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 | Motion JVco Limited |
|---|---|
| Balance Sheet Date | 25 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 |
Revised accounts We observed that the company had refiled accounts for the period ended 25 December 2021 with Companies House. However, we were unable to identify the reasons why amended accounts were produced and filed. The company explained that the annual report and accounts were refiled to include the name of a previously omitted UK registered subsidiary in the list of companies seeking to take advantage of exemption from audit under s479A of the Companies Act 2006. It acknowledged the requirements set out in The Companies (Revision of Defective Accounts and Reports) Regulations 2008 had not been met when refiling the accounts and that it would take steps to rectify that matter. We made some further observations and recommended that the company consider seeking additional clarification from its legal advisors regarding the lawfulness of the current and any subsequent refiled accounts including any consequences for the subsidiary placing reliance on them, for the purposes of the s479A audit exemption. Parent company accounts: investment in subsidiaries We noted that the carrying value of the company’s investment in its subsidiary significantly exceeded the net assets of the group and that headroom, which was disclosed for two of the three cash generating units in the group accounts, was relatively limited. We asked the company to provide further information about the impairment testing of its investment in subsidiaries, including a summary of the results of any impairment test conducted and a clarification of whether this matter included any significant judgements and estimates. The company provided satisfactory responses and agreed to include disclosure of the significant judgements and estimation uncertainty in the parent company accounts going forward. |
| Entity | National Grid plc |
| Balance Sheet Date | 30 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 | Norcros plc |
| Balance Sheet Date | 31 March 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2023 |
| Auditor (5) | BDO LLP |
| Case Summary / Press Notice |
Impairment reviews It was unclear whether certain matters disclosed in the company’s report (namely, climate-related risks and changes in energy prices) were considered to be indicators of potential impairment. We asked the company to explain whether this was the case and, if so, whether it had performed additional impairment calculations, as required by IAS 36. The company clarified that it had identified trading performance and higher UK energy prices as indicators of potential impairment, and explained the impairment review it had performed in respect of the affected cash-generating unit. It also explained that the impairment review and related sensitivity analysis did not identify an impairment loss. We were satisfied with the company’s response and closed our enquiries. In closing the matter, we encouraged the company to consider whether, in such circumstances, users may benefit from additional disclosures (for example, disclosures highlighting that an impairment review was performed and that it did not identify a loss, together with information about key assumptions applied and related sensitivity analyses). TCFD compliance statement We noted that the company’s annual report did not include a clear statement (‘TCFD compliance statement’) setting out whether its disclosures are consistent with the TCFD recommendations and recommended disclosures, as required by paragraph 8(a) of Listing Rule 9.8.6R. We also questioned whether the report included all the disclosures required by paragraph (8)(b)(ii) of the Listing Rule in circumstances where a listed company’s report does not include disclosures consistent with all of the TCFD recommendations and recommended disclosures (for example, steps being taken by the company to be able to provide the missing disclosures and the relevant timeframes). We closed our enquiries after the company agreed to provide a clear TCFD compliance statement in its future reports, and to enhance its disclosures about any TCFD recommendations and recommended disclosures not included in such reports. |
| Entity | Oxford Instruments plc |
| Balance Sheet Date | 31 March 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | March 2023 |
| Auditor (5) | BDO LLP |
| Case Summary / Press Notice | N/A |
| Entity | PageGroup plc |
| Balance Sheet Date | 31 December 2021 |
| 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 | Pennon Group plc |
| Balance Sheet Date | 31 March 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | March 2023 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice |
Cash flow for acquisition costs We asked the company to explain how the inclusion of the cash flow for acquisition costs within investing activities, in the group cash flow statement, complied with the requirements of IAS 7 ‘Statement of Cash Flows’. The company confirmed that the cash flow should have been presented within operating activities in the group cash flow statement but that it did not propose to restate the statement as it did not consider the effect of the change to be material. |
| Entity | Petrofac Limited (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 |
Classification of cash flows in relation to restricted cash, amounts owed to and from group entities and related derivatives We requested an explanation of the basis for presenting working capital adjustments relating to other net current financial assets within operating activities in the consolidated statement of cash flows, as well as a breakdown of these adjustments. The company provided the information and indicated in its analysis that the adjustments comprised cash flows in relation to restricted cash and derivatives. It agreed to include an explanation for this treatment of restricted cash in its next annual report and accounts. We requested similar information in respect of the parent company’s statement of cash flows for the classification within operating activities of working capital adjustments relating to other financial assets and liabilities, and cash flow movements in amounts due to and from group entities and related derivatives. In its response the company reconsidered its approach and agreed to restate the comparative cash flows in its next annual report and accounts to present movements in restricted cash (the principal component of the other financial assets and liabilities line) within investing activities and the cash flows in relation to amounts due to and from group entities within financing and investing activities, respectively. It also agreed to restate the related derivative cash flows on the same basis. Classification of cash receipts from subleases During our correspondence, we also questioned the basis for classifying cash receipts from subleases to joint operation partners within financing activities in the consolidated statement of cash flows. As a result of our enquiry, the company concluded that sublease receipts should be presented within investing activities and agreed to restate the comparative consolidated statement of cash flows and make consequential changes to its comparative consolidated income statement to present the lease finance income and expense on a gross basis, in its next annual report and accounts. In addition, the company agreed to enhance its IFRS 16 ‘Leases’ disclosures in relation to the subleases to joint operation partners. As these restatements affected the primary statements, we asked the company to disclose the fact that the matters had come to its attention as result of our enquiry. |
| Entity | Pets at Home Group 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 | Phoenix Group Holdings plc |
| 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 |
Fair value measurement of level 3 assets We asked the company for quantitative details of the significant unobservable inputs used to measure the fair value of assets held at level 3 in the fair value hierarchy. The company provided the information requested and agreed to enhance its disclosures in this respect in future annual reports and accounts. |
| Entity | Primary Health Properties PLC |
| Balance Sheet Date | 31 December 2021 |
| 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 | Rathbones Group 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) | Deloitte LLP |
| Case Summary / Press Notice |
Statement of cash flows We asked the company for further information about how the repayment of debt following the acquisition of Saunderson House was treated in the consolidated statement of cash flows. The company clarified that the repayment was made to a third party and explained that following further discussions, it had concluded that it would be more appropriate to classify the third-party debt repayment as a financing outflow in the consolidated statement of cash flows. The company agreed to restate the comparative period of the consolidated statement of cash flows in its 2022 Annual Report and Accounts. 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. We asked the company for further information about amounts reported in the consolidated statement of cash flows for the repurchase and issue of ordinary shares, and the purchase and sale of investment securities. The company provided a satisfactory answer to our questions and gave an undertaking to provide enhanced note disclosures in its 2022 Annual Report and Accounts. Share-based payments We asked the company for further information about the amounts presented in the primary financial statements for share-based payments. The company provided a satisfactory answer to our questions and gave an undertaking to provide enhanced disclosures in its 2022 Annual Report and Accounts by providing further disaggregation of amounts presented in the consolidated statement of changes in equity relating to share-based payments. |
| Entity | RHI Magnesita N.V. |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | March 2023 |
| Auditor (5) | PricewaterhouseCoopers Accountants N.V. |
| Case Summary / Press Notice | N/A |
| Entity | S4 Capital 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 |
Contingent consideration and holdback We requested further information about the balance for contingent consideration and holdback and asked for certain disclosures relating to contingent consideration required by IFRS 3 ‘Business Combinations’ and IFRS 13 ‘Fair Value Measurement’. The company provided further analysis of the contingent consideration and holdback balance and the disclosures requested. In its 2022 accounts, the company undertook to disclose additional details of contingent consideration arrangements arising from significant acquisitions in the year ended 2021. Furthermore, it will explain the changes recorded in 2021 to the amount of contingent consideration recognised. We also asked for further information about employment-linked contingent consideration arrangements, which the company provided, together with an undertaking to disclose details of such arrangements arising from significant acquisitions in 2021, in its 2022 accounts. Deferred equity consideration We asked the company to explain the basis for classifying deferred equity consideration within equity. The company provided a satisfactory response. Alternative performance measures (APMs) Proforma results were disclosed in the annual report and accounts, but it was unclear how these measures reconciled to the statutory IFRS measures and why management considered them useful information regarding the company’s financial performance. The company committed to make improvements to its APM disclosures in its 2022 accounts, including reconciling proforma measures to their IFRS equivalent and explaining the reason for use of the APM. We also sought an explanation for controlled billings, which the company provided, together with an undertaking to define this APM in its next accounts and reconcile the amount to revenue reported in accordance with IFRSs. Ultimate controlling party In response to our question, the company gave a satisfactory explanation of the factors considered in concluding that Sir Martin Sorrell was not the ultimate controlling party of the company. |
| Entity | Scirocco 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) | PKF Littlejohn LLP |
| Case Summary / Press Notice |
Joint venture We asked the company to explain the extent of its influence over an investee presented as a ‘joint venture or associate’. The company provided a satisfactory explanation of its voting rights and power to appoint directors, through which it has joint control over the investee, and confirmed that a call option to acquire a further interest in the investee is not currently exercisable. The company also confirmed that it considers the investee to be a joint venture and agreed to provide, in its future annual reports and accounts, in full the joint venture disclosures in accordance with IFRS 12, ‘Disclosure of Interests in Other Entities’. Classification of loan receivable We also sought and received clarification of the basis on which the company classified its loan to the investee as a current asset. |
| Entity | Scotia Gas Networks Limited |
| Balance Sheet Date | 31 March 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2023 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice |
Net credit adjustment We observed that the company disclosed a ‘net credit risk adjustment’ of £31.9m that reduced the fair value of financial liabilities. We asked the company to clarify which financial instruments this adjustment related to. We also asked for further information on the valuation technique used and the reasons why the adjustment was so significant in the current year, both in terms of the amount of financial liabilities at fair value and compared to the same adjustment made in the prior year. The company confirmed that the ‘net credit risk adjustment’ related to the fair value of inflation-linked swaps that had been entered into during the year ended 31 March 2022 and that an appropriate valuation technique had been utilised. They also explained that the magnitude of the adjustment resulted from the swaps having long dated tenors and differences in cash settlement arrangements giving rise to asymmetric cash positions. Consequently, the counterparty is exposed to greater credit risk. |