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 | Dr. Martens plc |
|---|---|
| Balance Sheet Date | 31 March 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | March 2023 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice | N/A |
| Entity | DS Smith Plc |
| Balance Sheet Date | 30 April 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | March 2023 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice | N/A |
| Entity | Dunelm Group plc |
| Balance Sheet Date | 2 July 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | March 2023 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice | N/A |
| Entity | Edge Performance VCT plc |
| Balance Sheet Date | 28 February 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2023 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Distributable reserves and lawfulness of dividend payments We observed that the distributable reserves presented in accounts filed by the company prior to its August and December 2021 dividend payments appeared to exclude certain losses realised on the disposal of investments. We asked the company to comment on our observations and to explain how it was satisfied that it had complied with the requirements of the Companies Act 2006 in respect of dividends. We also recommended that the company consider whether certain of its earlier distributions were consistent with Companies Act requirements. We closed our enquiries after the company acknowledged that there were errors in its accounts and satisfactorily explained the legal steps it proposed to take to address the unlawful December 2021 dividend, as well as the potentially unlawful August 2021 dividend. In closing our queries, we noted that the rectification of unlawful dividends is primarily a legal matter, and that the company had obtained relevant advice from its solicitors. Other matters Narrative comments in the accounts included a definition of distributable reserves, and disclosed the monetary amount. We asked the company to clarify how the amount was calculated as it differed from the sum of the relevant reserves presented on its balance sheet. We closed our query after the company explained its calculation, and agreed to update its definition when it prepares its future accounts. |
| Entity | EVRAZ plc (3) |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2023 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice |
Dividends We asked the company for further information about its basis for recognising a liability for interim dividends paid after the year end. In such cases, an obligation does not normally exist prior to payment unless the directors have taken steps to establish a legally binding liability at an earlier date. The company confirmed that no such obligation existed and agreed to revise its accounting policy in the 2022 financial statements with a restatement of the 2021 comparatives in the Statement of Financial Position. 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 for clarification of the current position in respect of certain dividends paid in breach of the procedural requirements of the Companies Act 2006. The company’s 2021 financial statements disclosed the expected steps intended to rectify the position. However, the company did not propose a special resolution at the Annual General Meeting in June 2022, as described in the disclosures. The company provided a satisfactory response in respect of its current intentions. |
| Entity | Halma plc |
| Balance Sheet Date | 31 March 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | March 2023 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice | N/A |
| Entity | Harbour Energy plc |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | March 2023 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice |
This company was selected as part of our thematic review of TCFD and climate and, as such, only disclosures relevant to these areas were reviewed. Statement of consistency with the TCFD Recommendations and Recommended Disclosures We noted that the company had not provided all of the recommended disclosures regarding strategy (a) and (b) which the FCA expects that companies will ordinarily be able to provide, partially on grounds of confidentiality. We noted further that the TCFD Recommendations and Listing Rules do not provide an exemption from disclosure on the grounds of confidentiality. The company acknowledged these matters, and explained the reasons for the noted deficiencies in the 2021 TCFD disclosures and the steps being taken to ensure that the 2022 annual report is consistent with FCA expectations on TCFD disclosure. We also noted that the company had not provided all of the information required by paragraph 9.8.6(8)(b)(ii) of the Listing Rules regarding disclosures not included in the 2021 annual report. The company agreed to provide these disclosures in the annual report in future. |
| Entity | Highway Capital Plc |
| Balance Sheet Date | 28 February 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | March 2023 |
| Auditor (5) | Shipleys LLP |
| Case Summary / Press Notice | N/A |
| Entity | HomeServe plc |
| Balance Sheet Date | 31 March 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | March 2023 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice | N/A |
| Entity | Hotel Chocolat Group Plc (3) |
| Balance Sheet Date | 27 June 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2023 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | Consent withheld |
| Entity | Ibstock plc |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | March 2023 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice |
Reversal of impairment We asked the company for information about the reversal of impairment recognised during the period in relation to the Atlas and Nostell sites. The impairment of these sites had been recognised in the 2020 annual report and accounts. We asked the company to explain the nature of the redevelopment of the building which had previously been impaired, and the basis for including expenditure to enhance the asset in the calculation of the value in use of the cash generating unit. We also asked the company for further information about that calculation, and the timing of the impairment test. The company explained that the impairment reversal was recognised at the point the company became committed to a restructuring, based on paragraphs 46-47 of IAS 36. While recognising this was an area of judgement, we and the company had different views on whether it was appropriate, under IAS 36, to view this as a restructuring or instead as an asset enhancement. However, as the company also demonstrated that significant cash outflows on the redevelopment of the related sites had been incurred by 31 December 2021, we concluded it would not be proportionate to pursue this matter further, as paragraph 42 of IAS 36 supports the inclusion of cashflows to complete development projects which are in progress. The company addressed the related questions that we asked to our satisfaction. The company agreed to enhance their disclosures to include information required by paragraph 130 of IAS 36 in the event of future impairment or reversal of impairment. |
| Entity | International Distributions Services plc (formerly Royal Mail plc) |
| Balance Sheet Date | 27 March 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | March 2023 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice | N/A |
| Entity | ITM Power Plc |
| Balance Sheet Date | 30 April 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2023 |
| Auditor (5) | Grant Thornton UK LLP |
| Case Summary / Press Notice |
Impairment of investment in subsidiaries We asked the company to explain why the reversal of previously recognised impairment losses in respect of the parent investment in subsidiaries had been treated as a prior year adjustment, rather than recognising the reversal in the income statement. The reversal of impairment losses arose following an impairment assessment where recoverable amount was based on fair value less costs to sell. Previous assessments had been performed on a value in use basis. We also asked the company to explain how the fair value of subsidiaries had been determined and to explain the apparent inconsistency with the accounting policy for investments, which stated that recoverable amount was based on value in use. The company explained that the fair value less costs to sell of the investment in subsidiaries was based on the market capitalisation of the Group, adjusted to reflect the fact that the subsidiaries were private companies. In previous years, value in use was used to determine the recoverable amount despite information being readily available which could be used to calculate a higher recoverable amount on a fair value less costs to sell basis. The company demonstrated that, had the impairment assessment considered fair value less costs to sell, as required by IAS 36 ‘Impairment of Assets’, no impairment loss would have been recognised for the years ended 30 April 2020 and 30 April 2021. As a result, the reversal of impairment losses to correct this error was treated as a prior period adjustment. The company agreed to amend the accounting policy for investments in future accounting periods to explain how recoverable amount is determined for impairment testing purposes. |
| Entity | ITV plc |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2023 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice |
Revenue recognition We questioned the nature of, and the accounting policy applied to, ‘partnerships and other revenue’. The company satisfactorily explained the nature of these revenues, and the accounting polices applied. They also agreed to update the revenue recognition accounting policy to clarify this information. We asked the company to describe the way in which variable consideration is recognised and measured. The company explained that variable consideration is only recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty is resolved and agreed to clarify this within their accounting policy. Cash flow We asked the company to clarify where in the cash flow statement certain cash outflows in respect of contingent consideration were recorded. The company satisfactorily explained that these cash flows were included within cash flows from operating items. |
| Entity | James Halstead plc |
| Balance Sheet Date | 30 June 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | March 2023 |
| Auditor (5) | BDO LLP |
| Case Summary / Press Notice | N/A |