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 | 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 |
| 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 |