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 | Renewi 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 |
Discount rates for provisions We questioned the basis on which the company selected the rates used to discount landfill and onerous contract provisions, as it was unclear whether the assumptions about inflation in the cash flows and discount rates in a present value measurement were internally consistent (that is both in nominal, or both in real terms). The company explained that it used government bond yields as a starting point to determine the risk-free discount rate. It then applied certain upward adjustments derived from the long-term averages for the bond yields and benchmarking with peers. The resulting rate, considered by the company to be an adjusted nominal rate, was then used to discount nominal cash flows. This adjusted nominal rate was higher than the corresponding government bond rate which is regarded as a measure of a risk-free rate. We were not persuaded that the company’s explanation of the methodology applied in determining a discount rate was in accordance with IAS 37, as it is generally difficult to justify discounting a provision at a rate that is higher than a risk-free rate. This is because, when discounting liabilities, adjusting for risks that have not been reflected in the cash flows should reduce the risk-free rate. However, we concluded that it would not be proportionate for us to pursue this matter further. In forming this conclusion, we read the company’s comments on the outcome of its benchmarking exercise. We also considered the fact that the company is taking external expert advice on this matter in preparing its next annual report and accounts, and the likely timing of its output. In its next annual report and accounts, the company undertook to enhance its disclosures about key assumptions in determining these provisions, as well as key aspects of its methodology for deriving the discount rates. |
| Entity | Renishaw Plc |
| Balance Sheet Date | 31 December 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 | Schroder Oriental Income Fund Limited |
| Balance Sheet Date | 31 August 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 | Seraphine Group plc |
| Balance Sheet Date | 3 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 |
Going concern We asked the company whether the directors’ conclusion that there were no material uncertainties in respect of going concern required the application of significant judgement. The company confirmed that the directors did not make any significant judgements. We also requested more information about the consistency of the values of the assumptions used in the going concern and viability assessments with those used in the impairment testing of goodwill and other intangible assets. The company clarified that an alignment of the cash flows would not have had an effect on the outcome of its going concern assessment and confirmed that it would ensure alignment of assumptions in future. Impairment We asked the company whether the assets of each individual store were tested for impairment on a standalone basis before grouping cash generating units for the impairment testing of goodwill and other intangible assets. The company confirmed that it did and agreed to explain this in future accounts. The accounts disclose that a post-tax discount rate is used to determine the value in use of non-current assets, including goodwill and other intangible assets. We queried whether the estimated future cash flows reflect the specific amount and timing of estimated future income tax receipts or payments. The company confirmed that they did and acknowledged that IAS 36 calls for a pre-tax discount rate to be used. We also asked for the basis on which the directors satisfied themselves that the impairment losses recognised for other intangible assets were not materially different amounts to those determined using pre-tax cash flows and a pre-tax discount rate. The company provided a satisfactory explanation. Share-based payment We asked the company for further information about the vesting conditions for the group’s equity-settled share scheme. The company confirmed that there were no market vesting conditions and explained that the statement in the accounts, referring to vesting being dependent on the group’s total shareholder return, is not correct and will not be included in future accounts. |
| Entity | Speedy Hire Plc |
| Balance Sheet Date | 30 September 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice |
Share buyback programme We asked the company to explain the accounting policy applied for a share buyback arrangement and how that policy complied with IFRS. The company explained that it had a contractual right to terminate immediately the arrangement outside close periods. Consequently, there was an obligation to repurchase only those shares purchased by its brokers, but not yet repurchased, as of 31 March and 30 September 2022, and a liability had been recognised at those reporting dates for these obligations. The company agreed to enhance disclosure of the applied accounting policy in its next annual report and accounts. Impairment review We queried the company’s conclusion that there were no indicators of impairment at the interim period end as its net asset value exceeded the company’s market capitalisation. The company clarified that it had considered whether a detailed impairment review was required. It satisfactorily explained the factors considered and its rationale for not performing a detailed impairment review at the interim period end. Disposals of hire equipment We requested a reconciliation between the amounts recognised as disposals revenue and cash proceeds from the disposal of hire equipment for the six months ended 30 September 2022 and the year ended 31 March 2022. The company satisfactorily explained that compensation received from customers for the loss or damage of hire equipment was included in the cash proceeds but excluded from disposals revenue. The company agreed to enhance the accounting policy for disposals revenue in its next annual report and accounts and to present cash flows from the disposal and purchase of hire equipment separately in its next interim report. |
| Entity | Storrington EquityCo Limited |
| Balance Sheet Date | 28 February 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | June 2023 |
| Auditor (5) | RSM UK Audit LLP |
| Case Summary / Press Notice | Consent withheld |
| Entity | S&U Plc |
| Balance Sheet Date | 31 January 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | Mazars LLP |
| Case Summary / Press Notice |
Net increase in overdraft presented in the cash flow statement We asked the company to explain an inconsistency between the net increase in overdraft of £1,273,000 presented in the cash flow statement and the change in total drawdowns on the overdraft facilities presented in the notes to the accounts, which indicated a reduction of £295,792. The company confirmed that the net increase in overdraft presented in the cash flow statement was correct and that the total drawdowns in the notes to the accounts omitted a late adjustment for cash in transit. The company undertook to amend the disclosure in the next annual report and accounts. Expected credit losses We asked the company to explain how forecasts of future economic scenarios had been incorporated into the determination of expected credit losses. We also asked for details of any overlays used to adjust the modelled output for expected credit losses. In addition, we noted that used vehicle prices were identified as a key variable used in the multiple economic scenarios for the incorporation of forward-looking information. We asked the company to explain why these assumptions were not disclosed and to provide details of these assumptions for each of the five economic scenarios, including the sensitivity of expected credit losses to changes in these assumptions. The company provided the information and agreed to enhance disclosure in respect of the sensitivity of motor finance expected credit losses provisions to changes in used vehicle price assumptions. Collateral We asked the company to provide details of the collateral held as security including the nature, quality and amount of collateral held, and any significant changes in the quality of that collateral during the year ended 31 January 2022. The company provided the information and agreed to enhance disclosures in respect of collateral held as security for financial assets that are credit-impaired at the reporting date. |
| Entity | Tritax EuroBox plc |
| Balance Sheet Date | 30 September 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 | VPC Specialty Lending Investments PLC |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice |
Expected credit losses: model assumptions The accounts disclosed that the company had prepared two economic scenarios in relation to its expected credit loss (‘ECL’) model but had allocated a 100 percent probability weighting to the downside scenario. We requested an explanation of the basis on which the measurement of ECL reflected an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes, as required by paragraph 5.5.17(a) of IFRS 9 ‘Financial Instruments’. The company responded satisfactorily and agreed to consider enhancing the related disclosures in future. We also questioned the basis for describing the assumptions relating to economic scenarios as significant estimates following the company’s explanation that a change in these estimates would not result in a material change in ECL. The company provided the information and agreed to further differentiate these estimates from its IAS 1 significant estimates in future disclosures. Expected credit losses: stage 1 and 2 loss allowances We requested an explanation of the rationale for not recognising a loss allowance against 12-month ECL (stage 1) loans, and the basis for determining that a significant increase in credit risk (’SICR’) had not occurred in respect of any stage 1 loans. This was in the light of the severity of the downside scenario described in the accounts, which included the assumption of an economic recession occurring within 12 months. The company provided the information including an explanation of the credit protection provided by the structured nature of its lending. We accepted the company’s response. As a result of our enquiry, the company agreed to provide further explanation of the methods used to determine and evaluate credit risk in its future accounts. Collateral held We questioned why certain disclosures relating to collateral held were not provided. The company’s response satisfactorily addressed our question. Statement of cash flows We requested an explanation of the basis for presenting cash flows relating to unrealised losses on notes payable in the statement of cash flows. The company provided the information requested and agreed to clarify in the narrative that these are cash flows. We also asked for an explanation of the basis for presenting cash flows relating to notes payable on a net rather than gross basis in the statement of cash flows. The company reconsidered the cash flow presentation and agreed to amend this presentation in future accounts. |
| Entity | Vp plc |
| Balance Sheet Date | 30 September 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 | Wellington Pub Company Plc |
| Balance Sheet Date | 31 March 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | Gerald Edelman |
| Case Summary / Press Notice | Consent withheld |
| Entity | Abcam plc |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | March 2023 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice | N/A |
| Entity | Amigo Holdings PLC |
| Balance Sheet Date | 31 March 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | March 2023 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice | N/A |
| Entity | Anglo American plc |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | March 2023 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice |
Significant sources of estimation uncertainty and other disclosures in relation to impairment of metallurgical coal assets. An impairment charge of $0.8bn was recognised in respect of certain metallurgical coal assets during the first half of the year ended 31 December 2021. We asked the company why the assumptions underlying this impairment review were not disclosed as a significant source of estimation uncertainty in the 2021 annual report and accounts. We also asked for information required by paragraph 130 of IAS 36 ‘Impairment of assets’, including the events and circumstances that led to the impairment and the key assumptions on which management based its determination of fair value. The company explained that the relevant disclosures in respect of significant sources of estimation uncertainty and the impairment charge were included in its June 2021 interim financial statements assets, and should have also been included in the December 2021 annual report and accounts. The company undertook to carry such disclosures forward to its annual report and accounts in future, if relevant and material. The company also satisfactorily explained its approach to reassessing key assumptions used in impairment tests carried out during the financial year at the year-end balance sheet date to determine whether they remained appropriate. Strategic report discussion of impairment We asked the company to explain how it had addressed the impairment of metallurgical coal assets in the strategic report, and how such disclosures could be enhanced. The company provided an explanation of the circumstances giving rise to the impairment, and explained that if the disclosures in the interim report had been appropriately included in the annual report, the linkage between the strategic report and the impairment charge would have been clear. It also agreed to consider the recommendations of our thematic report on TCFD and climate in the financial statements, and to provide a clear link between disclosures in the strategic report and those within the financial statements in relation to climate change in future. |
| Entity | AO World PLC |
| Balance Sheet Date | 31 March 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2023 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice |
Serious loss of capital We noted that the net assets of the company at 31 March 2022 were less than half of its called-up share capital. Under section 656 of the Companies Act 2006 (the “Act”), this constitutes a serious loss of capital. We asked the company to explain what steps were taken to call a general meeting, as required by the Act, to consider steps to deal with the situation. The company described the actions taken to remedy the loss of capital by way of a share placing and offer completed in July 2022, which raised £40m before expenses. We observed that the remedial action did not remove the requirement to convene a general meeting. In view of the company’s remediation, we have taken no further action on this matter. |