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 | Post Office Limited |
|---|---|
| Balance Sheet Date | 28 March 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | December 2022 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice |
Impairment of property, plant and equipment and right-of-use assets We asked for further information about the critical accounting judgement made by the company that the retail offering provided by the national network of branches as a whole is deemed to be one cash generating unit (‘CGU’) for the purpose of the impairment testing required by IAS 36, ‘Impairment of Assets’. We also asked for an explanation of the basis on which it was concluded that individual branch locations, or groups of locations, do not meet the definition of a CGU in IAS 36. The company explained that individual branch assets are immaterial and that the majority of the owned assets are central assets needed to support the functioning of the network as a whole. The company also explained that to meet the government’s access criteria, the network includes branches that would never be profitable and the Network Subsidy Payment received annually from government in recognition of this is not branch-specific. In closing the matter, we explained our expectation that the company should include a more detailed explanation of the factors considered in making this critical accounting judgement. Historical Matters related provisions The company disclosed that the effect of discounting provisions, which included the Historical Matters related provisions of £711 million, would be immaterial. IAS 37, ‘Provisions, Contingent Liabilities and Contingent Assets’, requires provisions to be discounted to the present value where the effect of the time value of money is material. In view of the significant amount of the provisions classified as non-current, we sought an explanation of the basis for this conclusion. The company explained that the cash flows were risk adjusted and, consequently, a risk-free rate was used to discount them. This risk-free rate was based on that of a government bond, which at the time was very low. The company also confirmed that the effect of the time value of money is assessed at each balance sheet date. |
| Entity | Prudential plc |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | December 2022 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice | N/A |
| Entity | PureTech Health plc |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | December 2022 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice | N/A |
| Entity | Reckitt Benckiser Plc |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | December 2022 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice | N/A |
| Entity | Restore plc |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | December 2022 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice | N/A |
| Entity | Rio Tinto plc |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | December 2022 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice | N/A |
| Entity | Rolls-Royce Holdings plc |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | December 2022 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice | N/A |
| Entity | Rotork Plc |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | December 2022 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice | N/A |
| Entity | Sanne Group plc |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | December 2022 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice | N/A |
| Entity | ScS Group plc (3) |
| Balance Sheet Date | 31 July 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | December 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Product warranty sales We questioned the basis for recognising revenue from the sale of product warranties as principal. As a result of our enquiry, the company reconsidered the principal versus agent requirements in IFRS 15 ‘Revenue from Contracts with Customers’ and reviewed the accounting treatment adopted by its peers. The company concluded that it did not control product warranties before transferring them to the customer and that revenue related to the sale of these warranties should have been recognised as agent rather than as principal. Consequently, the company agreed to restate the comparative amounts in the following year’s income statement. As the change affected a primary statement, we asked the company to disclose the fact that the matter had come to its attention as result of our enquiry. The company also agreed to make certain improvements to its accounting policy for product warranty sales and enhance certain other revenue-related disclosures. Product guarantees We asked the company to explain the accounting treatment of its 12-month and 20-year product guarantees. The company satisfactorily responded to our query. |
| Entity | Shell plc |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | December 2022 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice | N/A |
| Entity | Smith and Nephew plc |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | December 2022 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice | N/A |
| Entity | Smurfit Kappa Group plc |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | December 2022 |
| Auditor (5) | KPMG Ireland |
| Case Summary / Press Notice | N/A |
| Entity | Spirent Communications plc |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | December 2022 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice |
This company was selected as part of our thematic review of deferred tax assets and, as such, only these disclosures were reviewed. Non-recognition of UK deferred tax assets We asked the company to explain the extent to which it had considered the requirement of IAS 12, ‘Income Taxes’, to recognise deferred tax assets in relation to unused tax losses to the extent that there are sufficient taxable temporary differences relating to the same taxation authority and the same taxable entity. The company satisfactorily explained that the unrecognised deferred tax assets in the UK relate to non-trading losses that are recoverable only against future non-trading profits, and agreed to clarify this in its future reporting. Reconciling items in the effective tax rate reconciliation We requested more information on the nature of reconciling items in the effective tax reconciliation related to the recognition and utilisation of temporary differences previously not recognised, and sought confirmation that deferred tax assets are recognised to the extent that their recovery is considered probable. The company explained the components of the reconciling items, and the circumstances that led to their recognition in the respective periods. The company explained that it would recognise in its next annual report and accounts the full amount of an immaterial deferred tax asset not previously recognised for which recovery is considered probable, and agreed to consider whether to provide additional explanations of such reconciling items to aid the reader in future reporting periods. |
| Entity | Sthree plc |
| Balance Sheet Date | 30 November 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | December 2022 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice | N/A |