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 FRC's Operating Procedures, for Corporate Reporting Review, 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 | 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. |
| Entity | Wilkinson Hardware Stores, Limited (3) |
| Balance Sheet Date | 29 January 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 |
Financial instruments We asked the company to clarify whether it had applied IFRS 9, ‘Financial instruments’, in accounting for all of its financial instruments as permitted by FRS 102, ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’, or only to unsettled hedging instruments. The company confirmed that it had applied IFRS 9 to all financial instruments, and agreed to clarify this in future annual reports. Hedge accounting We requested further information about the cash flow hedge accounting movements in the period. The company agreed to restate its financial statements for the year ended 29 January 2022 to reclassify the effect of cash flow hedging in relation to inventory sold in the year from administrative expenses to cost of sales, and to present the related amount added to the cost of inventory purchased in the year as a movement in equity rather than as a reclassification within OCI, as required under IFRS 9. The company agreed to disclose the fact that the matter had come to its attention as a result of our enquiry. Recognition of deferred tax assets We sought more information on the nature of the evidence supporting the recognition of a net deferred tax asset in the light of the loss before tax, and the material uncertainty in relation to going concern, reported in the period. The company satisfactorily responded to our enquiries. The company further clarified that it did not consider there to be a significant risk of a material adjustment within the next financial year, but nevertheless agreed to assess at each balance sheet date the level of disclosure provided in relation to this matter. The company provided details of the expected net reversal of deferred tax assets within the next financial period and agreed to disclose this amount in future annual reports, in accordance with FRS 102. Insurance policy provisions We asked the company to indicate the extent to which the company’s provision for the self-insured excess on insurance policies was presented net of the related reimbursement asset. The company provided the requested information and, to the extent material, agreed to account for claims and reimbursement rights on a gross basis in future periods, as required under FRS 102. |
| Entity | Auction Technology Group plc |
| Balance Sheet Date | 30 September 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice |
Deferred tax on unrealised foreign exchange difference We asked the company for further information in relation to deferred tax on its unrealised foreign exchange difference. The company provided a satisfactory explanation. In closing the matter, we noted our expectation of improved clarity when disclosing the nature of the transactions underlying material items in the reconciliation of the tax charge to accounting profit. Classification of the repayment of acquiree debt within the cash flow statement We questioned why the repayment of acquiree debt was classified within investing activities in the consolidated cash flow statement, rather than financing activities. We accepted the company’s response, which explained that the repayment of debt was not at the company’s discretion as it was subject to a pre-existing change of control clause. In closing this matter, we observed that, should similar arrangements arise in future, users may benefit if this aspect of the debt settlement were disclosed. |
| Entity | Baillie Gifford US Growth Trust 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 |
We asked the company to clarify certain aspects of the tabular analysis disclosed to demonstrate the sensitivity of unlisted investments to changes in the assumptions underpinning the calculation of their fair value. We also asked for management’s view on how the disclosures in this area of the accounts could be presented more clearly. The company provided some further detail about the valuation techniques employed for unlisted investments, which are classified as Level 3 in the fair value hierarchy. They also agreed to improve various aspects of the table and the accompanying narrative disclosures, such as disclosing weighted averages, in order to provide more meaningful information to readers.
|
| Entity | Big Technologies PLC |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | June 2023 |
| Auditor (5) | Crowe U.K. LLP |
| Case Summary / Press Notice |
Adjusted earnings per share (‘EPS’) We asked the company to explain the basis for the rate of tax applied to the adjusting items and share-based payments included in the calculation of adjusted EPS, and why it differed from the overall effective tax rate. The company explained that the tax effect of the adjustments was determined by applying the actual tax effect of each component. We encouraged the company to provide an explanation of the tax effect of material adjusting items in future accounts, in accordance with the expectation set out in our thematic review on EPS. Share-based payments As a result of the company’s answer to our question on adjusted EPS, we asked for information about the accounting for the warrants exercised during the year, and for national insurance contributions (‘NICs’) relating to those warrants and other share-based payments. The company acknowledged that a share-based payment expense for the warrants had been omitted from the accounts for the year ended 31 December 2019, during which the warrants were granted and vested. The company estimated the expense at approximately £1,084,000, and considered the amount would have been material to the 2019 accounts. However, given that correction of this omission would have had no effect on amounts reported in the years ended 31 December 2020 or 2021, we did not consider it proportionate to pursue this matter further. The company provided satisfactory responses to our questions on NICs. |
| Entity | Braemar Plc |
| Balance Sheet Date | 31 August 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 | Brickability Group 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 |
Business combinations We asked the company to explain material differences between the consideration payable in respect of two acquisitions as reported in the annual report, and the corresponding RNS announcements. The company satisfactorily explained the reasons for the differences and undertook to use clearer language in future RNS announcements. We also requested more information about the basis of the discount rates used to estimate the fair value of the contingent consideration payable in relation to a material acquisition, which were significantly higher than those used for other acquisitions. The company satisfactorily explained why the rate was higher and agreed to expand its future disclosures in this area, to the extent that the effect of discounting is material, including details of how discount rates are determined. Tax effect of ‘other items’ We asked for more information about the tax effect of ‘other items’ excluded from adjusted profit. The company satisfactorily explained the tax effect of individual ‘other items’, and undertook to disclose this information in future accounts to the extent that the related amounts are considered material, including separate presentation in the 2023 accounts of a material effect of the change in the UK tax rate included within ‘other items’ in the 2022 comparatives. The company also agreed to expand the accounting policy on alternative performance measures to explain the classification of unusual or significant tax gains and losses as adjusting items. |
| Entity | Bridgepoint Group plc (3) |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | Mazars LLP |
| Case Summary / Press Notice |
Cash flow statement We noted that the company allocated IPO-related expenses between its income statement and statement of changes in equity, as required by IAS 32, ‘Financial Instruments: Presentation’. However, in the consolidated and parent company cash flow statements, the amounts were wholly allocated to net cash flows from financing activities. We asked the company to explain its basis for concluding that the amounts were appropriately classified in its cash flow statements. The company also entered into sale-and-repurchase agreements in relation to certain investments, and we noted that in accordance with guidance in IFRS 9, ‘Financial Instruments’, the transactions did not result in the derecognition of the investments. We asked for the company’s rationale for classifying the proceeds from the agreements as cash inflows from investing activities in its consolidated cash flow statement, given that the transactions appeared to represent collateralised borrowings. We closed our enquiries after the company agreed to restate the comparative figures included in its next annual report and accounts. As the restatements affected primary statements, we asked the company to disclose that the matters had come to its attention as a result of our enquiries. Additional investment in a subsidiary (parent company accounts) It was unclear how the company had measured its additional investment in a subsidiary, and we asked for an explanation. We closed our enquiry after it acknowledged that the investment had not been correctly measured and agreed to restate the comparative figures included in its next balance sheet and statement of changes in equity. Since the restatements also affected primary statements, we asked the company to disclose that the matter had come to its attention as a result of our enquiries. Accounting policy for non-controlling interests We asked for the company’s basis for classifying non-controlling interests as financial liabilities measured at fair value through profit and loss. The company provided a satisfactory explanation and agreed to include a relevant accounting policy in its next report and accounts. Management incentive scheme We asked for further information to enable us to understand the accounting applied to a management incentive scheme disclosed in the accounts and we were satisfied by the company’s explanations. |
| Entity | Coca-Cola HBC AG |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | PricewaterhouseCoopers S.A. |
| Case Summary / Press Notice |
Impairment testing of goodwill We asked the company to clarify and/or explain the following in respect of their disclosures about the impairment testing of goodwill:
We also questioned in more detail the calculation of the discount rates used in the company’s impairment analysis, as we noted that the rates used for European CGUs had decreased when European bond rates for the period had increased. The company explained the methodology underpinning the calculation of the discount rates, which were developed based on the advice of an independent valuation firm and involved the normalisation of the risk-free rate. Whilst we were not persuaded by the company’s arguments that the use of a normalised risk-free rate complied with IAS 36 ‘Impairment of Assets’, we did not consider it proportionate to pursue this matter further since the normalisation did not affect the discount rate key assumption enough to alter the results of the 2021 impairment test. Taxation We requested a breakdown of the uncertain tax positions, and a reconciliation from the prior year provision balance to the current year. We also queried a discrepancy in the current tax reconciliation. Management provided satisfactory explanations and undertook to improve relevant disclosures in their 2022 annual report and accounts. Accounting for contributions from The Coca Cola Company (‘TCCC’) We asked management to clarify the operation of and accounting for the marketing contributions programme with TCCC. We also clarified which elements of the programme were in the scope of IFRS 15 ‘Revenue from Contracts with Customers’. Management provided a satisfactory explanation and undertook to disclose further narrative detail to clarify how contributions from TCCC are presented in the income statement, and to improve the clarity of disclosures in general. |
| Entity | Currys plc |
| Balance Sheet Date | 30 April 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice |
Impairment testing of property, plant and equipment We asked the company to explain its allocation of online sales revenue to individual stores and 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 and encouraged the company to quantify the amount or proportion of revenues allocated to stores from online sales. Parent company’s investment in subsidiaries We queried the headroom over the carrying amount, that the company had voluntarily disclosed, in respect of assessing the investment for impairment. The company acknowledged that its calculation of the recoverable amount of the investment had been incorrect and that the amount of headroom had been significantly overstated. However, the company did not consider that this would have a material impact on the users of the financial statements owing to the amount of headroom remaining after the correction. We encouraged the company to disclose the corrected figure as a comparative in its 2023 annual report and accounts. |
| Entity | Deuce Topco Limited (3) |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice |
Covid-19-related rent concessions We asked the company to explain the accounting policy applied to Covid-19-related rent deferrals as it was unclear why invoices received in relation to deferred rents were recognised within trade payables, with a corresponding increase in prepayments, in addition to the lease creditor recognised in accordance with IFRS 16 ‘Leases’. The company acknowledged that the balance sheet was inappropriately grossed-up and agreed to restate the comparative amounts in its next report and accounts by decreasing both trade and other payables and trade and other receivables. Leasehold health clubs intangible asset We questioned whether a ‘leasehold health clubs intangible asset’, relating to operating leasehold interests from previous acquisitions, should have been reclassified to right-of-use assets upon the company’s transition to IFRS 16. The company acknowledged that the reclassification should have happened upon transition to IFRS 16 and agreed to restate the comparative amounts in its next report and accounts. Expected credit losses We queried the amount of the expected credit loss charge as it differed from the movement in the provision for impaired receivables. The company explained that the movements in the expected credit loss provision were presented on a net basis and agreed to present them on a gross basis in future. We drew the company’s attention to the fact that the impairment loss on trade receivables should be disclosed separately on the face of the consolidated income statement in accordance with IAS 1 ‘Presentation of Financial Statements’. The company agreed to such presentation in future annual report and accounts. As each of the three matters raised resulted in a change to a primary statement, we asked the company to disclose that they had come to its attention as a result of our enquiry. |