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 Supervision Committee’s Operating Procedures, 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 | Gateley (Holdings) Plc (3) |
|---|---|
| Balance Sheet Date | 30 April 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | MHA MacIntyre Hudson |
| Case Summary / Press Notice |
Acquisition payments linked to post-acquisition employment We requested more information about the nature of amounts paid and payable in a business combination to vendors that remained in employment post-acquisition. The company explained that the vendors’ rights to these payments are contingent upon the vendors remaining in employment for a specified period and consequently agreed to account for these amounts as a post-acquisition remuneration expense under IFRS 3, ‘Business Combinations’, rather than as acquisition consideration. The company also agreed to revisit the accounting for previous acquisitions that included similar terms, and to restate the financial information for the year ended 30 April 2022 accordingly in its next annual report. The company agreed to disclose the fact that the matter had come to its attention as a result of our enquiry. Distributable profits We questioned whether the company’s assessment of the level of its distributable profits had taken into account the non-distributable cumulative credit to equity in relation to share-based payment charges included in the carrying amount of its investment in subsidiaries. The company confirmed that it had not, and that consequently the dividend paid in October 2022 was in excess of the company’s distributable profits in its audited financial statements for the year ended 30 April 2022. The company confirmed that, although it had sufficient distributable reserves at the date the dividend was paid, it had not filed interim accounts to support the distribution as required under section 836(2)(a) of the Companies Act 2006. The company agreed to take steps to ratify this payment. |
| Entity | Genus Plc |
| Balance Sheet Date | 30 June 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice |
We noted that the company’s annual report did not include a clear statement explaining whether the report included climate‐related financial disclosures consistent with the recommendations and recommended disclosures of the Taskforce for Climate-related Financial Disclosures (TCFD), as required by the Listing Rules. We also identified a number of areas where improvements could be made to the company’s TCFD disclosures. We closed our enquiries after the company confirmed that it will provide a clearer statement that fulfils the requirements of the Listing Rules in its future reports. It agreed to provide explanations about any TCFD recommendations and recommended disclosures not included in its future reports, together with relevant explanations, as required by the Listing Rules. It also agreed to make a number of improvements to the TCFD disclosures, consistent with our expectations as set out in our recent thematic review report. |
| Entity | GlobalData Plc (3) |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice |
Refinancing transactions We requested more information about the nature of two refinancing transactions completed in the year. The company satisfactorily explained the circumstances of these, clarifying that the August 2022 refinancing of the previous term loan and revolving credit facilities (‘RCF’) was judged to be a repayment of the group’s existing debt and the drawdown of new debt facilities under IFRS 9, ‘Financial Instruments’. The company acknowledged that the disclosure in its annual report, which stated that the transaction was accounted for as a substantial modification of the existing debt, was incorrect. The company agreed to include amended wording, and highlight the wording error, in its next annual report and accounts. We also questioned the accounting treatment applied to the costs of the refinancing transactions. The company satisfactorily responded to our enquiries. We sought clarification of the basis for presenting the financing cash flows related to the refinancing of the previous term loan and RCF on a gross basis in the consolidated cash flow statement. The company identified that the transaction had resulted in the receipt of a single net cash inflow and agreed to restate the consolidated cash flow statement and related notes for the year ended 31 December 2022 accordingly in its next annual report and accounts. The company agreed to disclose the fact that the matter had come to its attention as a result of our enquiry. |
| Entity | Guild Esports Plc |
| Balance Sheet Date | 30 September 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | PKF Littlejohn LLP |
| Case Summary / Press Notice | Consent withheld |
| Entity | Haleon plc |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice | N/A |
| Entity | Hollybrook (UK) Limited |
| Balance Sheet Date | 30 September 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | September 2023 |
| Auditor (5) | Gibsons Financial Limited |
| Case Summary / Press Notice |
Provisions and contingencies We asked the Company to explain how they had met the requirements of FRS 102, section 21, ‘Provisions and Contingencies’ in respect of potential fire safety remediation costs. In response to our enquiry, the Company restated the comparatives in the September 2022 annual report and accounts to record a provision and a related reimbursement asset. |
| Entity | Intertek Group plc |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice | N/A |
| Entity | James Fisher and Sons plc (3) |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice |
Impairment testing We asked the company for information relating to the impairment testing of goodwill, including certain of the disclosures required by IAS 36 ‘Impairment of Assets’. The company provided a satisfactory response, and enhanced its disclosures by including the required information for each cash generating unit with significant goodwill, quantifying key assumptions used in the tests, and explaining significant movements in those assumptions. We also asked the company to explain whether an impairment test had been carried out on the parent company’s investments in subsidiaries, and to clarify the accounting policy applied in relation to impairment testing of loans to subsidiaries. The company confirmed that an impairment test had been carried out on the investment in subsidiaries and that no impairment was required. The company confirmed that loans from subsidiaries had been tested for impairment using the Expected Credit Loss approach under IFRS 9 ‘Financial Instruments’. It explained that a more detailed approach had been undertaken in 2022, which led to recognition of an expected credit loss provision of £1.1m at 31 December 2022. The company also enhanced the disclosures explaining the policy and methodology. Deferred tax assets We asked the company to explain the nature of evidence supporting the recognition of deferred tax assets. The company answered the question to our satisfaction. Contract modifications and variable consideration from contracts with customers We asked the company to explain the accounting policy applied to contract modifications and variable consideration from contracts with customers. In responding to this question, the company identified a ‘pain provision’ of £4.8m on one contract that was recognised in other payables instead of as a reduction in contract assets, and has restated the comparatives in the 2022 annual report to correct this. The company also enhanced the disclosures explaining the accounting policy for such contracts. Contract costs We sought an explanation from the company about the nature of commission fees of £6m recognised as a contract asset in 2021. As a result of our questions, the company has now identified that these costs related to future services, and were cancellable, and as such should not have been recognised as a contract asset and liability. The company has restated the 2021 balance sheet in its 2022 annual report to derecognise the contract asset and corresponding liability presented within accruals. Insurance claims We asked the company for further information about certain insurance claim assets recognised within other debtors. The company satisfactorily addressed our queries. Presentation of financial statements We asked the company to explain its rationale for not presenting apparently material impairment losses in relation to financial assets on the face of the consolidated income statement as required by paragraph 82(ba) of IAS 1, ‘Presentation of Financial Statements’. The company agreed to present this charge on the face of the income statement in future financial statements to the extent material, and agreed to restate the 2021 comparatives to the 2022 income statement accordingly. As the restatement 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. We also asked the company to clarify the purpose of the ‘separately disclosed items’ column in the 2021 income statement. We sought clarification from the company as to the basis for excluding certain impairment expenses from this classification. The company chose to simplify the income statement presentation by removing the ‘before separately presented items’ and ‘separately presented items’ columns from the 2022 income statement. The company included the information relating to these alternative performance measures in a separate note to the accounts, which addressed our concerns. Litigation provisions and contingent liabilities We asked the company for information relating to litigation provisions and contingent liabilities. The company addressed our questions satisfactorily, and agreed to disclose the use of the relevant disclosure exemption in IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’. Movements in working capital We sought an explanation for the movements in certain other debtors and other payables. The company provided the information requested and has also provided improved explanations of significant balance sheet movements in the strategic report and notes to the 2022 accounts. Note 1 to the 2022 accounts explains that the company restated the consolidated cash flow statement to reclassify £6.1m of deposits for new build vessels, which were presented within other debtors in 2021, from cash flows from operating activities to cash flows from investing activities in 2021. Lessor disclosures We asked the company about the omission of certain disclosures required by IFRS 16 ‘Leases’ for lessors. The company has now addressed these disclosure requirements. |
| Entity | Jersey Electricity plc |
| Balance Sheet Date | 30 September 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | PricewaterhouseCoopers CI LLP, Jersey |
| Case Summary / Press Notice |
Cash flow hedging We asked the company to explain the accounting entries and disclosures in respect of cash flow hedging. The relevant disclosures did not appear to be consistent with the entries in the financial statements or to meet the requirement in IFRS 7, ‘Financial Instruments: Disclosures’, to separately disclose the fair value and recycling movements on the cash flow hedging reserve. The company acknowledged that the disclosures contained an error, provided a corrected version, and agreed to separately disclose the relevant movements in future accounts. Ultimate controlling party We asked for further information about the company’s basis for concluding that the Government of Jersey did not have control of the company. The company provided a satisfactory response describing its analysis, and agreed to clarify these disclosures in future accounts. |
| Entity | Kin and Carta plc |
| Balance Sheet Date | 31 July 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice |
Taxation We sought an explanation for the recognition of a current tax charge in other comprehensive income for foreign exchange movements. The company explained that the tax charge arose on foreign currency denominated inter-company loans included as part of the net investment in foreign operations. The company agreed to disclose additional policy information on the recycling of foreign exchange movements in future annual reports and accounts. We reminded the company of the need to disclose any significant judgements made in concluding that any additional repayment of these loans was neither planned nor likely to occur. We asked the company to explain the rationale for the tax rate applied to calculate deferred tax on the retirement benefit surplus. The company confirmed that the rate applied is consistent with how they expect to realise the economic benefits of the surplus. We asked the company for more information about the deferred tax balances recognised for share options, acquired intangible assets and short-term timing differences. The company responded satisfactorily to our questions and confirmed that a related misclassification between reserves in the consolidated statement of changes in equity was not considered to be material. The company agreed to disclose the deferred tax asset for tax deductible goodwill and deferred tax liability for other acquired intangibles separately in future annual reports and accounts. Expected credit losses We requested clarification of the amount of provision for impairment of trade receivables. The company provided a breakdown of the provision recognised against trade receivables and explained the differences between the amounts disclosed in different notes to the annual report and accounts. The company agreed to enhance the disclosure by including a reconciliation of the total balance in future annual reports and accounts. Business combinations We asked the company to explain the basis for the share price used to calculate the consideration for the acquisition of a subsidiary. The company explained that the date used for determining the share price was that defined in the sale and purchase agreement, rather than the mid-market share price on the date of completion. The latter is in line with the company’s policy and the requirements of IFRS 3, ‘Business Combinations’. The company explained that it did not consider the effect of the error to be material to the 2022 Annual Report and Accounts. Lease additions We sought an explanation of the difference between the amount of additions to the right-of-use asset and the related lease liabilities. The company confirmed that the additions to right-of-use assets comprised both additions for new leases and a lease modification for the extension of an existing lease. These amounts were disclosed separately in the breakdown of movements on lease liabilities. |
| Entity | KPMG LLP |
| Balance Sheet Date | 30 September 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | Grant Thornton UK LLP |
| Case Summary / Press Notice | N/A |
| Entity | ME Group International plc |
| Balance Sheet Date | 31 October 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | Mazars LLP |
| Case Summary / Press Notice | N/A |
| Entity | Müller UK & Ireland Group LLP |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | BDO LLP |
| Case Summary / Press Notice | Consent withheld |
| Entity | Pershing Square Holdings Limited |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice | N/A |
| Entity | Proton Motor Power Systems PLC (3) |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | September 2023 |
| Auditor (5) | RMT Accountants & Business Advisors Ltd |
| Case Summary / Press Notice |
IAS 33, ‘Earnings per share’ (‘EPS’) We noted that the effect of the share subdivision made during the year had not been reflected retrospectively in the weighted average number of ordinary shares used for calculating EPS. We asked the company for an explanation, and also for clarification of the basis on which the company had not included certain share options in calculating diluted EPS for the current financial year, and had restated the diluted loss per share for the prior year. The company acknowledged that its treatment of the share subdivision did not comply with IAS 33, and that potential ordinary shares arising from its stock awards scheme should have been included in the calculation of diluted EPS. It agreed to make a prior period restatement to correct both matters in its 2022 annual report and accounts. As the changes affected a primary statement, we asked the company to disclose that the matters had come to its attention as a result of our enquiry. The company satisfactorily explained why its share options did not qualify as potential ordinary shares for the calculation of diluted EPS, and agreed to enhance its disclosures in future to explain this. The company explained its restatement of the loss per share and agreed to give the required disclosures when making such changes in future. While it was not clear how the restated diluted loss per share complied with IAS 33’s definition of dilution, we did not consider it proportionate to pursue the matter further, as the restatement has no effect on future annual accounts. Embedded derivative The company reported a significant gain on an embedded derivative relating to convertible loan interest options that had been waived during the year for no consideration. We asked for an explanation of the basis on which the total gain was presented in profit for the year, with no portion recognised directly in equity as a transaction with owners in their capacity as owners, given that the holders of the options held the majority of the company’s ordinary shares. The company reassessed the circumstances of the waiver, concluded that its effect should be recognised in equity, and agreed to a prior period restatement in its 2022 annual report and accounts. As the change affected a primary statement, we asked the company to disclose that the matter had come to its attention as a result of our enquiry. We also asked for further detail of the methodology, inputs and judgements used in the valuation of the options. From the information provided, it appeared that the valuation involved significant judgements that could have had a material effect on the outcome and should have been disclosed. In light of the nature of these judgements, we also considered that the measurement might have been more appropriately categorised as Level 3 in the fair value hierarchy under IFRS 13, ‘Fair Value Measurement’, rather than Level 2. However, as the options had been derecognised in full following their waiver, we concluded it was not proportionate for us to pursue this matter further. We explained our observations on the valuation, and noted that, if similar circumstances arose in future, we expected the company to provide more detailed and informative disclosures of the valuation technique and inputs used, together with any significant judgements and sources of estimation uncertainty involved. |