The accounting policies adopted are consistent with those of the previous financial year except for the early adoption of IFRS 15 "Revenue from Contracts with Customers" and "Clarifications to IFRS 15 Revenue from Contracts with Customers".

Initial adoption of IFRS 15 "Revenue from Contracts with Customers"

The standard has an effective date of 1 January 2018 but the Group has decided to early adopt this standard with a date of initial application to the Group of 4 December 2017 using the full retrospective method.

IFRS 15 replaces all existing revenue requirements in IFRS and applies to all revenue arising from contracts with customers unless the contracts are within the scope of other standards such as IAS 17 "Leases".

The standard outlines the principles that entities must apply to measure and recognise revenue with the core principle being that entities should recognise revenue at an amount that reflects the consideration to which the entity expects to be entitled in exchange for fulfilling its performance obligations to a customer.

The principles in IFRS 15 must be applied using the following 5 step model:

1. Identify the contract(s) with a customer;
2. Identify the performance obligations in the contract;
3. Determine the transaction price;
4. Allocate the transaction price to the performance obligations in the contract; and
5. Recognise revenue when or as the entity satisfies its performance obligations.

The standard requires entities to exercise considerable judgement taking into account all the relevant facts and circumstances when applying each step of this model to its contracts with customers. The standard also specifies how to account for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract, as well as requirements covering matters such as licences of intellectual property, warranties, principal versus agent assessment and options to acquire additional goods or services.

The Group has applied IFRS 15 fully retrospectively in accordance with paragraph C3 (a) of the standard, restating the prior period's comparatives and electing to use the following practical expedient:

• in respect of completed contracts that have variable consideration, the Group will use the transaction price at the date the contract was completed rather than estimating variable consideration amounts in the comparative periods (para. C5(b));

Details of the change in the Group's accounting policy in respect of revenue recognition are set out in note 2.1.

The Group early adopted IFRS 15 "Revenue from Contracts with Customers" (IFRS 15) using the full retrospective method. This note details the Group's new accounting policy for revenue and shows the impact of the adoption of IFRS 15 on the Group's primary financial statements.

Below is a description of the IFRS 15 impact on material areas requiring reclassification or restatement:

Consolidated Income Statement Restatement under IFRS 15

Recognition of Revenue:

Under the Group's previous accounting policy, revenue for certain contracts was recognised under the percentage of completion method based upon costs incurred to date as a proportion of the estimated full cost of completing the contract and applying the percentage to the total revenue expected to be earned. Such percentage of completion accounting would typically result in higher levels of revenue recognised in the earlier stages of a contract in line with the profile of costs incurred.

Under IFRS 15 revenue is recognised once, or as, a performance obligation is fulfilled. Typically, in an Ocado Solutions contract, revenue recognition would not commence until the date of “go-live”. Previously revenue was typically recognised in the earlier development stages of a contract. This change has resulted in a reduction of £9.3 million in revenue recognised in the period to 3 December 2017. Under IFRS 15, revenue is now spread over the period the services are provided.

Consolidated Balance Sheet Restatement under IFRS 15

The cumulative effect of the adoption of IFRS 15 has resulted in a decrease in net assets of £23.1 million as at 3 December 2017 (28 November 2016 : £13.8 million) and a corresponding decrease in retained earnings. This reflects an important change in accounting policy as the Group moves from percentage of completion to a methodology that is focused on aligning revenue recognition to the delivery of their performance obligation as described in note 2.1. The new policy results in lower levels of revenue being recognised in the early stages of a contract but higher levels towards the end of a contract.

The decrease in trade and other payables relates to the reclassification and restatement of deferred income as non-current and current contract liabilities. Prior to adoption of IFRS 15 deferred income was classified within ‘Trade and other payables’.

The increase in property, plant and equipment relates to contributions received from a customer towards the cost of an asset. These are within the scope of IFRS 15 and are therefore recognised as contract liabilities and released over the life of the contract but were previously offset against the cost of the asset

Consolidated Statement of Cash Flows Restatement under IFRS 15

As a result of the adoption of IFRS 15, certain reclassifications are required in relation to the cash flow movements between relevant balance sheet accounts. There has been no change in the net increase in cash and cash equivalents as a result of these reclassifications or the restatement of these balance sheet accounts.

See Alternative Performance Measures