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 | Redde Northgate 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) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice |
Impairment of financial assets We asked the company why apparently material impairment losses in relation to financial assets were not disclosed on the face of the consolidated income statement, as required by IAS 1, ‘Presentation of Financial Statements’. The company agreed to disclose this information in future financial statements and to restate the prior year comparatives in the April 2023 accounts. 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. Statement of cash flows We asked the company to explain the rationale for classifying certain intercompany cash flows in the parent company cash flow statement as investing activities. The company acknowledged that the presentation did not follow the requirements of IAS 7, ‘Statement of Cash Flows’, but noted that it intended to adopt FRS 101, ‘Reduced Disclosure Framework’, and will not present a parent company statement of cash flows in its future reporting. We closed our enquiries on this basis. Classification of amounts due from subsidiary undertakings We questioned the classification of amounts due from subsidiary undertakings that appeared to be long-term in nature as current assets in the balance sheet of the parent company, as this appeared inconsistent with the requirements of IAS 1. The company acknowledged that almost all of the amounts due from subsidiary undertakings would have been more appropriately classified as due in more than one year. The company noted that it intended to adopt FRS 101 and include debtors due in more than one year within current assets in future financial statements. We closed our enquiries on this basis. |
| Entity | Renew Holdings plc |
| Balance Sheet Date | 30 September 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice |
Offsetting positive cash balances and overdraft liabilities We requested an explanation of the basis on which the company had offset an amount, described elsewhere in the accounts as a bank loan, against positive cash balances in the consolidated accounts. The company satisfactorily explained the basis on which it met the requirements to offset in IAS 32 ‘Financial Instruments: Presentation’ and explained that the loan would be more appropriately described as an overdraft. The company agreed to provide the related disclosures on offsetting required by IFRS 7 ’Financial Instruments: Disclosures’ in its next annual report and accounts. The company also informed us that it had identified an unrelated error in the parent company accounts in relation to the offsetting of certain positive cash balances against the overdraft liability. It explained that it intended to restate the comparative amounts, and present them on a gross basis, in the parent company’s balance sheet in its next annual report and accounts. |
| Entity | Safestore Holdings plc |
| Balance Sheet Date | 31 October 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice |
Consolidated cash flow statement We requested more information about the classification of the settlement of debt acquired in a business combination as an investing, rather than financing, cash outflow. The company satisfactorily explained that the classification was appropriate as the settlement of the debt was not at the company’s discretion because it was triggered by a pre-existing change of control clause in the facility agreement. The company agreed to consider disclosing critical accounting judgements in this respect should similar transactions arise in the future. Distributable profits We observed that the total dividends paid during the year ended 31 October 2022 exceeded the company’s retained earnings at 31 October 2021. The company confirmed that it had sufficient distributable reserves to make these dividend payments. However, no interim accounts had been filed at Companies House to support the distributions, as required by section 836(2)(a) of the Companies Act 2006 (the Act). The company satisfactorily explained the steps that it intends to take to rectify its non-compliance with the requirements of the Act. We also asked for details of the accounting policy applied in relation to share-based payments by the parent company. The company satisfactorily responded to our enquiries and agreed to reconsider the related disclosures in future financial statements. In closing the case, we recommended that the company consider the effect on distributable profits of any cumulative equity-settled share-based payment amounts not expensed by the company. |
| Entity | SDL Global Holdings Limited |
| Balance Sheet Date | 30 September 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | September 2023 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Exemption from audit We questioned the company’s eligibility to take advantage of the small company audit exemption under s 477 of the Companies Act 2006. The company explained that it had identified that the audit exemption had been taken incorrectly and was in the process of rectifying the situation. It confirmed that an auditor had been appointed to audit revised annual accounts to 30 September 2021, which would be filed at Companies House. |
| Entity | SSP Group plc |
| Balance Sheet Date | 30 September 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice |
Disclosure of borrowings We asked the company to explain the difference between the carrying value of its borrowings of £839.9m and the total borrowings of £815.5m described in its narrative disclosures. We closed our enquiry after the company provided satisfactory explanations and agreed to include additional information in its narrative disclosures when it prepares its 2023 report and accounts. |
| Entity | Superdry Plc |
| Balance Sheet Date | 30 April 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice |
Impairment testing We asked the company to explain its approach to distinguishing between expenditure that related to asset enhancement as opposed to maintenance, when preparing value in use calculations. We were satisfied with the company’s response. We also asked for clarification of the pre-tax discount rate used for goodwill impairment testing, because it was lower than the disclosed post-tax weighted average cost of capital from which it was derived. The company explained that the rate shown was incorrect due to a typographical error, and the pre-tax rate used was higher than the post-tax weighted average cost of capital. The company confirmed that it will correct this in its next annual report and accounts. |
| Entity | The Alumasc Group plc (3) |
| Balance Sheet Date | 30 June 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | Crowe U.K. LLP |
| Case Summary / Press Notice |
Discontinued operations and assets held for sale We asked the company why the assets and liabilities of the Levolux business, which was disclosed to be held for sale, did not appear on the balance sheet at the year end. The notes to the accounts stated that at the year end the discontinued operation had liabilities of £3,859,000, and that the assets held for resale were written down to a value equivalent to the liabilities to reflect the sales proceeds of £1 received after the year end. The company agreed to restate the June 2022 balance sheet and associated notes in the 2023 annual report and accounts to show the gross Levolux assets and liabilities as held for sale. As this change in presentation affected the primary statements, we asked the company to disclose that the matter had come to its attention as a result of our enquiry. We also asked the company to disclose the major classes of assets and liabilities classified as held for sale, as required by IFRS 5, which the company agreed to do. It was not clear to us why the post year end disposal of Levolux had given rise to a loss on disposal, or why this was not disclosed in the annual report. The company gave a satisfactory explanation of the loss arising on disposal, and noted that the omission of a note giving an estimate of the non-adjusting item was an oversight. It was noted, however, that an estimate of the non-adjusting loss was provided in the investor presentation for the 2022 results, and was fully disclosed in the subsequent half year results announcement. Finally, we asked why the charge for restructuring costs fell within continuing operations, when disclosures indicated that this related mainly to the discontinued Levolux business. The company explained that these costs related to liabilities of the continuing group. It undertook to amend the comparative disclosure on provisions in its 2023 report and accounts to clarify this. |
| Entity | TheWorks.co.uk plc |
| Balance Sheet Date | 1 May 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice |
Parent company investment in subsidiaries We sought further information about the impairment of the investment’s carrying amount following a waiver of intercompany debt, and the disclosure of sensitivity to changes in key assumptions. The company acknowledged that its disclosures could have described the circumstances of the impairment and related sensitivities more clearly. The company agreed to disclose, in its next annual report and accounts, information relevant to users’ understanding of the estimation uncertainty involved in calculating the recoverable amount after consideration of the requirements in IAS 1 and IAS 36. The company also agreed to consider the FRC guidance in the FRC Thematic Reviews on Impairment of non-financial assets and Judgements and Estimates. Income tax relating to amounts recognised in other comprehensive income We asked the company to explain why no income tax appeared to have been charged on gains recognised in other comprehensive income (OCI). The company acknowledged that there were errors in the presentation of deferred tax on foreign currency contracts, with one amount having been presented in the income statement rather than OCI and another omitted from the accounts. The company also explained that it did not consider the errors to be material. |
| Entity | Topps Tiles Plc |
| Balance Sheet Date | 1 October 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 | UK Commercial Property REIT Limited |
| 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 | UP Global Sourcing Holdings plc |
| Balance Sheet Date | 31 July 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | BDO LLP |
| Case Summary / Press Notice | N/A |
| Entity | Victorian Plumbing Group plc |
| Balance Sheet Date | 30 September 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice |
Capitalised software and website development costs We requested further information about the software and website development costs capitalised, including clarification of whether any of these projects were in progress at the year-end. The company provided the information and confirmed there were no material intangible assets under construction at the balance sheet date. Earnings per share We asked for the basis on which the company determined the weighted average number of shares used to calculate basic and diluted earnings per share, which the company provided. The company agreed to consider providing further information in its 2023 accounts to explain the basis for the weighted average number of shares when it is not clear how these relate to the number of shares in issue and potential ordinary shares. Parent company balance sheet We asked the company to clarify whether it had carried out an impairment review of the subsidiary investment balance, and amounts owed by group companies, in the parent company accounts. The company confirmed that an impairment review had been completed and provided a summary of its analysis. In response to observations that we had made, the company agreed to review its disclosures of judgements and key sources of estimation uncertainty and provide more granular information where beneficial to readers of the accounts. |
| Entity | Videndum plc |
| 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 |
Tax asset in relation to EU State Aid investigation We asked the company to explain its rationale for recognising a tax asset in relation to EU state aid investigation, as this was disclosed as a key judgement but the disclosures did not refer to the recent developments in relation to this case. The company satisfactorily explained that it considered the recent developments in relation to the EU State Aid investigation, and it concluded that the tax asset remained recoverable at year-end. The company agreed to disclose, in its future report and accounts, the ongoing developments and their impact on company’s judgement in relation to this case. Directors' Remuneration Report As part of the FRC’s non-statutory monitoring of remuneration reporting against the relevant requirements, we queried why the company included, within the single figure of total remuneration table, the estimated value of the 2020 LTIP award, as it was subject to the achievement of performance measures at a future date. The company explained that it considered that the performance measures have been substantially completed at the year-end and, as such, the relevant regulations permitted this treatment. |
| Entity | Virgin Atlantic Limited |
| 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 |
Intangible assets – the DL AFKL transatlantic agreement and brand licence We asked the company to explain the basis on which the cost of the intangible asset for the DL AFKL transatlantic agreement and brand licence was determined. The company explained that there are two intangible assets and provided an explanation of the determination of the cost of each of them. The company agreed to disclose, in future accounts, the carrying amount and remaining amortisation period of each of these intangible assets as well as the significant judgements made about the recognition of the DL AFKL transatlantic agreement as an intangible asset. Preference shares We requested further information about the preference shares issued and issuable. The company explained the circumstances that resulted in the issuance of preference shares and those in which further shares may be issued in the future as well as the accounting treatment applied. The company agreed to disclose, in future accounts, the accounting policies for preference shares issued and issuable. The company also explained that, as a result of our letter, the directors had reconsidered the accounting treatment applied to an obligation to issue certain preference shares, which was accounted for as an equity-settled share-based payment transaction, in the 2020 and 2021 accounts. Immediately before the company’s September 2020 recapitalisation project this obligation was recognised as a financial liability. As a result of the recapitalisation project, the company agreed to issue in the future a variable number of preference shares to settle that liability. As a result of their reconsideration, the directors concluded that the liability should have continued to be accounted for as a financial liability in the 2020 and 2021 accounts. The directors have decided to restate retrospectively the 2022 accounts to reflect the liability and to refer to our interaction in the note explaining the restatement. Revenue – frequent flyer miles We asked the company to explain the accounting treatment applied to the sales transactions with Virgin Red, the Virgin Group loyalty company, and to loyalty rewards awarded to and redeemed by the company’s customers. The company provided a satisfactory explanation and agreed to clarify the wording of the accounting policy for passenger revenue. Leased aircraft maintenance provisions We asked the company to clarify the accounting treatment applied to maintenance provisions for leased aircraft. It did so satisfactorily and agreed to provide a clearer explanation within the accounting policy. Analysis of changes in borrowings We requested a reconciliation of the amounts presented in the analysis of changes in borrowings to the relevant line items in the statement of cash flows and other disclosures in the accounts, identifying those that are non-cash changes. We also asked for an explanation of how the proceeds of a sale and leaseback transaction that did not meet the criteria in IFRS 15, ‘Revenue from Contracts with Customers’, for recognising a sale were reflected in the analysis of changes in borrowings. The company provided the reconciliation and satisfactory explanations as well as agreeing to enhance related disclosures in future accounts. Parent company’s investment in subsidiaries We asked the company for the basis on which the directors had satisfied themselves that the carrying amount of the parent company’s investments in subsidiaries was recoverable and we also observed that no accounting policy is disclosed. The company provided a satisfactory response and agreed to disclose its accounting policy in future accounts. |
| Entity | Volution Group plc |
| Balance Sheet Date | 31 July 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice |
Contingent consideration in a business combination We asked whether the continuing employment of selling shareholders was a condition for the payment of contingent consideration and whether the payments should have been treated as post-combination remuneration. The company satisfactorily explained that the continuing employment of selling shareholders was not a condition for the payment of contingent consideration. Significant judgements and estimates We asked for further details of the accounting judgements and estimates that are required to be disclosed by the relevant accounting standard. We noted that the precise judgement or nature of the estimation uncertainty was not always apparent. Additionally, some estimates did not appear to have a significant risk of a material adjustment to the carrying amount of assets and liabilities in the next financial year which is the threshold for reporting. The company provided the information requested and agreed to specify, in future annual reports and accounts, which judgements and estimates, if any, are required to be reported. The company also agreed to present any additional judgements and estimates separately. The comparison of avoided emissions to operational emissions Avoided emissions from the sale of heat recovery products were shown as a separate line below the “total scope 1, 2 and 3” emissions, and subtracted from that total to show a new total for “net emissions” in a data table in the strategic report. The comparison was potentially misleading because operational emissions excluded scope 3 emissions from the use of sold products. In addition, the presentation appeared to give the impression that the company’s overall emissions were negative. The company agreed to present a comparison of avoided emissions to scope 1, 2 and 3 emissions in future annual reports and accounts only when emissions from the use of sold products are included in the scope 3 emissions number. The company gave an undertaking to consider the manner in which such information is presented in future annual reports and accounts. The company also agreed to consider whether there is any impact of the exclusion of relevant categories of scope 3 emissions on the consistency of its disclosures with TCFD metrics and targets recommended disclosure (b) and, if so, to report accordingly. Methodology used and level of assurance obtained We questioned whether the company’s disclosures appropriately described the level of assurance obtained over scope 3 emissions and the methodology used in the calculation of avoided emissions. |