designated at FVTPL as it is implicitly managed on a fair value basis as its value is directly linked to the market value of the underlying portfolio of assets.

Where the Group is deemed to control an investment vehicle as a result of holdings in that vehicle by subsidiaries to back unit linked non-participating investment contract liabilities, the assets and liabilities of the vehicle are consolidated within the Group's statement of financial position. The liability for third party interest in such consolidated funds is presented as a unit linked liability.

Unit linked liabilities and assets backing unit linked liabilities are presented separately in the consolidated statement of financial position except for those held in operations held for sale, which are presented in assets and liabilities held for sale in the consolidated statement of financial position.

Contributions received on non-participating investment contracts and from third party interest in consolidated funds are treated as deposits and not reported as revenue in the consolidated income statement.

Withdrawals paid out to policyholders on non-participating investment contracts and to third party interest in consolidated funds are treated as a reduction to deposits and not recognised as expenses in the consolidated income statement.

Investment return and related benefits credited in respect of non-participating investment contracts and third party interest in consolidated funds are recognised in the consolidated income statement as changes in investment contract liabilities and changes in liability for third party interest in consolidated funds respectively. Investment returns relating to unit linked business are for the account of policyholders and have an equal and opposite effect on income and expenses in the consolidated income statement with no impact on profit or loss after tax.

Assets backing unit linked liabilities comprise financial investments, which are all classified as FVTPL on a mandatory basis, and receivables and other financial assets and cash and cash equivalents which are measured at amortised cost.

(a)   Result for the year attributable to unit linked business

		2023	2022
	Notes	£m	£m
Net gains or losses on financial instruments and other income	4	4	5
Other administrative expense	5	(1)	(1)
Profit before tax		3	4
Tax expense attributable to unit linked business	9	(3)	(4)
Profit after tax		-	-

(b)      Financial instrument risk management

The shareholder is not directly exposed to market risk or credit risk in relation to the financial assets backing unit linked liabilities. The shareholder's exposure to market risk on these assets is limited to variations in the value of future revenue as fees are based on a percentage of fund value.

The shareholder is exposed to liquidity risk relating to unit linked funds. For the unit linked business, liquidity risk is primarily managed by holding a range of diversified instruments which are assessed against cash flow and funding requirements. A core portfolio of assets is maintained and invested in accordance with the mandates of the relevant unit linked funds. Given that unit linked policyholders can usually choose to surrender, in part or in full, their unit linked contracts at any time, the non-participating investment contract unit linked liabilities are designated as payable within one year. Such surrenders would be matched in practice, if necessary, by sales of underlying assets. Policyholder behaviour and the trading position of asset classes are actively monitored. The Group can delay settling liabilities to unit linked policyholders to ensure fairness between those remaining in the fund and those leaving the fund. The length of any such delay is dependent on the underlying financial assets.

(c)       Fair value measurement of unit linked financial liabilities and financial assets backing unit linked liabilities

Each of the unit linked financial liabilities and the financial assets backing unit linked liabilities has been categorised below using the fair value hierarchy as defined in Note 36. Refer Note 36 for details of valuation techniques used.

	Level 1		Level 2		Level 3		Not at fair value		Total
	2023	2022	2023	2022	2023	2022	2023	2022	2023	2022
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Financial investments	396	601	273	322	-	1	-	-	669	924
Receivables and other financial assets	-	-	-	-	-	-	4	5	4	5
Cash and cash equivalents	-	-	-	-	-	-	13	23	13	23
Total financial assets backing unit linked liabilities	396	601	273	322	-	1	17	28	686	952
Investment contract liabilities	-	-	684	772	-	1	-	-	684	773
Third party interest in consolidated funds	-	-	-	173	-	-	-	-	-	173
Other unit linked financial liabilities	-	-	-	2	-	-	2	4	2	6
Total unit linked financial liabilities	-	-	684	947	-	1	2	4	686	952

In addition to financial assets backing unit linked liabilities and unit linked financial liabilities shown above there is a current tax asset of £nil (2022: less than £1m) included in unit linked assets and a current tax liability of £nil (2022: less than £1m) included in unit linked liabilities.

The financial investments backing unit linked liabilities comprise equity securities and interests in pooled investment funds of £667m (2022: £811m), debt securities of £2m (2022: £112m) and derivative financial assets of £nil (2022: £1m).

The fair value of financial instruments not held at fair value approximates to their carrying value at both 31 December 2023 and 31 December 2022.

There were no significant transfers from level 1 to level 2 during the year ended 31 December 2023. There were transfers from level 1 to level 2 of £52m during the year ended 31 December 2022. The Group now considers government bonds not issued by the G7 countries or the European Union as level 2. There were no significant transfers from level 2 to level 1 during the year ended 31 December 2023 (2022: £nil). Transfers are deemed to have occurred at the end of the calendar quarter in which they arose.

The movements during the period of level 3 unit linked assets and liabilities held at fair value are analysed below.

	Equity securities and interests in pooled investment funds		Investment contract liabilities
	31 Dec 2023	31 Dec 2022	31 Dec 2023	31 Dec 2022
	£m	£m	£m	£m
At start of period	1	1	(1)	(1)
Sales	(1)	-	1	-
At end of period	-	1	-	(1)

Unit linked level 3 assets related to holdings in real estate funds. No individual unobservable input is considered significant. Changing unobservable inputs in the measurement of the fair value of these unit linked level 3 financial assets and liabilities to reasonably possible alternative assumptions would have no impact on profit attributable to equity holders or on total assets.

Transfers of unit linked assets and liabilities to level 3 generally arise when external pricing providers stop providing prices for the underlying assets and liabilities in the funds or where the price provided is considered stale.

(d)      Change in non-participating investment contract liabilities

The change in non-participating investment contract liabilities was as follows:

	2023	2022
	£m	£m
At 1 January	773	1,088
Contributions	54	36
Account balances paid on surrender and other terminations in the year	(206)	(237)
Change in non-participating investment contract liabilities recognised in the consolidated income statement	65	(112)
Recurring management charges	(2)	(2)
At 31 December	684	773

(e)      Derivatives

The treatment of collateral accepted and pledged in respect of financial instruments and the Group's approach to offsetting financial assets and liabilities is described in Note 34. The following table presents the impact of master netting agreements and similar arrangements for derivatives backing unit linked liabilities.

			Related amounts not offset on the consolidated statement of financial position
	Gross amounts of financial instruments as presented on the consolidated statement of financial position		Financial instruments		Financial collateral pledged/(received)		Net position
	2023	2022	2023	2022	2023	2022	2023	2022
	£m	£m	£m	£m	£m	£m	£m	£m
Financial assets
Derivatives1	-	1	-	-	-	-	-	1
Total financial assets	-	1	-	-	-	-	-	1
Financial liabilities
Derivatives1	-	(1)	-	-	-	-	-	(1)
Total financial liabilities	-	(1)	-	-	-	-	-	(1)

1. Only OTC derivatives subject to master netting agreements have been included above.

24.    Issued share capital and share premium

Shares are classified as equity instruments when there is no contractual obligation to deliver cash or other assets to another entity on terms that may be unfavourable. The Company's share capital consists of the number of ordinary shares in issue multiplied by their nominal value. The difference between the proceeds received on issue of the shares and the nominal value of the shares issued is recorded in share premium.

Where the Company undertakes share buybacks, the reduction to retained earnings is accounted for on the trade date of the transaction of each repurchase with a liability recognised for unsettled trades, unless the Company has an irrevocable contractual obligation with a third party. Where the Company has an irrevocable contractual obligation, the full contractual value of the buyback programme is recognised as a liability and as a reduction to retained earnings on the date of the agreement. The reduction to share capital for the cancellation of the shares and the related credit to the capital redemption reserve is always accounted for on the settlement date for the repurchases.

The movement in the issued ordinary share capital and share premium of the Company was:

	2023			2022
	Ordinary share capital		Share premium	Ordinary share capital		Share premium
Issued shares fully paid	13 61/63p each	£m	£m	13 61/63p each	£m	£m
At 1 January	2,001,891,899	280	640	2,180,724,786	305	640
Shares issued in respect of share incentive plans	2,414	-	-	2,381	-	-
Share buyback	(161,153,949)	(23)	-	(178,835,268)	(25)	-
At 31 December	1,840,740,364	257	640	2,001,891,899	280	640

All ordinary shares in issue in the Company rank pari passu and carry the same voting rights and entitlement to receive dividends and other distributions declared or paid by the Company.

On 5 June 2023, the Company announced that it would initiate a £150m return to shareholders. On 8 August 2023, the Company announced the extension of this programme to £300m. The share buyback commenced on 5 June 2023 and was completed on 19 December 2023. During the year ended 31 December 2023, the Company had bought back and cancelled 161,153,949 shares as part of this programme. The total consideration was £302m which includes transaction costs.

During the year ended 31 December 2022, the Company bought back and cancelled 178,835,268 shares. The total consideration was £302m which included transaction costs. There were no unsettled purchases at 31 December 2022.

The share buyback has resulted in a reduction in retained earnings of £302m (2022: £302m).

In addition, an amount of £23m (2022: £25m) has been credited to the capital redemption reserve relating to the nominal value of the shares cancelled.

The Company can issue shares to satisfy awards granted under employee incentive plans which have been approved by shareholders. Details of the Group's employee plans are provided in Note 40.

25.    Shares held by trusts

Shares held by trusts relates to shares in abrdn plc that are held by the abrdn Employee Benefit Trust (abrdn EBT), the abrdn Employee Trust (formerly named the Standard Life Employee Trust)(abrdn ET) and the Aberdeen Asset Management Employee Benefit Trust 2003 (AAM EBT).

The abrdn EBT, abrdn ET and AAM EBT purchase shares in the Company for delivery to employees under employee incentive plans. Purchased shares are recognised as a deduction from equity at the price paid. Where new shares are issued to the abrdn EBT, abrdn ET or AAM EBT the price paid is the nominal value of the shares. When shares are distributed from the trust their corresponding value is released to retained earnings.

The number of shares held by trusts was as follows:

				2023	2022
Number of shares held by trusts
abrdn Employee Benefit Trust				34,076,343	36,112,240
abrdn Employee Trust				22,187,644	22,629,035
Aberdeen Asset Management Employee Benefit Trust 2003				2,080,853	2,264,591

26.    Retained earnings

The following table shows movements in retained earnings during the year.

		2023	2022
			restated1
	Notes	£m	£m
Opening balance carried forward		4,986	5,766
Effect of application of IFRS 9 on Investments in associates and joint ventures accounted for using the equity method2		51	-
Opening balance at 1 January		5,037	5,766
Recognised in comprehensive income
Recognised in profit/(loss) for the year attributable to equity holders1		1	(558)
Recognised in other comprehensive income
Remeasurement losses on defined benefit pension plans	31	(139)	(793)
Share of other comprehensive income of associates and joint ventures1		(31)	(57)
Total items recognised in comprehensive income		(169)	(1,408)
Recognised directly in equity
Dividends paid on ordinary shares		(279)	(307)
Share buyback	24	(302)	(302)
Cancellation of capital redemption reserve	27	-	1,059
Transfer for vested employee share-based payments		31	63
Transfer between reserves on disposal of subsidiaries		-	1
Transfer between reserves on impairment of subsidiaries	27	169	207
Shares distributed by employee and other trusts		(38)	(70)
Other movements3		-	(23)
Total items recognised directly in equity		(419)	628
At 31 December		4,449	4,986

1. Comparatives for 2022 have been restated for the implementation of IFRS 17. Refer Basis of preparation.

2. The Group implemented IFRS 9 in 2019. However, as permitted under a temporary exemption granted to insurers in IFRS 4 Insurance Contracts, the Group's insurance joint venture, Heng An Standard Life Insurance Company Limited, applied IFRS 9 at 1 January 2023 following the implementation of the new insurance standard, IFRS 17. Refer Basis of preparation.

3. Other movements in 2022 included the transfer of (£17m) previously recognised in the foreign currency translation reserve (which is part of Other reserves) to Retained earnings. In prior years we have considered the functional currency of an intermediate subsidiary holding the Group's investment in HDFC Life to be US Dollars. We now consider that the functional currency should have been GBP, resulting in the current period transfer between reserves. Prior periods have not been restated as the impact on prior periods is not considered material.

27.    Movements in other reserves

In July 2006 Standard Life Group demutualised and during this process the merger reserve, the reserve arising on Group reconstruction and the special reserve were created.

Merger reserve: the merger reserve consists of two components. Firstly at demutualisation in July 2006 the Company issued shares to former members of the mutual company. The difference between the nominal value of these shares and their issue value was recognised in the merger reserve. The reserve includes components attaching to each subsidiary that was transferred to the Company at demutualisation based on their fair value at that date. Secondly following the completion of the merger of Standard Life plc and Aberdeen Asset Management PLC on 14 August 2017, an additional amount was recognised in the merger reserve representing the difference between the nominal value of shares issued to shareholders of Aberdeen Asset Management PLC and their fair value at that date. On disposal or impairment of a subsidiary any related component of the merger reserve is released to retained earnings.

Reserve arising on Group reconstruction: The value of the shares issued at demutualisation was equal to the fair value of the business at that date. The business's assets and liabilities were recognised at their book value at the time of demutualisation. The difference between the book value of the business's net assets and its fair value was recognised in the reserve arising on Group reconstruction. The reserve comprises components attaching to each subsidiary that was transferred to the Company at demutualisation. On disposal of such a subsidiary any related component of the reserve arising on Group reconstruction is released to retained earnings.

Special reserve: Immediately following demutualisation and the related initial public offering, the Company reduced its share premium reserve by court order giving rise to the special reserve. Dividends can be paid out of this reserve.

Capital redemption reserve: In August 2018, as part of the return of capital and share buyback the capital redemption reserve was created. Additional capital redemption reserve is created by subsequent buybacks (refer Note 24). See below for the cancellation of the capital redemption reserve as at 1 July 2022.

The following tables show the movements in other reserves during the year.

		Cash flow hedges	Foreign currency translation	Merger reserve	Equity compensation reserve	Special reserve	Reserve arising on Group reconstruction	Capital redemption reserve	Total
	Notes	£m	£m	£m	£m	£m	£m	£m	£m
1 January 2023		23	70	275	48	115	(685)	25	(129)
Recognised in other comprehensive income
Fair value losses on cash flow hedges		(40)	-	-	-	-	-	-	(40)
Exchange differences on translating foreign operations		-	(35)	-	-	-	-	-	(35)
Items transferred to profit or loss		28	(1)	-	-	-	-	-	27
Aggregate tax effect of items recognised in other comprehensive income		3	-	-	-	-	-	-	3
Total items recognised in other comprehensive income		(9)	(36)	-	-	-	-	-	(45)
Recognised directly in equity
Share buyback	24	-	-	-	-	-	-	23	23
Reserves credit for employee share-based payments		-	-	-	24	-	-	-	24
Transfer to retained earnings for vested employee share-based payments		-	-	-	(31)	-	-	-	(31)
Transfer between reserves on impairment of subsidiaries		-	-	(169)	-	-	-	-	(169)
Total items recognised directly within equity		-	-	(169)	(7)	-	-	23	(153)
At 31 December 2023		14	34	106	41	115	(685)	48	(327)

The merger reserve includes £94m (2022: £263m) in relation to the Group's asset management businesses. During 2023, following the impairment of the Company's investment in abrdn Investments (Holdings) Limited, £169m was transferred from the merger reserve to retained earnings. During 2022, following the impairment of the Company's investments in abrdn Holdings Limited and abrdn Investments (Holdings) Limited, £207m was transferred from the merger reserve to retained earnings. Refer to the Company financial statements for further details on these impairments.

		Cash flow hedges	Foreign currency translation	Merger reserve	Equity compensation reserve	Special reserve	Reserve arising on Group reconstruction	Capital redemption reserve	Total
	Notes	£m	£m	£m	£m	£m	£m	£m	£m
1 January 2022		18	17	483	87	115	(685)	1,059	1,094
Recognised in other comprehensive income
Fair value gains on cash flow hedges		85	-	-	-	-	-	-	85
Exchange differences on translating foreign operations		-	36	-	-	-	-	-	36
Items transferred to profit or loss		(78)	-	-	-	-	-	-	(78)
Aggregate tax effect of items recognised in other comprehensive income		(2)	-	-	-	-	-	-	(2)
Total items recognised in other comprehensive income		5	36	-	-	-	-	-	41
Recognised directly in equity
Share buyback	24	-	-	-	-	-	-	25	25
Cancellation of capital redemption reserve		-	-	-	-	-	-	(1,059)	(1,059)
Reserves credit for employee share-based payments		-	-	-	24	-	-	-	24
Transfer to retained earnings for vested employee share-based payments		-	-	-	(63)	-	-	-	(63)
Transfer between reserves on disposal of subsidiaries		-	-	(1)	-	-	-	-	(1)
Transfer between reserves on impairment of subsidiaries		-	-	(207)	-	-	-	-	(207)
Other movements1		-	17	-	-	-	-	-	17
Total items recognised directly within equity		-	17	(208)	(39)	-	-	(1,034)	(1,264)
At 31 December 2022		23	70	275	48	115	(685)	25	(129)

1. Other movements included the transfer of (£17m) previously recognised in the foreign currency translation reserve to Retained earnings. In prior periods we had considered the functional currency of an intermediate subsidiary holding the Group's investment in HDFC Life to be US Dollars. We now consider that the functional currency should have been GBP, resulting in the transfer between reserves. Prior periods were not restated as the impact on prior periods was not considered material. There was no impact on net assets for any period presented.

On 1 July 2022, the Company's capital redemption reserve at this date was cancelled in accordance with section 649 of the Companies Act 2006 resulting in a transfer of £1,059m to retained earnings.

28.    Other equity and non-controlling interests

Perpetual subordinated notes issued by abrdn plc are classified as other equity where no contractual obligation to deliver cash exists.

(a)       Other equity - perpetual subordinated notes

5.25% Fixed Rate Reset Perpetual Subordinated Contingent Convertible Notes

On 13 December 2021, the Company issued £210m of 5.25% Fixed Rate Reset Perpetual Subordinated Contingent Convertible Notes (the 'Notes'). These were classified as other equity and initially recognised at £207m (proceeds received less issuance costs of £3m).

The Notes initially bear interest on their principal amount at 5.25% per annum payable semi-annually in arrears on 13 June and 13 December in each year. The interest rate is subject to reset on 13 June 2027 and then every five years thereafter. The payments of interest are discretionary and non-cumulative. The interest paid is recognised as profit attributable to other equity when paid. The profit for the year attributable to other equity was £11m (2022: £11m).

The Notes have no fixed redemption date. The Company has the option to redeem the Notes (in full) between 13 December 2026 and 13 June 2027 and every five years thereafter. The Notes are convertible to ordinary shares in abrdn plc at a conversion price of £1.6275 (fixed subject to adjustment for share corporate actions e.g. share consolidations in accordance with the terms and conditions of the Notes) if the Group IFPR CET1 Ratio falls below 70%. The IFPR CET1 ratio at 31 December 2023 was 467% (2022: 408%).

(b)      Non-controlling interests - ordinary shares

Non-controlling interests - ordinary shares of £5m were held at 31 December 2023 (2022: £7m). The profit for the year attributable to non-controlling interests - ordinary shares was less than £1m (2022: £1m).

29.    Financial liabilities

Management determines the classification of financial liabilities at initial recognition. Financial liabilities which are managed and whose performance is evaluated on a fair value basis are designated as at fair value through profit or loss. Changes in the fair value of these financial liabilities are recognised in the consolidated income statement.

Derivatives are also measured at fair value. Changes in the fair value of derivatives are recognised in Net gains or losses on financial instruments and other income in the consolidated income statement except for derivative instruments that are designated as a cash flow hedge or net investment hedge. The classification of derivatives and the accounting treatment of derivatives designated as a hedging instrument are set out in Note 18.

Except for contingent consideration liabilities which are measured at fair value, other financial liabilities are classified as being subsequently measured at amortised cost. Amortised cost is calculated, and the related interest expense is recognised in the consolidated income statement, using the effective interest method.

All financial liabilities are initially recognised at fair value less, in the case of financial liabilities subsequently measured at amortised cost, transaction costs that are directly attributable to the issue of the liability.

Where the terms of a financial liability measured at amortised cost are modified and the modification does not result in the derecognition of the liability, the liability is adjusted to the net present value of the future cash flows less transaction costs with a modification gain or loss recognised in the income statement.

The methods and assumptions used to determine fair value of financial liabilities measured at fair value through profit or loss and derivatives are discussed in Note 36.

The table below sets out an analysis of financial liabilities excluding unit linked financial liabilities which are set out in Note 23.

		At fair value through profit or loss1		At amortised cost		Total
		2023	2022	2023	2022	2023	2022
	Notes	£m	£m	£m	£m	£m	£m
Third party interest in consolidated funds		187	242	-	-	187	242
Subordinated liabilities	30	-	-	599	621	599	621
Derivative financial liabilities	18	9	1	-	-	9	1
Other financial liabilities2	32	129	143	1,112	1,055	1,241	1,198
Total		325	386	1,711	1,676	2,036	2,062

1. All financial liabilities measured at fair value through profit or loss have been classified at FVTPL on a mandatory basis except for third party interest in consolidated funds which the Group has designated as at FVTPL.

2. The Group has made a presentational change to show Deferred income within Other financial liabilities. Refer Note 32.

30.    Subordinated liabilities

Subordinated liabilities are debt instruments issued by the Company which rank below its other obligations in the event of liquidation but above the share capital. Subordinated liabilities are initially recognised at the value of proceeds received after deduction of issue expenses. Subsequent measurement is at amortised cost using the effective interest rate method.

		2023		2022
	Notes	Principal amount	Carrying value	Principal amount	Carrying value
Subordinated notes
4.25% US Dollar fixed rate due 30 June 2028		$750m	£599m	$750m	£621m
Total subordinated liabilities	36		£599m		£621m

A description of the key features of the Group's subordinated liabilities as at 31 December 2023 is as follows:

	4.25% US Dollar fixed rate1
Principal amount	$750m
Issue date	18 October 2017
Maturity date	30 June 2028
Callable at par at option of the Company from	Not applicable
If not called by the Company interest will reset to	Not applicable

1. The cash flows arising from the US dollar subordinated notes give rise to foreign exchange exposure which the Group manages with a cross-currency swap designated as a cash flow hedge. Refer Note 18 for further details.

The difference between the fair value and carrying value of the subordinated liabilities is presented in Note 36. A reconciliation of movements in subordinated liabilities in the year is provided in Note 37.

The principal amount of the subordinated liabilities is expected to be settled after more than 12 months. The accrued interest on the subordinated liabilities of £13m (2022: £nil) is expected to be settled within 12 months.

During the year ended 31 December 2022, the Group redeemed subordinated liabilities with the following key features:

	5.5% Sterling fixed rate
Principal amount	£92m
Issue date	4 December 2012
Maturity date	4 December 2042
Callable at par at option of the Company from	4 December 2022 and on every interest payment date (semi-annually) thereafter
If not called by the Company interest will reset to	4.85% over the five-year gilt rate (and at each fifth anniversary)

The 5.5% Sterling fixed rate subordinated notes with a principal amount of £92m were redeemed on 4 December 2022.

 

END