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 | Victrex plc |
|---|---|
| Balance Sheet Date | 30 September 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | September 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Wickes Group Plc |
| Balance Sheet Date | 1 January 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | September 2022 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice | N/A |
| Entity | Acre 1217 Limited |
| Balance Sheet Date | 31 July 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
We questioned why certain disclosures, required under Schedule 7 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, were not provided within the directors’ report. The specific requirements related to energy and carbon reporting, and to the company’s regard for the need to foster relationships with suppliers, customers and others, and its effect on the principal decisions taken by the company during the financial year. The company acknowledged the omissions and confirmed that relevant information had been included in its subsequent annual report.
|
| Entity | Anglian Water Services Limited |
| Balance Sheet Date | 31 March 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | June 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Revenue recognition – services offered to property developers We noted diversity in practice among the water utility companies regarding the revenue recognition for the services offered to property developers, such as new connections to the water and wastewater networks, adoption of assets contributed by developers at nil consideration and network infrastructure charges, which reflect the costs incurred in network reinforcement. Some companies are deferring the recognition of revenue in relation to some or all of the income streams in question, mainly over the useful economic life of the related assets; whereas other companies are recognising such revenue upfront – i.e. upon completion of the connection or upon the adoption of an infrastructure asset from the developer. We asked the company to explain its rationale for the timing at which it recognises revenue on such services. In particular, we challenged the appropriateness of recognising revenue at the time of connection or upon adoption of contributed assets. The company provided information on the arrangements, the judgements applied and the rationale for the timing of revenue recognition. We accepted the company’s treatment given the lack of specific guidance on the accounting for these types of transactions, the judgement involved and the diversity in accounting practices applied. The company undertook to improve its disclosure of the accounting policy on this matter by better describing the key judgements involved in deciding that the services offered to the developers are deemed to be distinct from the ongoing provision of water and wastewater services. |
| Entity | B&M European Value Retail SA |
| Balance Sheet Date | 30 March 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Provision for dilapidation expenditure We asked the company for further information about provisions for dilapidation costs and, in particular, whether provisions were recognised for stores under contract and not at risk of closure. The company explained that it had considered the requirement for a provision for ongoing stores but confirmed that it had judged that such a provision would be immaterial. We were satisfied with the company’s explanation, and its undertaking to enhance its future disclosures. |
| Entity | BMO Real Estate Investments Limited |
| Balance Sheet Date | 30 June 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | June 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Card Factory plc |
| Balance Sheet Date | 31 January 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Property leases We asked the company for further information about its accounting policies in respect of properties where the lease has expired but the company continues to occupy the site while the renewal is negotiated (‘holdover leases’). The company generally accounts for such situations as if it has entered into a new lease with a five-year term. We requested information about the company’s basis for assuming a new five-year term for such leases, the legal and contractual rights and obligations relevant to this assessment, the treatment of any exceptions, and the accounting entries and amounts concerned. The company confirmed that the majority of its leases are protected by the Landlord and Tenant Act 1954, which provides the tenant with an automatic right to a new lease, subject to certain conditions. The company also provided a satisfactory response in respect of its basis for assuming a five-year term at the start of the holdover period. The company agreed to enhance its accounting policy disclosures in respect of these arrangements in future periods. We also noted our expectation that the company will disclose specific judgements made about the lease term where these have a material impact on the financial statements. |
| Entity | Civitas Social Housing PLC |
| Balance Sheet Date | 31 March 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | June 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Lease incentives We requested some further information about lease incentives recognised in the accounts and for an explanation of the basis for classifying certain payments as lease incentives. The company provided the information and explanations requested to our satisfaction. Related party transactions We asked the company about their relationship with certain other parties, and asked them to explain whether any of these parties met the definition of related parties as set out in IAS 24 ‘Related Party Disclosures.’ The company explained the nature of their relationships with the parties, and why these were not considered to meet the definition of related parties. Operating segments We asked the company about how they intended to disclose information about major customers, as required by IFRS 8 ‘Operating Segments’, in relation to certain customers under common control. The company confirmed that they intend to disclose aggregated information for customers under common control in their next annual report and accounts. |
| Entity | Craneware plc |
| Balance Sheet Date | 30 June 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | June 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | DFS Furniture plc |
| Balance Sheet Date | 27 June 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | June 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | easyJet plc |
| Balance Sheet Date | 30 September 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | June 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Edinburgh Worldwide Trust plc |
| Balance Sheet Date | 31 October 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | June 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Energean plc (3) |
| Balance Sheet Date | 31 December 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Income taxes We requested further information about deferred tax assets arising from losses. The company satisfactorily explained the evidence supporting the recognition of these deferred tax assets, and other factors associated with the losses, including the locations in which these losses arose and, where relevant, their expiry date. The company agreed to provide additional disclosures associated with these deferred tax assets in the future. Leases We asked the company to explain their accounting policy for certain leases referred to in the annual report. The company explained their accounting policy for these leases, which related to oil and gas concessions, and agreed to include disclosure of the accounting policy for leases outside the scope of IFRS 16 in its next annual reports and accounts. Trade and other payables We requested an explanation for certain balances presented within trade and other payables. We questioned the nature of a liability described as a long term prepayment. The company explained this arose from amounts paid by Israel Natural Gas Lines for the transfer of the near shore and onshore segment of the Karish and Tanin infrastructure, which was expected to complete in Q4 2021/Q1 2022. We asked the company further questions about the classification of the associated asset as property, plant, and equipment, the timing of the expected derecognition, and the classification of cash flows in the cash flow statement. As a result of our enquiries, the company reconsidered the classification of the cash flows, and agreed that they should be classified as investing activities, rather than financing activities. The company agreed to reclassify the comparative amounts to reflect this change in its 2021 annual report and accounts. As the reclassification affects a primary statement, the company also agreed to disclose in its 2021 report and accounts that the matter came to its attention as a result of the Financial Reporting Council’s enquiry. Borrowing facilities We asked the company for an explanation of the difference between the carrying value of its borrowings, and the disclosures of the amounts drawn down under those facilities. The company explained these differences to our satisfaction. |
| Entity | Epwin Group Plc (3) |
| Balance Sheet Date | 31 December 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Offset of bank overdrafts and cash and cash equivalents We questioned why the parent company accounts included an overdraft balance which was not included within the consolidated accounts. The company acknowledged that, in its consolidated accounts, it had offset positive cash balances and overdrafts that did not meet the offsetting criteria in paragraph 42 of IAS 32, ‘Financial Instruments: Presentation’. The company agreed to restate the comparative balance sheet in its next annual report and accounts by presenting the positive cash balances and overdrafts separately. 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. Share options We asked the company for more information about the terms of the share options exercised during the year and to explain the consequential reduction in equity. The company provided a satisfactory explanation of the terms of the options including a net settlement feature which supported the reduction. The company undertook to disclose details of the terms and conditions of the options, including the net settlement feature, in its next annual report and accounts. Movement in lease assets We asked for clarification of the reasons for the reduction in lease assets, held by the company as a lessor, and where this was disclosed in the annual report and accounts. The company explained that the asset had been reclassified to right-of-use assets as it is no longer sublet and is instead now expected to be used by the group. The company agreed to expand the disclosure in its next annual report and accounts to explain the recognition of the right-of-use asset. Gain on sale and leaseback We asked the company to explain where the gain on sale and leaseback of a property was presented in the income statement. The company provided this information noting that it was not separately presented in the income statement as, in the year under review, total gross gains were considered immaterial. |
| Entity | European Opportunities Trust PLC |
| Balance Sheet Date | 31 May 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | June 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |