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 | 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. |
| Entity | Diageo Plc |
| Balance Sheet Date | 31 December 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 | Diploma 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 |
Lawfulness of dividends We observed that, after the payment of the company’s final dividend in February 2021, the interim dividend for 2021, paid in June 2021, appeared to exceed its retained earnings. However, no interim accounts were filed at Companies House to support the distribution, as required by the Companies Act 2006 (the Act). We asked the directors how they had satisfied themselves that the interim distribution was lawful. The company explained that interim accounts satisfying the requirements of the Act were prepared but, due to an inadvertent oversight, a copy was not delivered to the Registrar of Companies. We closed the matter on the basis that the company had taken legal advice and satisfactorily explained how it intended to rectify its non-compliance with the requirements of the Act relating to the unlawful distribution. Alternative Performance Measures (‘APMs’) We made a number of observations about the calculation and presentation of certain APMs presented in the company’s strategic report and asked how the directors intended to address these matters in the 2023 annual report and accounts. The company satisfactorily explained the improvements it will make to its disclosure of APMs in future annual reports and accounts. These improvements include presenting a table of all APMs used, their closest IFRS equivalent, and the rationale for using the APM, as well as reconciliations of the key APMs to their nearest statutory equivalent. Strategic report On the basis that many of our observations, referred to above, reflect the prominence given to APMs in the strategic report, we asked the company to explain the basis on which the directors concluded that the strategic report contained a fair review of its business and met the requirements of paragraphs 35 and 36 of the ESMA Guidelines on APMs. We closed the matter on the basis of the company’s response and the improvements it will make to its future annual reports and accounts. |
| Entity | Doric Nimrod Air Three Limited |
| Balance Sheet Date | 30 September 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | Grant Thornton Limited |
| Case Summary / Press Notice |
Interim indicators of impairment We asked the company to clarify why it considered it not practicable to conduct an interim impairment review of aircraft assets at the 30 September 2022 period end, explaining whether any indicators of impairment existed. The company confirmed that there was no indication that the aircraft assets were impaired during the period, thus a detailed assessment of the valuation of the aircraft was not required. The company agreed to expand its disclosures around impairment testing and external valuation in future interim reports, and to include a confirmation that the directors perform an impairment assessment when an indicator of impairment exists. |
| Entity | Fidelity Emerging Markets Limited |
| Balance Sheet Date | 30 June 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | KPMG Channel Islands Limited |
| Case Summary / Press Notice | N/A |
| Entity | Focusrite plc |
| Balance Sheet Date | 31 August 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice |
Amortisation of intangible assets We asked the company for further information about its policy for the amortisation of capitalised development costs. The financial statements referred to the amortisation of certain technology, products and patents ‘in development’. This appeared to be inconsistent with the requirements of IAS 38, ‘Intangible Assets’, which states that amortisation shall begin when the relevant assets are available for use. The company’s response clarified the policy adopted and confirmed that the amortisation of certain acquired intangible assets had commenced before these were available for use, resulting in a £1.0m understatement of the carrying values. The directors considered the effects to be immaterial and noted their intention to correct the error prospectively. The company agreed to make certain enhancements to disclosures in future accounts including: clarifying the company’s accounting policy to state that amortisation begins when an asset is available for use; providing an explanation how the company determines products have reached this stage; and separately disclosing the amount of intangible assets for which amortisation has not yet begun. |
| Entity | Foresight Group Holdings Limited |
| Balance Sheet Date | 30 September 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 | Games Workshop Group PLC |
| Balance Sheet Date | 27 November 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 | Hilton Food Group plc (3) |
| Balance Sheet Date | 2 January 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | June 2023 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice |
Consolidated cash flow statement We asked the company to explain how the cash outflow within investing activities for the ‘acquisition of subsidiary, net of debt acquired’ had been calculated and the basis on which each transaction met the definition of an investing activity in IAS 7, ‘Statement of Cash Flows’. The company explained how the amount had been calculated. For one of the associated business combinations the company acknowledged that certain non-cash transactions had incorrectly been included within investing activities in the cash flow statement with offsetting misstatements within financing activities. The company agreed to restate the comparative consolidated cash flow statement in its next annual report and accounts to remove the non-cash transactions from both investing and financing activities. 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. The company also undertook to enhance several other elements of the disclosure of its business combination transactions in its next annual report and accounts. Deferred tax We asked the company for more information about the deferred tax balances recognised on the acquisition of subsidiaries. The company acknowledged that the deferred tax liabilities arising on the recognition of intangible assets had been incorrectly classified within the notes to the accounts. The company undertook to correct this classification in its next annual report and accounts. Impairment testing of goodwill We asked the company for clarification as to whether the goodwill arising on acquisitions in the period had been tested for impairment. The company explained the considerations it had made regarding the impairment testing and acknowledged that the disclosures within the annual report and accounts did not fully reflect these. We reminded the company of the requirement to test for impairment, before the end of the current annual period, any cash generating units to which goodwill from a current year acquisition has been allocated. |
| Entity | Idox plc |
| Balance Sheet Date | 31 October 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice |
Business combinations We requested more information about the terms of contingent consideration payable in relation to three acquisitions, including clarification of how the definition of equity in IAS 32, ‘Financial Instruments; Presentation’, was met in relation to contingent consideration classified as equity. The company provided the requested information and agreed to disclose more information about the terms of contingent consideration payable in future annual reports, as required under IFRS 3, ‘Business Combinations’. In addition, the company identified that an element of contingent consideration had been incorrectly classified as equity at 31 October 2021. However, the company explained that the effect of the misclassification was not considered material and that the amount was appropriately classified at 31 October 2022. We asked the company to provide the disclosures required under IFRS 13, ‘Fair Value Measurement’, in relation to contingent consideration liabilities categorised within Level 3 of the fair value hierarchy. The company provided the requested information and agreed to include these disclosures, where appropriate, in future annual reports and accounts. We questioned the non-recognition of share premium or merger relief in relation to shares issued in the year in connection with a previous business combination. The company agreed to recognise merger relief on this share issue within other reserves in its half-year report for the period ending 30 April 2023. We requested reconciliations between the investing cash outflows in relation to the acquisition of subsidiaries included in the consolidated cash flow statement in 2022 and 2021, and the corresponding business combination disclosures. The company provided these reconciliations and agreed to include more detailed disclosures in relation to cash flows relating to acquisitions, where appropriate, in future annual reports and accounts. |
| Entity | Investec plc |
| Balance Sheet Date | 31 March 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice |
Disclosures relating to uncertain tax positions We asked the company for further information about disclosures relating to uncertain tax positions, and in particular, why no quantification of the provision was provided, as it was identified as a key management assumption. We closed the enquiry after the company explained that the matter related to historical dividend arbitrage transactions which were disclosed elsewhere in the financial statements. |
| Entity | JP Morgan Japanese Investment Trust plc |
| Balance Sheet Date | 30 September 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 | Knight Frank LLP |
| Balance Sheet Date | 31 March 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 |