CRR Case Summaries and Entity-specific Press Notices
The FRC publishes, on a quarterly basis, summaries of its findings from recently closed reviews that resulted in a substantive question to a company (‘Case Summaries’). In addition, it publishes the names of companies whose reviews were closed in the previous quarter without the need for a substantive question. No Case Summary is prepared for such reviews.
Case Summaries, which are available for cases closed in the quarter ending March 2021 onwards, are included in the table below. As, currently, the FRC is subject to existing legal restrictions on disclosing confidential information received from a company, the Case Summaries can only be disclosed with the company's consent. Where consent has been withheld by the company, that fact is disclosed in the table.
From March 2018 until March 2021, the FRC published the names of companies whose reviews were closed in the previous quarter but did not prepare Case Summaries. However, on an exceptional basis, specific cases may be publicised through entity-specific Press Notices, which can also be found in the table below.
The FRC’s reviews are based solely on the company’s annual report and accounts (or interim reports) and do not benefit from detailed knowledge of the company’s business or an understanding of the underlying transactions entered into. They are, however, conducted by staff of the FRC who have an understanding of the relevant legal and accounting framework. The FRC’s correspondence with the company provides no assurance that the annual report and accounts (or interim reports) are correct in all material respects; the FRC’s role is not to verify the information provided but to consider compliance with reporting requirements. The FRC’s correspondence is written on the basis that the FRC (which includes the FRC’s officers, employees and agents) accepts no liability for reliance on its letters or Case Summaries by the company or any third party, including but not limited to investors and shareholders.
Key
- Only a certain number of CRR’s reviews result in substantive questioning of the Board. Matters raised may cover questions of recognition, measurement and/or disclosure.
- CRR’s routine reviews of companies’ annual reports and accounts generally cover all parts over which the FRC has statutory powers (that is, strategic reports, directors’ reports and financial statements). Similarly, CRR’s routine reviews of companies’ interim reports will generally cover all information in that document. Limited scope reviews arise for a number of reasons, including those conducted when a company’s annual report and accounts or interim report are selected for thematic review or reviews that have been prompted by a complaint. In accordance with the FRC's Operating Procedures, for Corporate Reporting Review, CRR does not identify those companies whose reviews were prompted by a complaint.
- The FRC may ask a company to refer to its exchanges with CRR when the company makes a change to a significant aspect of its annual report and accounts or interim report in response to a review.
- Case closed after 1 January 2021 but performed under operating procedures that did not allow for the publication of Case Summaries.
- From the quarter ended June 2023, the FRC started identifying the auditor of the annual report and accounts, or the audit firm that issued a review report on the interim report, that was the subject of the CRR review. This information was also back-dated for closed cases publicised from the quarter ended September 2022. Cases marked N/A relate to those published prior to September 2022 or interim reviews that did not have a review opinion.’
Case Summaries
CRR Case Summaries and Entity-specific Press Notices (Excel version)
| Entity | Diversified Energy Company PLC |
|---|---|
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2024 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice |
Restricted cash We asked the company for further information about restricted cash balances, which are presented separately from cash and cash equivalents. The company provided the information requested and agreed to enhance the disclosure of restricted cash in future annual reports and accounts by including additional details of the nature of the balances, including why they are not considered to meet the definition of cash and cash equivalents. We also requested an explanation for the presentation of movements on restricted cash balances as financing activities in the consolidated statement of cash flows and a clarification of the nature of the cash flows. The company provided a satisfactory response explaining its rationale for the policy adopted, based on its specific arrangements. Royalties We sought clarification of the nature of the company’s royalty arrangements and the policy adopted for their recognition and measurement. The company explained the range of other parties that hold non-operating rights or other shared interests to whom various payments are made. They provided a satisfactory explanation of the accounting policy adopted and agreed to enhance their disclosures of these arrangements to provide greater clarity in future annual reports and accounts. |
| Entity | DPDGroup UK Ltd |
| Balance Sheet Date | 1 January 2023 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | March 2024 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice | N/A |
| Entity | Drax Group plc |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | March 2024 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice | N/A |
| Entity | Equitix Capital Eurobond 6 Limited |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | March 2024 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice |
Fair value measurement and related disclosures We asked the company to explain the basis on which it concluded that its investments constitute a single class of asset for the purposes of its IFRS 13, 'Fair Value Measurement' disclosures. It explained that all investments are classified as level 3 on the fair value hierarchy and are made in respect of long term assets that share the nature and characteristics typical of core infrastructure. The company confirmed that it considers the investments to have similar risks and to represent a single class of asset. It acknowledged that users may benefit from disclosure which disaggregates the investments by geography and agreed to provide this information in its 2023 annual report and accounts. We requested further information about the inputs used in the fair value measurement of investments, including those related to the long-term inflation rates, deposit interest rates and discount rate premiums. The company provided the requested information. It agreed to provide additional detail to clarify the periods covered by the inflation and deposit interest rates assumptions and to explain its approach to determining the discount rate premiums in its 2023 annual report and accounts. We sought information about the cash flow projection risks associated with its investments, including whether any of the assumptions made about the amount or timing of cash flows were significant unobservable inputs. The company was also asked to explain any assumptions made about its ability to extend the period over which the cash flows are projected. The company provided a satisfactory response and agreed to keep the disclosures under review to ensure that they remain appropriate for the investment portfolio’s composition in its 2023 annual report and accounts. The company was also asked to describe the valuation technique and inputs used to determine the fair value of its Eurobonds and the related fair value hierarchy level. The company provided a satisfactory explanation and agreed to clarify the disclosure in its 2023 annual report and accounts. |
| Entity | Esken Limited |
| Balance Sheet Date | 28 February 2023 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | March 2024 |
| Auditor (5) | Mazars LLP |
| Case Summary / Press Notice | N/A |
| Entity | Eurasia Mining PLC |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | March 2024 |
| Auditor (5) | Grant Thornton (Ireland) |
| Case Summary / Press Notice |
We asked the company to explain the basis on which it decided not to disclose in its annual report and accounts information about two matters in litigation, which had been notified to the market. The company noted that disclosure would be seriously prejudicial to its position, for which there is a relevant statutory exemption from reporting in a company's strategic report. The company also confirmed for one matter that it considered the probability of economic outflow to be remote and that any possible outflow would not be material, such that it was not appropriate in its view to include disclosure of a contingent liability. On either of these grounds, disclosure is not required. The other matter was settled during 2023 and we did not consider it proportionate to pursue that point. |
| Entity | Ferrexpo plc |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2024 |
| Auditor (5) | MHA MacIntyre Hudson |
| Case Summary / Press Notice |
Foreign currency risk We asked the company to explain why the significant foreign currency gains and losses recognised during the year did not appear to be consistent with the analysis of foreign currency risk exposure and sensitivities disclosed in the accounts. The company explained that this volatility related to intercompany balances which are eliminated on consolidation, and that this exposure was not reflected in the Group foreign currency risk disclosures. The company agreed to provide disclosures to explain this additional foreign currency exposure related to US dollar-denominated intercompany balances in the books of the Ukrainian subsidiaries. Functional currency We also asked the company to explain whether management considered the determination of the Ukrainian subsidiaries’ functional currency involved significant judgement under IAS 1 ‘Presentation of Financial Statements’, given that sales are generated in US dollars and staff and other operational costs are denominated in hryvnia. The company explained why they did not consider this matter to have involved significant judgement. |
| Entity | Foresight VCT Plc |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | March 2024 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice | N/A |
| Entity | Frasers Group Plc |
| Balance Sheet Date | 30 April 2023 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | March 2024 |
| Auditor (5) | RSM UK Audit LLP |
| Case Summary / Press Notice | Consent withheld |
| Entity | Goldman Sachs International |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | March 2024 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice | N/A |
| Entity | Goodwin PLC |
| Balance Sheet Date | 30 April 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2024 |
| Auditor (5) | RSM UK Audit LLP |
| Case Summary / Press Notice |
Climate-related financial disclosures We asked the company to explain the extent to which consideration of climate-related matters affected the recognition, measurement and disclosure of items in the financial statements. The company noted that it had not performed a full assessment at the time of completing the 2022 annual report and accounts. It agreed to disclose any climate-related matters which are identified as affecting the recognition and measurement of items in future financial statements. We also noted that the strategic report’s climate-related disclosures did not appear to meet the Listing Rules requirements or be consistent with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations in several areas. We encouraged the company to review the findings of the FRC’s ‘CRR Thematic review of TCFD disclosures and climate in the financial statements’ and the FCA’s ‘Review of TCFD-aligned disclosures by premium listed commercial companies’. We performed a limited scope review of the company’s climate-related financial disclosures in its 2023 annual report, and were pleased to see improved disclosures. We made a number of observations, intended to promote further improvement of its disclosures in future reports. Revenue recognition We sought further information about contract modifications and claims. The company confirmed the nature of movements in the period, and agreed both to clarify its accounting policy disclosure for performance obligations satisfied over time in respect of engineered bespoke products, and to disclose, when material, additional information that helps users understand the potential upward and downward changes in revenue. We also asked the company to clarify the extent of estimation uncertainty and significant judgement affecting its recognition of revenue and contract balances. Having considered the company’s response, we observed that the disclosures could be enhanced by the inclusion of quantitative information, where material, and the omission or segregation of non-critical judgements and estimates. Corporate governance reporting As part of the FRC’s non-statutory monitoring of reporting against the 2018 UK Corporate Governance Code, we invited the company to comment on our observations on its corporate governance report. It provided an explanation of its approach to these matters, noting that information elsewhere in the annual report was intended to communicate, for example, the company’s purpose, its engagement with shareholders and employees, and its alignment of directors’ interests with those of shareholders as a whole. The company also identified improvements to be made in its future reporting, which we welcomed |
| Entity | Great Portland Estates plc |
| Balance Sheet Date | 30 September 2023 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | March 2024 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice | N/A |
| Entity | Hill & Smith PLC |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2024 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice |
Climate change in the financial statements We asked for more information about the company’s considerations of the impact of climate change when preparing the consolidated financial statements. The company confirmed that the transition risks identified in the strategic report were considered when preparing the consolidated financial statements and agreed to state this in its 2023 annual report and accounts. The company also explained how the risk of carbon price increases, as well as opportunities to mitigate this risk, had been incorporated into the value in use assessments used in its impairment testing of goodwill. We asked the company to consider disclosing these qualitative factors in future annual reports and accounts. |
| Entity | Hipgnosis Songs Fund Limited (3) |
| Balance Sheet Date | 30 September 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2024 |
| Auditor (5) | PricewaterhouseCoopers CI LLP |
| Case Summary / Press Notice |
Accrued income It was not clear to us why the Usage Accrual was nil prior to March 2022. We also wanted to understand the impact of the increase in accrued income on amounts due to songwriters. The company provided a satisfactory explanation of the increase, and explained that the amounts due to songwriters arise from a different revenue stream than the usage accruals. Alternative Performance Measures (‘APMs’) We asked the company to explain the meaning and purpose of the new Distributable Revenues APM, and also explain the change in definition of Leveraged Free Cash Flow. The company provided the explanations requested, and offered to include additional disclosures in the 2023 Annual Report to:
We also challenged the prominence of the PFAR revenue metric and the absence of a reconciliation of this to IFRS revenue. The company offered to continue to expand and develop the analysis of IFRS revenue such that there is a more balanced approach in the 2023 Annual Report, with at least equal prominence. The company also explained the difficulties in providing a reconciliation between the PFAR metric and the IFRS revenues reported, and noted that it intends to transition away from using PFAR as an APM. In the light of this, we did not pursue this matter any further. Impairment of Catalogues of Songs We asked for a more granular explanation of the approach used to calculate the value in use of the Catalogues of Songs, including the key assumptions used and the sensitivity of the carrying value to changes in these assumptions. The company provided the requested information, and offered to disclose the discount rate used to calculate value in use, the fact that this is a major source of estimation uncertainty, and also any material impact of a change in this discount rate on the impairment charge in the March 2023 Annual Report. The company also offered to consider disclosing a quantitative sensitivity analysis on other inputs, including the projected earnings, in future reporting periods. We also requested further details of management’s judgement in determining appropriate Cash Generating Units (‘CGUs’) for the purposes of the impairment review. The company provided this, and offered to disclose an enhanced analysis of the key catalogues within the Kobalt Portfolio in the March 2023 Annual Report to increase clarity on the Kobalt Portfolio and its impairment review. Accrued dividends We asked for an explanation of the basis for accruing dividends declared but not paid in the interim accounts. After obtaining legal advice, the company confirmed that unpaid dividends are not a legally binding obligation. As a consequence of this, the company agreed to restate the next interim accounts to no longer show unpaid dividends as a liability of the company. As this change affected the primary statements, we asked the company to disclose that the matter had come to its attention as a result of our enquiry. |
| Entity | Hostmore plc (3) |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2024 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice |
Parent company’s investment in subsidiaries We asked the company about the basis on which the impairment test on the parent company investment in subsidiary undertakings was performed. Specifically, it was unclear whether subsidiaries’ liabilities, such as bank loans and leases, had been appropriately reflected. The company explained that it erroneously did not reflect the impact of external debt in the calculation of the value in use of the investment in subsidiary undertakings. Consequently, it recalculated a material impairment and agreed to restate the comparative parent company statement of financial position in its next annual report and accounts. As the change affected a primary statement, we asked the company to disclose the fact that the matter had come to its attention as a result of our enquiry. Calculation of adjusted basic and diluted earnings per share We queried whether the calculation of adjusted basic and diluted earnings per share included the effect of tax. The company explained that the tax effect of adjusting items is not removed and that this is consistent with its definition of this measure. The company agreed to clarify the disclosure in this regard. Consistency between going concern and impairment assessments As a result of additional information provided to us by the FRC’s Audit Quality Review Team, whose work was ongoing at the time of our correspondence, we asked the company about the consistency of assumptions used in its going concern and impairment assessments. We closed our enquiry after the company provided a satisfactory explanation. |