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Accounting information and policies (Policies)
 12 Months Ended
Jun. 30, 2024
Disclosure Of Accounting Policies, Changes In Accounting Estimates And Errors [Abstract]  
Basis of preparation (a) Basis of preparation
The consolidated financial statements are prepared in accordance with IFRS® Accounting Standards (IFRSs) adopted by the UK (UK-
adopted International Accounting Standards) and IFRSs, as issued by the International Accounting Standards Board (IASB), including
interpretations issued by the IFRS Interpretations Committee. IFRS as adopted by the UK differs in certain respects from IFRS as
issued by the IASB. The differences have no impact on the group’s consolidated financial statements for the years presented. The
consolidated financial statements are prepared on a going concern basis under the historical cost convention, unless stated otherwise in
the relevant accounting policy.
The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates.
Going concern (b) Going concern
Management prepared 18 month cash flow forecasts which were also sensitised to reflect severe but plausible downside scenarios
taking into consideration the group's principal risks. In the base case scenario, management included assumptions for mid-single digit
net sales growth, slightly growing operating margin and global TBA market share growth. In light of the ongoing geo-political
volatility, the base case outlook and severe but plausible downside scenarios incorporated considerations for a prolonged global
recession, supply chain disruptions, higher inflation and further geo-political deterioration. Even under these scenarios, the group’s
liquidity is still expected to remain strong. Mitigating actions, should they be required, are all within management’s control and could
include reductions in discretionary spending such as acquisitions and capital expenditure, lower level of A&P and investment in
maturing stock, as well as a temporary suspension or reduction in its return of capital to shareholders (dividends or share buybacks) in
the next 12 months, or drawdowns on committed facilities. Having considered the outcome of these assessments, the Directors are
comfortable that the company is a going concern for at least 12 months from the date of signing the group's consolidated financial
statements.
Consolidation (c) Consolidation
The consolidated financial statements include the results of the company and its subsidiaries together with the group’s attributable
share of the results of associates and joint ventures. A subsidiary is an entity controlled by Diageo plc. The group controls an investee
when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns
through its power over the investee. Where the group has the ability to exercise joint control over an entity but has rights to specified
assets and obligations for liabilities of that entity, the entity is included on the basis of the group’s rights over those assets and
liabilities.
Foreign currencies (d) Foreign currencies
Items included in the financial statements of the group’s subsidiaries, associates and joint ventures are measured using the currency of
the primary economic environment in which each entity operates (its functional currency). The consolidated financial statements are
presented in US dollar, which is the functional currency of the parent company, Diageo plc. The functional currency of Diageo plc is
determined by using management judgement that considers the parent company as an extension of its subsidiaries.
Starting 1 July 2023, in line with reporting requirements, the functional currency of Diageo plc changed from sterling to US dollar
which is applied prospectively. This is because the group's share of net sales and expenses in the United States and other countries
whose currencies correlate closely with the US dollar has been increasing over the years, and that trend is expected to continue in line
with the group's strategic focus. Diageo also decided to change its presentation currency to US dollar with effect from 1 July 2023,
applied retrospectively, as it believes that this change will provide better alignment of the reporting of performance with its business
exposures.
The income statements and cash flows of non US dollar entities are translated into US dollar at weighted average rates of
exchange, except for subsidiaries in hyperinflationary economies that are translated with the closing rate at the end of the year and for
substantial transactions that are translated at the rate on the date of the transaction. Exchange differences arising on the retranslation to
closing rates are taken to the exchange reserve.
Assets and liabilities are translated at the relevant year end closing rates. Exchange differences arising on the retranslation at closing
rates of the opening balance sheets of non US dollar entities are taken to the exchange reserve, as are exchange differences arising on
foreign currency borrowings and financial instruments designated as net investment hedges, to the extent that they are effective. Tax
charges and credits arising on such items are also taken to the exchange reserve. Gains and losses accumulated in the exchange reserve
are recycled to the income statement when the foreign operation is sold. Other exchange differences are taken to the income statement.
Transactions in foreign currencies are recorded at the rate of exchange on the date of the transaction.
Share capital, share premium, capital redemption reserve included in other reserves and own shares at 30 June 2023, 30 June 2022
and 30 June 2021 in the statement of changes in equity are translated to US dollar at the closing exchange rate at the relevant balance
sheet date; exchange differences arising on the retranslation to closing rates are taken to the exchange reserve. From 1 July 2023, as
Diageo plc changed its functional currency, the share capital, share premium, capital redemption reserve included in other reserves and
own shares in the consolidated statement of changes in equity are recorded in US dollar.
The cumulative foreign exchange translation reserve was set to zero on 1 July 2004, the date of transition to IFRS and this reserve
is re-presented as if the group reported in US dollar since that date.
As a result of the functional and presentation currency change, the group has realigned its economic hedging portfolio managing
balance sheet translation risk in line with the changed foreign exchange risk management objective. The group has also realigned its
net investment hedging portfolio in line with the new currency exposures and as part of this exercise Diageo has re-designated its buy
US dollar sell sterling cross currency interest swaps in net investment hedge relationships previously used in cash flow hedging
foreign currency debt of the group.
Critical accounting estimates and judgements (e) Critical accounting estimates and judgements
Details of critical estimates and judgements which the Directors consider could have a significant impact on the financial statements
are set out in the related notes as follows:
–Taxation – management judgement whether a provision is required and management estimate of amount of corporate tax
payable or receivable, the recoverability of deferred tax assets and expectation on manner of recovery of deferred taxes – pages
256 and 306.
–Brands, goodwill, other intangibles and contingent considerations – management judgement whether the assets and liabilities
are to be recognised and synergies resulting from an acquisition. Management judgement and estimate are required in
determining future cash flows and appropriate applicable assumptions to support the intangible asset and contingent
consideration value – page 265.
–Post-employment benefits – management judgement whether a surplus can be recovered and management estimate in
determining the assumptions in calculating the liabilities of the funds – page 274.
–Contingent liabilities and legal proceedings – management judgement in assessing the likelihood of whether a liability will arise
and an estimate to quantify the possible range of any settlement; and significant unprovided tax matters where maximum
exposure is provided for each – page 304.
Hyperinflation (f) Hyperinflationary accounting
The group applied hyperinflationary accounting for its operations in Türkiye, Argentina, Ghana and Venezuela.
The group applies hyperinflationary accounting for its operations in Ghana starting from 1 July 2023. Hyperinflationary
accounting needs to be applied as if Ghana had always been a hyperinflationary economy, hence, as per Diageo’s accounting policy
choice, the differences between equity at 30 June 2023 as reported and the equity after the restatement of the non-monetary items to
the measuring unit current at 30 June 2023 were recognised in retained earnings.
The group’s consolidated financial statements include the results and financial position of its operations in hyperinflationary
economies restated to the measuring unit current at the end of each period, with hyperinflationary gains and losses in respect of
monetary items being reported in finance income and charges. Comparative amounts presented in the consolidated financial
statements are not restated. When applying IAS 29 on an ongoing basis, comparatives in stable currency are not restated and the effect
of inflating opening net assets to the measuring unit current at the end of the reporting period is presented in other comprehensive
income.
Adoption of new IFRS standards and amendments up to current year end (g) New accounting standards and interpretations
The following standard and amendments to the accounting standards, issued by the IASB and endorsed by the UK, were adopted by
the group from 1 July 2023 with no material impact on the group’s consolidated results, financial position or disclosures:
–IFRS 17 – Insurance Contracts
–Amendments to IAS 12 Income Taxes – Deferred Tax related to Assets and Liabilities arising from a Single Transaction
–Amendments to IAS 1, 8 – Definition of Accounting Estimates
–Amendments to IAS 1 Disclosure Initiative – Accounting Policies
New IFRS standards applicable in future years The following amendments issued by the IASB have been endorsed by the UK and have not yet been adopted by the group, which are
not expected to have material impact on the group's consolidated results or financial position:
–Amendments to IAS 1 – Classification of Liabilities and Non-current Liabilities with Covenants (effective from the year ending
30 June 2025)
–Amendments to IFRS 16 – Lease Liability in a Sale and Leaseback (effective from the year ending 30 June 2025)
–Amendments to IAS 7 and IFRS 7 – Supplier Finance Arrangements (effective from the year ending 30 June 2025)
There are a number of other standards, amendments and clarifications to IFRSs, effective in future years, which are not expected to
significantly impact the group’s consolidated results or financial position.
Climate Change Considerations (h) Climate change considerations
The impact of climate change assessment and the net zero carbon emission target for Diageo's direct operations (Scope 1 & 2) for
2030 have been considered as part of the assessment of estimates and judgements in preparing the group's consolidated financial
statements.
The climate change scenario analyses performed in 2024 – conducted in line with TCFD recommendations (‘Transition
Scenario’ (RCP 2.6), a ‘Moderate Warming’ Scenario (RCP 4.5) and a ‘Severe Warming Scenario’ (RCP 8.5)) – identified no material
financial impact to these financial statements.
The following considerations were made in respect of the financial statements:
•The impact of climate change on factors (like residual values, useful lives and depreciation methods) that determine the carrying
value of non-current assets.
•The impact of climate change on forecasts of cash flows used (including forecast depreciation in line with capital expenditure
plans for Diageo's net zero carbon emission commitment) in impairment assessments for the value-in-use of non-current assets
including goodwill (see note 9).
•The impact of climate change on post-employment assets.
Sales Sales comprise revenue from contracts with customers from the sale of goods, royalties and rents receivable. Revenue from the sale of
goods includes excise and other duties which the group pays as principal but excludes duties and taxes collected on behalf of third
parties, such as value added tax. Sales are recognised as or when performance obligations are satisfied by transferring control of a
good or service to the customer, which is determined by considering, among other factors, the delivery terms agreed with customers.
For the sale of goods, the transfer of control occurs when the significant risks and rewards of ownership are passed to the customer.
Based on the shipping terms agreed with customers, the transfer of control of goods occurs at the time of dispatch for the majority of
sales. Where the transfer of control is subsequent to the dispatch of goods, the time between dispatch and receipt by the customer is
generally less than five days. The group includes in sales the net consideration to which it expects to be entitled. Sales are recognised
to the extent that it is highly probable that a significant reversal will not occur. Therefore, sales are stated net of expected price
discounts, allowances for customer loyalty and certain promotional activities and similar items. Generally, payment of the transaction
price is due within credit terms that are consistent with industry practices, with no element of financing.
Net sales Net sales are sales less excise duties. Diageo incurs excise duties throughout the world. In the majority of countries, excise duties are
effectively a production tax which becomes payable when the product is removed from bonded premises and is not directly related to
the value of sales. It is generally not included as a separate item on external invoices; increases in excise duty are not always passed on
to the customer and where a customer fails to pay for products received the group cannot reclaim the excise duty. The group therefore
recognises excise duty, unless it regards itself as an agent of the regulatory authorities, as a cost to the group.
Advertising costs Advertising costs, point of sale materials and sponsorship payments are charged to marketing in operating profit when the company
has a right of access to the goods or services acquired.
Exceptional items Exceptional items are those that in management’s judgement need to be disclosed separately. Such items are included in the income
statement caption to which they relate, and form part of the segmental reporting. Management believes that separate disclosure of
exceptional items and the classification between operating and non-operating further helps investors to understand the performance of
the group.
Changes in estimates and reversals in relation to items previously recognised as exceptional are presented consistently as
exceptional in the current year.
Exceptional items are those that in management’s judgement need to be disclosed separately. Such items are included in the income
statement caption to which they relate, and form part of the segmental reporting included in note 2. Management believes that separate
disclosure of exceptional items and the classification between operating and non-operating further helps investors to understand the
performance of the group.
Changes in estimates and reversals in relation to items previously recognised as exceptional are presented consistently as
exceptional in the current year.
Operating items Exceptional operating items are those that are considered to be material and unusual or non-recurring in nature and
are part of the operating activities of the group, such as one-off global restructuring programmes which can be multi-year, impairment
of intangible assets and fixed assets, indirect tax settlements, property disposals and changes in post-employment plans.
Non-operating items Gains and losses on the sale or directly attributable to a prospective sale of businesses, brands or distribution
rights, step up gains and losses that arise when an investment becomes an associate or an associate becomes a subsidiary and other
material, unusual non-recurring items, that are not in respect of the production, marketing and distribution of premium drinks, are
disclosed as exceptional non-operating items below operating profit in the income statement.
Taxation items Exceptional current and deferred tax items comprise material and unusual or non-recurring items that impact taxation.
Examples include direct tax provisions and settlements in respect of prior years and the remeasurement of deferred tax assets and
liabilities following tax rate changes.
Finance income and charges Net interest includes interest income and charges in respect of financial instruments and the results of hedging transactions used to
manage interest rate risk. 
Finance charges directly attributable to the acquisition, construction or production of a qualifying asset, being an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale, are added to the cost of that asset. Borrowing
costs which are not capitalised are recognised in the income statement using the effective interest method. All other finance charges
are recognised primarily in the income statement in the year in which they are incurred. 
Net other finance charges include items in respect of post-employment plans, the discount unwind of long-term obligations and
hyperinflation charges. The results of operations in hyperinflationary economies are adjusted to reflect the changes in the purchasing
power of the local currency of the entity before being translated to US dollar. 
The impact of derivatives, excluding cash flow hedges that are in respect of commodity price risk management or those that are
used to hedge the currency risk of highly probable future currency cash flows, is included in interest income or interest charge.
Investment in associates and joint ventures An associate is an undertaking in which the group has a long-term equity interest and over which it has the power to exercise
significant influence. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights
to the net assets of the arrangement. The group’s interest in the net assets of associates and joint ventures is reported in investments in
the consolidated balance sheet and its interest in their results (net of tax) is included in the consolidated income statement below the
group’s operating profit. Associates and joint ventures are initially recorded at cost including transaction costs, and the group's share
of post acquisition changes in the investee's reserves are recognised under the equity method. Investments in associates and joint
ventures acquired prior to 1 July 1998 comprise the cost of shares less goodwill written off to reserves that has not been reinstated,
plus the group’s share of post acquisition reserves. Investments in associates and joint ventures are reviewed for impairment whenever
events or circumstances indicate that the carrying amount may not be recoverable. The impairment review compares the net carrying
value with the recoverable amount, where the recoverable amount is the higher of the value in use calculated as the present value of
the group’s share of the associate’s future cash flows and its fair value less costs of disposal.
Taxation Current tax is based on taxable profit for the year. Taxable profit is different from accounting profit due to temporary differences
between accounting and tax treatments, and due to items that are never taxable or tax deductible. Tax treatments are not recognised
unless it is probable that a tax authority will accept the treatment. Once considered to be probable, tax treatments are reviewed each
year to assess whether a provision should be taken against full recognition of the treatment on the basis of potential settlement through
negotiation and/or litigation with the relevant tax authorities. Tax provisions are included in current liabilities. Penalties and interest on
tax liabilities are included in operating profit and finance charges, respectively.
Full provision for deferred tax is made for temporary differences between the carrying value of assets and liabilities for financial
reporting purposes and their value for tax purposes, except for deferred tax provision arising on goodwill from business combinations.
The amount of deferred tax reflects the expected recoverable amount and is based on the expected manner of recovery or settlement of
the carrying amount of assets and liabilities, using the basis of taxation enacted or substantively enacted by the balance sheet date.
Deferred tax assets are not recognised where it is more likely than not that the assets will not be realised in the future. No deferred tax
liability is provided in respect of any future remittance of earnings of foreign subsidiaries where the group is able to control the
remittance of earnings and it is probable that such earnings will not be remitted in the foreseeable future, or where no liability would
arise on the remittance.
Critical accounting estimates and judgements
The group is required to estimate the corporate tax in each of the jurisdictions in which it operates. Management is required to estimate
the amount that should be recognised as a tax liability or tax asset in many countries which are subject to tax audits which by their
nature are often complex and can take several years to resolve; current tax balances are based on such estimations. Tax provisions are
based on management’s judgement and interpretation of country specific tax law and the likelihood of settlement. However, the actual
tax liabilities could differ from the provision and in such event the group would be required to make an adjustment in a subsequent
period which could have a material impact on the group’s profit for the year.
The evaluation of deferred tax asset recoverability requires estimates to be made regarding the availability of future taxable income.
For brands with an indefinite life, management’s intention is to recover the book value through a potential sale in the future, and
therefore the deferred tax on the brand value is generally recognised using the appropriate country capital gains tax rate. To the extent
brands with an indefinite life have been impaired, management considers this to be an indication of recovery through use and in such a
case deferred tax on the brand value is recognised using the appropriate country corporate income tax rate.
Acquisition and sale of businesses and purchase of non-controlling interests The consolidated financial statements include the results of the company and its subsidiaries together with the group’s attributable
share of the results of associates and joint ventures. The results of subsidiaries acquired or sold are included in the income statement
from, or up to, the date that control passes.
Business combinations are accounted for using the acquisition method. Identifiable assets, liabilities and contingent liabilities acquired
are measured at fair value at acquisition date. The consideration payable is measured at fair value and includes the fair value of any
contingent consideration. Among other factors, the group considers the nature of, and compensation for the selling shareholders'
continuing employment to determine if any contingent payments are for post-combination employee services, which are excluded
from consideration.
On the acquisition of a business, or of an interest in an associate or joint venture, fair values, reflecting conditions at the date of
acquisition, are attributed to the net assets, including identifiable intangible assets and contingent liabilities acquired. Directly
attributable acquisition costs in respect of subsidiary companies acquired are recognised in other external charges as incurred.
The non-controlling interests on the date of acquisition can be measured either at the fair value or at the non-controlling shareholder’s
proportion of the net fair value of the identifiable assets assumed. This choice is made separately for each acquisition.
Where the group has issued a put option over shares held by a non-controlling interest, the group derecognises the non-controlling
interests and instead recognises a contingent deferred consideration liability for the estimated amount likely to be paid to the non-
controlling interest on the exercise of those options. Movements in the estimated liability in respect of put options are recognised in
retained earnings.
Transactions with non-controlling interests are recorded directly in retained earnings.
For all entities in which the company directly or indirectly owns equity, a judgement is made to determine whether it controls and
therefore should fully consolidate the investee. An assessment is carried out to determine whether the group has the exposure or rights
to the variable returns of the investee and has the ability to affect those returns through its power over the investee. To establish
control, an analysis is carried out of the substantive and protective rights that the group and the other investors hold. This assessment is
dependent on the activities and purpose of the investee and the rights of the other shareholders, such as which party controls the board,
executive committee and material policies of the investee. Determining whether the rights that the group holds are substantive,
requires management judgement.
Where less than 50% of the equity of an investee is held, and the group holds significantly more voting rights than any other vote
holder or organised group of vote holders, this may be an indicator of de facto control. An assessment is needed to determine all the
factors relevant to the relationship with the investee to ascertain whether control has been established and whether the investee should
be consolidated as a subsidiary. Where voting power and returns from an investment are split equally between two entities then the
arrangement is accounted for as a joint venture.
On an acquisition, fair values are attributed to the assets and liabilities acquired. This may involve material judgement to determine
these values.
Intangible assets and goodwill Acquired intangible assets are held on the consolidated balance sheet at cost less accumulated amortisation and impairment losses.
Acquired brands and other intangible assets are initially recognised at fair value if they are controlled through contractual or other
legal rights, or are separable from the rest of the business, and the fair value can be reliably measured. Where these assets are regarded
as having indefinite useful economic lives, they are not amortised.
Goodwill represents the excess of the aggregate of the consideration transferred, the value of any non-controlling interests and the fair
value of any previously held equity interest in the subsidiary acquired over the fair value of the identifiable net assets. Goodwill
arising on acquisitions prior to 1 July 1998 was eliminated against reserves, and this goodwill has not been reinstated. Goodwill
arising subsequent to 1 July 1998 has been capitalised.
Amortisation and impairment of intangible assets is based on their useful economic lives and they are amortised on a straight-line
basis and reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable.
Goodwill and intangible assets that are regarded as having indefinite useful economic lives are not amortised and are reviewed for
impairment at least annually or when there is an indication that the assets may be impaired. Impairment reviews compare the net
carrying value with the recoverable amount (where recoverable amount is the higher of fair value less costs of disposal and value in
use) and in case the net carrying value exceeds the recoverable amount, an impairment charge is recognised. Amortisation and any
impairment write downs are charged to other operating expenses in the income statement. It is reviewed at each reporting date whether
there is any indication that an impairment loss recognised in prior periods for an asset other than goodwill either no longer exists or
has decreased. Reversal of impairment loss is considered if the recoverable amount of the assets is constantly and significantly above
the carrying value over an extended period. The increased carrying amount of an asset other than goodwill attributable to a reversal of
an impairment loss shall not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no
impairment loss been recognised for the asset in prior years. Any reversal of impairment loss is charged against the same income
statement line on which the initial impairment was recorded.
Computer software is amortised on a straight-line basis to estimated residual value over its expected useful life. Residual values and
useful lives are reviewed each year. Subject to these reviews, the estimated useful lives are up to eight years. 
Critical accounting estimates and judgements
Assessment of the recoverable amount of an intangible asset and the useful economic life of an asset are based on management's
estimates.
Impairment reviews are carried out to ensure that intangible assets, including brands, are not carried at above their recoverable
amounts. Value in use and fair value less costs of disposal are both considered for these reviews and any impairment charge is based
on these. The tests are dependent on management’s estimates in respect of the forecasting of future cash flows, the discount rates
applicable to the future cash flows and what expected growth rates are reasonable. Judgement is required in determining the cash-
generating units. Such estimates and judgements are subject to change as a result of changing economic conditions and actual cash
flows may differ from forecasts.
Consideration of climate risk impact
The impact of climate risk on the future cash flows has also been considered for scenarios analysed in line with the climate change risk
assessment. The climate change scenario analyses performed in 2024 – conducted in line with TCFD recommendations (‘Transition
Scenario’ (RCP 2.6), a ‘Moderate Warming’ Scenario (RCP 4.5) and a ‘Severe Warming Scenario (RCP 8.5)) – identified no material
financial impact to the current year impairment assessments.
Property, plant and equipment Land and buildings are stated at cost less accumulated depreciation. Freehold land is not depreciated. Leaseholds are generally
depreciated over the unexpired period of the lease. Other property, plant and equipment are depreciated on a straight-line basis to
estimated residual values over their expected useful lives, and these values and lives are reviewed each year. Subject to these reviews,
the estimated useful lives fall within the following ranges: buildings – 10 to 50 years; within plant and equipment casks and containers
– 15 to 50 years; other plant and equipment – 5 to 40 years; fixtures and fittings – 5 to 10 years; and returnable bottles and crates – 5 to
10 years.
Reviews are carried out if there is an indication that assets may be impaired, to ensure that property, plant and equipment are not
carried at above their recoverable amounts.
Government grants Government grants are not recognised until there is reasonable assurance that the group will comply with the conditions pursuant to
which they have been granted and that the grants will be received. Government grants in respect of property, plant and equipment are
deducted from the asset that they relate to, reducing the depreciation expense charged to the income statement.
Biological assets Biological assets held by the group consist of agave (Agave Azul Tequilana Weber) plants. The harvested plants are used during the
production of tequila. The maturity cycle of agave ranges between six and eight years; based on this, biological assets are classified as
mature and immature. Mature biological assets are measured at fair value less costs to sell on initial recognition and at the end of each
reporting period based on the present value of future cash flows discounted at an appropriate rate for Mexico (income approach as per
IFRS 13). Immature biological assets are plants that have not reached the point of maturity because their sugar content yield and
weight is not enough to be harvested and there is no active market for such plants; consequently the Company accounts for these assets
by applying fair valuation using the cost approach (replacement cost).
Leases Where the group is the lessee, all leases are recognised on the balance sheet as right-of-use assets and depreciated on a straight-line
basis with the charge recognised in cost of sales or in other operating items depending on the nature of the costs. The liability,
recognised as part of net borrowings, is measured at a discounted value and any interest is charged to finance charges.
The group recognises services associated with a lease as other operating expenses. Payments associated with leases where the value
of the asset when it is new is lower than $5,000 (leases of low value assets) and leases with a lease term of 12 months or less (short-
term leases) are recognised as other operating expenses. A judgement in calculating the lease liability at initial recognition includes
determining the lease term where extension or termination options exist. In such instances, any economic incentive to retain or end a
lease are considered and extension periods are only included when it is considered reasonably certain that an option to extend a lease
will be exercised.
Other investments Other investments are equity investments that are not classified as investments in associates or joint arrangements nor investments in
subsidiaries. They are included in non-current assets. Subsequent to initial measurement, other investments are stated at fair value.
Gains and losses arising from the changes in fair value are recognised in the income statement or in other comprehensive income on a
case-by-case basis. Accumulated gains and losses included in other comprehensive income are not recycled to the income statement.
Dividends from other investments are recognised in the consolidated income statement.
Loans receivable are non-derivative financial assets that are not classified as equity investments. They are subsequently measured
either at amortised cost using the effective interest method less allowance for impairment or at fair value with gains and losses arising
from changes in fair value recognised in the income statement or in other comprehensive income that are recycled to the income
statement on the de-recognition of the asset. Allowances for expected credit losses are made based on the risk of non-payment taking
into account ageing, previous experience, economic conditions and forward-looking data. Such allowances are measured as either 12-
months expected credit losses or lifetime expected credit losses depending on changes in the credit quality of the counterparty.
Post employment benefits The group’s principal post-employment funds are defined benefit plans. In addition, the group has defined contribution plans,
unfunded post-employment medical benefit liabilities and other unfunded defined benefit post-employment liabilities. For post-
employment plans other than defined contribution plans, the amount charged to operating profit is the cost of accruing pension
benefits promised to employees over the year, plus any changes arising on benefits granted to members by the group during the year.
Net finance charges comprise the net deficit/surplus on the plans at the beginning of the year, adjusted for cash flows in the year,
multiplied by the discount rate for plan liabilities. The differences between the fair value of the plans’ assets and the present value of
the plans’ liabilities are disclosed as an asset or liability on the consolidated balance sheet. Any differences due to changes in
assumptions or experience are recognised in other comprehensive income. The amount of any pension fund asset recognised on the
balance sheet is limited to any future refunds from the plan or the present value of reductions in future contributions to the plan.
Contributions payable by the group in respect of defined contribution plans are charged to operating profit as incurred.
Critical accounting estimates and judgements
Application of IAS 19 requires the exercise of estimate and judgement in relation to various assumptions.
Diageo determines the assumptions on a country-by-country basis in conjunction with its actuaries. Estimates are required in
respect of uncertain future events, including the life expectancy of members of the funds, salary and pension increases, future inflation
rates, discount rates and employee and pensioner demographics. The application of different assumptions could have a significant
effect on the amounts reflected in the income statement, other comprehensive income and the balance sheet. There may be
interdependencies between the assumptions.
Where there is an accounting surplus on a defined benefit plan, management judgement is necessary to determine whether the
group can obtain economic benefits through a refund of the surplus or by reducing future contributions to the plan.
Inventories Inventories are stated at the lower of cost and net realisable value. Cost includes raw materials, direct labour and expenses, an
appropriate proportion of production and other overheads, but not borrowing costs. Cost is calculated at the weighted average cost
incurred in acquiring inventories. All maturing inventories and raw materials are classified as current assets, as they are expected to be
realised in the normal operating cycle which can be a period of several years.
Trade and other receivables Trade and other receivables are initially recognised at fair value less transaction costs and subsequently carried at amortised cost less
any allowance for discounts and doubtful debts. Trade receivables arise from contracts with customers, and are recognised when
performance obligations are satisfied, and the consideration due is unconditional as only the passage of time is required before the
payment is received. Allowance losses are calculated by reviewing lifetime expected credit losses using historic and forward-looking
data on credit risk.
Trade and other payables Trade and other payables are initially recognised at fair value including transaction costs and subsequently carried at amortised
costs. Contingent considerations recognised in business combinations are subsequently measured at fair value through income
statement. The group evaluates supplier arrangements against a number of indicators to assess if the liability has the characteristics of
a trade payable or should be classified as borrowings. This assessment considers the commercial purpose of the facility, whether
payment terms are similar to customary payment terms, whether the group is legally discharged from its obligation towards suppliers
before the end of the original payment term, and the group’s involvement in agreeing terms between banks and suppliers.
Provisions Provisions are liabilities of uncertain timing or amount. A provision is recognised if, as a result of a past event, the group has a present
legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required
to settle the obligation. Provisions are calculated on a discounted basis. The carrying amounts of provisions are reviewed at each
balance sheet date and adjusted to reflect the current best estimate.
Financial instruments and risk management Financial assets and liabilities are initially recorded at fair value including, where permitted by IFRS 9, any directly attributable
transaction costs. For those financial assets that are not subsequently held at fair value, the group assesses whether there is evidence of
impairment at each balance sheet date.
The group classifies its financial assets and liabilities into the following categories: financial assets and liabilities at amortised cost,
financial assets and liabilities at fair value through income statement and financial assets at fair value through other comprehensive
income.
The accounting policies for other investments and loans are described in note 13, for trade and other receivables and payables in note
15 and for cash and cash equivalents in note 17.
Financial assets and liabilities at fair value through income statement include derivative assets and liabilities. Where financial assets or
liabilities are eligible to be carried at either amortised cost or fair value through other comprehensive income, the group does not apply
the fair value option.
Derivative financial instruments are carried at fair value using a discounted cash flow model based on market data applied consistently
for similar types of instruments. Gains and losses on derivatives that do not qualify for hedge accounting treatment are taken to the
income statement as they arise.
Other financial liabilities are carried at amortised cost unless they are part of a fair value hedge relationship when the amortised cost of
the financial liabilities are adjusted with the fair value change attributable to the risk being hedged from the inception of the hedge
relationship. The difference between the initial carrying amount of the financial liabilities and their redemption value is recognised in
the income statement over the contractual terms using the effective interest rate method. Financial liabilities in respect of the Zacapa
acquisition are recognised at fair value.
Hedge accounting
The group designates and documents certain derivatives as hedging instruments against changes in fair value of recognised assets and
liabilities (fair value hedges), commodity price risk of highly probable forecast transactions, as well as the cash flow risk from a
change in exchange or interest rates (cash flow hedges) and hedges of net investments in foreign operations (net investment hedges).
Derivative instruments designated in hedge relationship are included in other financial assets and liabilities on the consolidated
balance sheet. The effectiveness of such hedges is assessed at inception and at least on a quarterly basis, using prospective testing.
Methods used for testing effectiveness include critical terms, regression analysis and hypothetical derivative models.
Fair value hedges are used to manage the currency and/or interest rate risks to which the fair value of certain assets and liabilities are
exposed. Changes in the fair value of the derivatives are recognised in the income statement, along with any changes in the relevant
fair value of the underlying hedged asset or liability. If such a hedge relationship no longer meets hedge accounting criteria, fair value
movements on the derivative continue to be taken to the income statement while any fair value adjustments made to the underlying
hedged item to that date are amortised through the income statement over its remaining life using the effective interest rate method.
Cash flow hedges are used to hedge the foreign currency risk of highly probable future foreign currency cash flows, the commodity
price risk of highly probable future transactions, as well as the cash flow risk from changes in exchange or interest rates. The effective
portion of the gain or loss on the hedges is recognised in other comprehensive income, while any ineffective part is recognised in the
income statement. Amounts recorded in other comprehensive income are recycled to the income statement in the same period in which
the underlying foreign currency, commodity or interest exposure affects the income statement. When a hedge relationship no longer
meets the criteria for hedge accounting, any cumulative gain or loss existing in equity is either transferred to the income statement or
amortised over its remaining life using the effective interest rate method.
Net investment hedges utilise either foreign currency borrowings or derivatives as hedging instruments. Foreign exchange differences
arising on translation of net investments are recorded in other comprehensive income and included in the exchange reserve. Liabilities
used as hedging instruments are revalued at closing exchange rates and the resulting gains or losses are also recognised in other
comprehensive income to the extent that they are effective, with any ineffectiveness taken to the income statement. Foreign currency
derivative contracts hedging net investments are carried at fair value. Effective fair value movements are recognised in other
comprehensive income, with any ineffectiveness taken to the income statement. Cost of hedging model is applied in case of cross-
currency interest rate swaps in net investment hedges. The fair value changes attributable to the spot component of the hedging
instruments are designated to offset foreign exchange differences of net investments and therefore taken to net investment hedge
reserve. The fair value changes attributable to the forward component of the hedging instruments (including currency basis) is taken to
the cost of hedging reserve and amortised to the consolidated income statement.
Borrowings Borrowings are initially recognised at fair value net of transaction costs and are subsequently reported at amortised cost. Certain
bonds are designated in fair value hedge relationship. In these cases, the amortised cost is adjusted for the fair value of the risk being
hedged, with changes in value recognised in the income statement. The fair value adjustment is calculated using a discounted cash
flow technique based on unadjusted market data. 
Bank overdrafts form an integral part of the group’s cash management and are included as a component of net cash and cash
equivalents in the consolidated statement of cash flows.
Cash and cash equivalents comprise cash in hand and deposits which are readily convertible to known amounts of cash and which
are subject to insignificant risk of changes in value and have an original maturity of three months or less, including money market
deposits, commercial paper and investments.
Net borrowings are defined as gross borrowings (short-term borrowings and long-term borrowings plus lease liabilities plus interest
rate hedging instruments, cross currency interest rate swaps and foreign currency forwards and swaps used to manage borrowings) less
cash and cash equivalents.
Own shares Own shares represent shares and share options of Diageo plc that are held in treasury or by employee share trusts for the purpose of
fulfilling obligations in respect of various employee share plans or were acquired as part of a share buyback programme. Own shares
are treated as a deduction from equity until the shares are cancelled, reissued or disposed of and when vest are transferred from own
shares to retained earnings at their weighted average cost.
Share based payments Share-based payments include share awards and options granted to directors and employees. The fair value of equity settled share
options and share grants is initially measured at grant date based on Monte Carlo and Black Scholes models and is charged to the
income statement over the vesting period. For equity settled shares, the credit is included in retained earnings. Cancellations of share
options are treated as an acceleration of the vesting period and any outstanding charge is recognised in operating profit immediately.
Any surplus or deficit arising on the sale of the Diageo plc shares held by the group is included as a movement in equity.
Dividends Dividends are recognised in the financial statements in the year in which they are approved.
Contingent liabilities and legal proceedings Provision is made for the anticipated settlement costs of legal or other disputes against the group where it is considered to be
probable that a liability exists and a reliable estimate can be made of the likely outcome. Where it is possible that a settlement may
be reached or it is not possible to make a reliable estimate of the estimated financial effect, appropriate disclosure is made but no
provision created.
Critical accounting judgements and estimates
Judgement is necessary in assessing the likelihood that a claim will succeed, or a liability will arise, and an estimate to quantify the
possible range of any settlement. Due to the inherent uncertainty in this evaluation process, actual losses may be different from the
liability originally estimated. The group may be involved in legal proceedings in respect of which it is not possible to make a reliable
estimate of any expected settlement. In such cases, appropriate disclosure is provided but no provision is made and no contingent
liability is quantified.