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 | Foresight Group Holdings Limited |
|---|---|
| Balance Sheet Date | 30 September 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | BDO LLP |
| Case Summary / Press Notice | N/A |
| Entity | Games Workshop Group PLC |
| Balance Sheet Date | 27 November 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Hilton Food Group plc (3) |
| Balance Sheet Date | 2 January 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | June 2023 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice |
Consolidated cash flow statement We asked the company to explain how the cash outflow within investing activities for the ‘acquisition of subsidiary, net of debt acquired’ had been calculated and the basis on which each transaction met the definition of an investing activity in IAS 7, ‘Statement of Cash Flows’. The company explained how the amount had been calculated. For one of the associated business combinations the company acknowledged that certain non-cash transactions had incorrectly been included within investing activities in the cash flow statement with offsetting misstatements within financing activities. The company agreed to restate the comparative consolidated cash flow statement in its next annual report and accounts to remove the non-cash transactions from both investing and financing activities. 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. The company also undertook to enhance several other elements of the disclosure of its business combination transactions in its next annual report and accounts. Deferred tax We asked the company for more information about the deferred tax balances recognised on the acquisition of subsidiaries. The company acknowledged that the deferred tax liabilities arising on the recognition of intangible assets had been incorrectly classified within the notes to the accounts. The company undertook to correct this classification in its next annual report and accounts. Impairment testing of goodwill We asked the company for clarification as to whether the goodwill arising on acquisitions in the period had been tested for impairment. The company explained the considerations it had made regarding the impairment testing and acknowledged that the disclosures within the annual report and accounts did not fully reflect these. We reminded the company of the requirement to test for impairment, before the end of the current annual period, any cash generating units to which goodwill from a current year acquisition has been allocated. |
| Entity | Idox plc |
| Balance Sheet Date | 31 October 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice |
Business combinations We requested more information about the terms of contingent consideration payable in relation to three acquisitions, including clarification of how the definition of equity in IAS 32, ‘Financial Instruments; Presentation’, was met in relation to contingent consideration classified as equity. The company provided the requested information and agreed to disclose more information about the terms of contingent consideration payable in future annual reports, as required under IFRS 3, ‘Business Combinations’. In addition, the company identified that an element of contingent consideration had been incorrectly classified as equity at 31 October 2021. However, the company explained that the effect of the misclassification was not considered material and that the amount was appropriately classified at 31 October 2022. We asked the company to provide the disclosures required under IFRS 13, ‘Fair Value Measurement’, in relation to contingent consideration liabilities categorised within Level 3 of the fair value hierarchy. The company provided the requested information and agreed to include these disclosures, where appropriate, in future annual reports and accounts. We questioned the non-recognition of share premium or merger relief in relation to shares issued in the year in connection with a previous business combination. The company agreed to recognise merger relief on this share issue within other reserves in its half-year report for the period ending 30 April 2023. We requested reconciliations between the investing cash outflows in relation to the acquisition of subsidiaries included in the consolidated cash flow statement in 2022 and 2021, and the corresponding business combination disclosures. The company provided these reconciliations and agreed to include more detailed disclosures in relation to cash flows relating to acquisitions, where appropriate, in future annual reports and accounts. |
| Entity | Investec plc |
| Balance Sheet Date | 31 March 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice |
Disclosures relating to uncertain tax positions We asked the company for further information about disclosures relating to uncertain tax positions, and in particular, why no quantification of the provision was provided, as it was identified as a key management assumption. We closed the enquiry after the company explained that the matter related to historical dividend arbitrage transactions which were disclosed elsewhere in the financial statements. |
| Entity | JP Morgan Japanese Investment Trust plc |
| Balance Sheet Date | 30 September 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice | N/A |
| Entity | Knight Frank LLP |
| Balance Sheet Date | 31 March 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice | N/A |
| Entity | LendInvest plc |
| Balance Sheet Date | 31 March 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | BDO LLP |
| Case Summary / Press Notice |
Forward-looking information We sought further information about the forward-looking macroeconomic assumptions used by the company to determine expected credit losses (ECLs) and the non-linear impact on ECLs of making alternative assumptions about macroeconomic factors. The company provided this and agreed to enhance its disclosures in future annual reports and accounts by quantifying underlying significant estimates and sensitivities, incorporating additional information about upside and downside scenario assumptions, articulating the non-linear relationship between economic factors and credit losses, and disclosing sensitivity to House Price Inflation and/or other single factors in addition to Forced Sale Discount. Significant increase in credit risk We asked the company to explain the factors considered in determining whether there has been a significant increase in credit risk (‘SICR’) for a financial instrument at the reporting date and its definition of default. The company provided a comprehensive response and agreed to disclose the credit risk factors in its future annual reports and accounts. The company also agreed to enhance its disclosure of risk grading and to disclose its definition of default as applied to each type of lending. Financing cash flows in the six months to 30 September 2022 In the course of our review, we noted that the condensed consolidated interim statement of cash flows to 30 September 2022 presented cash flows relating to the repayment and issuance of retail bonds which appeared to include non-cash amounts, where bondholders had exchanged one issue of bonds for another. The company agreed to ensure that the amounts reported in the 2023 annual report and accounts in respect of the issuance and redemption of bonds in August 2022 will take account of exchanges where no cash (or cash equivalents) was paid to or received from bondholders. |
| Entity | Moonpig Group plc |
| Balance Sheet Date | 30 April 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice |
Recoverability of parent company investment in subsidiaries We asked the company to explain the basis on which the eight year forecast period used in the estimation of the value in use of its investment in subsidiaries was considered to meet the reliability and past forecasting accuracy requirements of IAS 36, ‘Impairment of Assets’, which otherwise requires a maximum forecast period of five years. The company satisfactorily explained the rationale applied and undertook to disclose this in future annual reports to the extent it remains relevant. The company also agreed to keep under review the extent to which any changes in market conditions and trading results require updates to the forecast period and other aspects of the value in use calculation. We also requested further detail of other aspects of the assumptions applied in estimating the value in use and related sensitivities, which the company provided. The company agreed to expand its disclosure in this respect in future annual reports on the basis that this would provide useful information to the reader. |
| Entity | Nando's Group Holdings Limited |
| Balance Sheet Date | 27 February 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice | N/A |
| Entity | NCC Group plc |
| Balance Sheet Date | 31 May 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice |
Set-up fees included in Global Managed Services We asked the company about its revenue recognition policy in relation to the set-up fees for its Managed Service Provider model, where the group is acting as a principal, and its reseller model, where the group is acting as an agent. In both cases, these are recognised upfront as they are considered to be distinct from the other services being provided. The company clarified that the majority of its set-up fees relate to the reseller model, and satisfactorily explained the rationale for considering these services a separate performance obligation. The company agreed to enhance its accounting policy disclosure on this matter. |
| Entity | Next 15 Group plc (formerly Next Fifteen Communications Group plc)(3) |
| Balance Sheet Date | 31 January 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice |
Contingent consideration and share purchase obligation We sought an explanation for the income statement presentation of changes to contingent consideration and the share purchase obligation as finance income or expense. The company provided a satisfactory explanation. We also asked for details of the liquidity risk associated with contingent consideration and for certain disclosures required by IFRS 13 ‘Fair Value Measurement’ relating to the measurement of contingent consideration. The company provided the information requested and undertook to enhance its disclosures in these areas in its next annual report and accounts. We requested clarification of the company’s policy for reporting payments of contingent consideration in the cash flow statement. As a result of our enquiry, the company reviewed the classification of these payments and considered them to represent cash flows from financing activities. This was on the basis they reflected the settlement of a long-term liability that financed an acquisition. The company undertook to reclassify retrospectively payments of contingent consideration from investing activities to financing activities, in its 2023 accounts. In closing the matter, we encouraged the company to review whether the presentation of the payments of contingent consideration as financing activities represented a significant judgement requiring disclosure under paragraph 122 of IAS 1 ‘Presentation of Financial Statements’. Since the restatement affected a primary financial statement, we asked the company to disclose the fact that the matter had come to its attention as result of our enquiry in its next annual report and accounts. Other contingent liability We asked for further details about the other contingent liability balance of £5.2m. The company provided a satisfactory response which included an undertaking to rename the balance in future accounts to avoid confusion over the nature of the balance. Share-based payment charge We requested further information to help us understand how the charge for share-based payments reconciled to the movement reported in equity, which the company provided, together with an undertaking to enhance its disclosures to enable users to reconcile the amounts in future accounts. Employment related acquisition payments We asked for clarification of the company’s policy for reporting payments in the cash flow statement relating to remuneration for post-combination services. The company explained these payments had been included within cash flows from investing activities but, on reflection, should have been recognised within operating activities. The company undertook to restate the comparatives in its 2023 accounts to present the employment related acquisition payments within operating cash flows and to disclose the fact that the matter had come to its attention as a result of our enquiry. Deferred tax In response to our question, the company provided a breakdown of the deferred tax asset relating to intangibles and undertook to provide a more granular analysis of the balance with appropriate headings in its next accounts. |
| Entity | OTAQ plc |
| Balance Sheet Date | 31 March 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | RSM UK Audit LLP |
| Case Summary / Press Notice |
Goodwill impairment testing We asked the company why disclosures of the assumptions used for goodwill impairment testing, required by IAS 36, ‘Impairment of Assets’, were not provided. The company agreed to make these disclosures in future should the amount of goodwill continue to be significant. Onerous contracts We asked for details of the onerous supply contract, referred to in a circular issued by the company in October 2022, and the amounts owed under a legacy supply contract, referred to in the company’s interim financial statements. The company provided the details requested and explained why it had concluded that this supply contract was not an onerous contract as defined by IAS 37, ‘Provisions, Contingent Liabilities and Contingent Assets’. Classification of amounts due from subsidiary undertakings We asked the company to explain the rationale for classifying the amount due from a subsidiary as a current asset in the balance sheet of the parent company, which appeared inconsistent with the classification of this amount as a non-current liability in the accounts of the subsidiary concerned. The company provided an explanation and we did not consider it proportionate to pursue further. |
| Entity | QinetiQ Group plc (3) |
| Balance Sheet Date | 31 March 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice |
We asked the company to explain its basis for accounting for Research & Development Expenditure Credits (RDECs) under IAS 12 ‘Income Taxes’, as opposed to IAS 20 ‘Government Grants’, which is the more common treatment. The company explained the factors it considered to support its application of IAS 12 to the credits. However, we highlighted other factors that might indicate that IAS 20 is the more appropriate standard. As a result of this, the company reconsidered its approach and agreed to change its accounting policy to apply IAS 20 instead of IAS 12. As this change in accounting policy 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 questioned the appropriateness of the presentation of a proportion of the RDECs on a net basis. These related to contracts with the Ministry of Defence (‘MoD’) and were to be passed through to the MoD following receipt and approval by the Single Source Regulations Office (‘SSRO’). However, as this matter will no longer be relevant following a decision by the SSRO that the MoD had no valid claim to the credits, we did not consider it proportionate to pursue the matter further. |
| Entity | Real Estate Credit Investments Limited |
| Balance Sheet Date | 30 September 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice | N/A |