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 | Acre 1175 Limited |
|---|---|
| Balance Sheet Date | 31 July 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | September 2022 |
| Auditor (5) | HW Fisher LLP |
| Case Summary / Press Notice |
We noted that the company was required to include in its strategic report a statement which describes how the directors have had regard to the matters set out in section 172(1)(a) to (f)*, Companies Act 2006, when performing their duty under section 172. The company confirmed that it would provide the relevant disclosure in future annual reports and accounts. * These matters cover: long-term consequences of decisions; interests of employees; business relationships; the company’s impact on the community and the environment; maintaining a high reputation for business conduct; and acting fairly between members. |
| Entity | Baillie Gifford Japan Trust PLC |
| Balance Sheet Date | 31 August 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 | Buxton Holdings Limited |
| Balance Sheet Date | 31 July 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | September 2022 |
| Auditor (5) | HW Fisher LLP |
| Case Summary / Press Notice |
We noted that the company was required to include in its strategic report a statement which describes how the directors have had regard to the matters set out in section 172(1)(a) to (f)*, Companies Act 2006, when performing their duty under section 172. The company confirmed that it would provide the relevant disclosure in future annual reports and accounts. * These matters cover: long-term consequences of decisions; interests of employees; business relationships; the company’s impact on the community and the environment; maintaining a high reputation for business conduct; and acting fairly between members. |
| Entity | CareTech Holdings PLC |
| Balance Sheet Date | 30 September 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
We sought and received further information about put options granted to owners of the non-controlling interest in the Smartbox business, acquired during the period. The company agreed to enhance its disclosures regarding these options, including relevant judgements and estimates, in its next annual report and accounts. We also asked the company to provide explanations and reconciliations for apparent inconsistencies in disclosures relating to:
The company acknowledged errors affecting these disclosures and agreed to correct the relevant amounts and their labelling in its next annual report and accounts. The company also agreed to enhance its disclosure of right of use asset disposals. |
| Entity | Carnival plc (3) |
| Balance Sheet Date | 30 November 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Our enquiries related to the Strategic Report and IFRS financial statements of Carnival plc for the year ended 30 November 2020. The combined US GAAP financial statements of Carnival Corporation and plc for that year, mentioned below, were not within the scope of our inquiries. The disclosure of the possible effects of climate change on the Company’s business
The company explained that it had subsequently enhanced its disclosures in the above respects in its Strategic Report and IFRS financial statements for the year ended 30 November 2021. The company undertook to include in its future Strategic Reports a summary of the impact of the business on the environment and disclosure of appropriately balanced information regarding the usage of LNG, reflecting the different views as to the impact of LNG on the environment relative to other fossil fuels. The company also agreed to continue to monitor environmental developments and to update its disclosure of the potential effect of climate change on significant judgements and estimates, including in relation to impairment and useful lives of ships, as the company’s understanding of the actual and potential impacts develops and changes in the related assumptions are made. We also asked the company to consider clearer signposting in the various documents that form its annual report to the individual disclosures required under subsections 414CB(2)(a) to (e) and subsections 172(1)(a) to (f) of the Act (as required under section 414CZA). The company included clearer signposting to these disclosures in its 2021 Strategic Report. Alternative performance measures (‘APMs’) We asked the company to consider how it might improve the presentation of financial information in the Strategic Report (which is based on the US GAAP results of Carnival Corporation and plc rather than the IFRS results of Carnival plc) to align with the European Securities and Markets Authority (‘ESMA’) ‘Guidelines on Alternative Performance Measures’ as regards prominence compared with, and reconciliations to, the IFRS financial statement figures. We also asked the company to reconsider the granularity of the related reconciliation provided in the segment reporting note in line with paragraph 28 of IFRS 8, ‘Operating Segments’. The company committed to present key IFRS measures for Carnival plc in its 2022 and future Strategic Reports. It also provided a more granular reconciliation between the combined group US GAAP and plc IFRS results in the segment reporting note for the year ended 30 November 2021. We encouraged the company to include a cross-reference to this reconciliation from the Strategic Report. Cash flow statements We asked for more information on the gross cash payments to, and receipts from, other group entities reported as net amounts in the group cash flow statement. The company satisfactorily explained the presentation of cash flows on a net basis in relation to amounts owed to other group entities. We also questioned the classification of cash flows in relation to loans to other group entities as financing activities in the parent company cash flow statement, rather than investing activities under paragraphs 6 and 16(e) of IAS 7 ‘Statement of Cash Flows’. The company identified that certain cash flows in relation to loans to other group entities had been incorrectly presented as financing activities in the years ended 30 November 2020 and 2021 and stated that it would restate the comparative parent company statement of cash flows for the year ended 30 November 2021 included in the 2022 financial statements to present these cash flows within investing activities. As the matter related to a primary statement, we asked the company to disclose that the matter had come to its attention as a result of our enquiry. Accounting for foreign exchange We requested further information on the foreign exchange accounting policy applied by the parent company in its individual financial statements. The company explained its foreign exchange accounting policy in relation to the parent company’s individual financial statements and undertook to expand its policy wording in its 2022 financial statements. As a result of our enquiries the company revised its net investment hedging accounting treatment and the translation of investments in subsidiaries, and recognised immaterial adjustments in its 2021 parent company financial statements to amend its previous accounting treatment in these respects. Accounting for dry-docking costs We asked the company to clarify its accounting policy in relation to dry-docking costs in the light of the requirements of paragraph 14 of IAS 16, ‘Property, Plant and Equipment’. The company satisfactorily responded to our enquiry and revised the accounting policy wording for dry-docking costs in its IFRS financial statements for the year ended 30 November 2021. |
| Entity | Chill Brands Group plc (3) |
| Balance Sheet Date | 31 March 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2022 |
| Auditor (5) | PKF Littlejohn LLP |
| Case Summary / Press Notice |
Payment for the purchase of a domain name The company’s condensed consolidated statement of cash flows, in its interim results for the six months ended 30 September 2021, includes a cash outflow described as ‘Purchase of intangible assets’ of £1,195,898. We asked the company to confirm the cost of the domain name at 30 September 2021 and explain how this was determined. It explained that the cost of the domain name was £1,195,898 and that this amount is specified in the purchase agreement. We also asked how the cash outflow for the purchase of the domain name, presented in the 2021 interim results, relates to the statement in the company’s RNS of 26 April 2022, about its £3.5 million fundraising. This noted that one of the uses of the funds will be settlement of the outstanding balance owed in respect of purchasing the domain name. The company acknowledged that the cash flow statement should only have included the amount actually paid during the period to 30 September 2021. The company confirmed that it will:
|
| Entity | CMC Markets plc |
| Balance Sheet Date | 31 March 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Lawfulness of dividends We observed that the company’s dividends paid during the year to 31 March 2021, relating to the final dividend for 2020 and the interim dividend for 2021, exceeded its retained earnings at 31 March 2020. However, no interim accounts were filed at Companies House to support the distributions, as required by section 836(2)(a) of the Companies Act 2006 (the Act). We also observed that the company’s investment in subsidiary undertakings includes capital contributions relating to share-based payments and that corresponding credits are recognised in retained earnings for these transactions. We asked the directors how they had satisfied themselves that the distributions were lawful and how the capitalisation of share-based payments was factored into the assessment of the lawfulness of dividends paid. The company undertook a review of the lawfulness of dividends paid during the year to 31 March 2021 and prior financial periods. The company explained the steps that it intended to take to rectify its non-compliance with the requirements of the Act. The company also explained that balances relating to share-based payments are excluded from the determination of reserves available for distribution as it does not consider them to represent realised profits. We closed the matter on the basis that the company had taken legal advice and satisfactorily explained how it intended to rectify the unlawful distributions. |
| Entity | Coats Group plc |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2022 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice |
US legacy environmental provision We asked for details of the basis on which the insurance reimbursements referred to in the disclosure of contingent liabilities in the accounts were recognised and how they were presented in the consolidated statement of financial position. The company provided a satisfactory response. |
| Entity | Convatec Group Plc |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | September 2022 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice | N/A |
| Entity | Dialight plc |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | September 2022 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice | N/A |
| Entity | EnQuest PLC |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | September 2022 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice | N/A |
| Entity | Ferroners Plc |
| Balance Sheet Date | 31 March 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2022 |
| Auditor (5) | HW Fisher LLP |
| Case Summary / Press Notice |
We noted that the company was required to include in its strategic report a statement which describes how the directors have had regard to the matters set out in section 172(1)(a) to (f)*, Companies Act 2006, when performing their duty under section 172. The company acknowledged an oversight in omitting this statement and confirmed that it would provide the relevant disclosure in its future annual reports and accounts. * These matters cover: long-term consequences of decisions; interests of employees; business relationships; the company’s impact on the community and the environment; maintaining a high reputation for business conduct; and acting fairly between members. |
| Entity | FirstGroup plc (3) |
| Balance Sheet Date | 31 March 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Transfers between property, plant, and equipment and right of use assets We asked the company for additional information about transfers between property, plant, and equipment (PPE) and right of use assets including factors considered in concluding that transfers met the criteria to be considered sales, any judgements involved, and the treatment of related cash flows. The company explained that they had reassessed the accounting treatment adopted for certain transactions accounted for as sale and leasebacks, and had concluded these should have been treated as financing transactions. The company told us that the proceeds from these transactions had been incorrectly netted off purchases of PPE in the cash flow statement, and that these cash flows should have been classified as financing activities. The company also explained that cash flows relating to certain lease buy outs had been incorrectly reported within purchases of PPE rather than as repayments of lease liabilities. The company agreed to restate the comparative amounts in the consolidated cash flow statement to correct these items in its 2022 annual report and accounts, in addition to making certain reclassifications in the notes to the accounts. As the restatement affects a primary statement, the company also agreed to disclose in its 2022 report and accounts that the matter came to its attention as a result of the Financial Reporting Council’s enquiry. |
| Entity | FRP Advisory Group plc (3) |
| Balance Sheet Date | 30 April 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Deemed remuneration In relation to acquisitions, we requested further information about the company’s accounting for deemed remuneration. The company satisfactorily explained the basis for concluding that equity consideration represented post combination remuneration (deemed remuneration) and provided its rationale for recording the deemed remuneration debit to the share-based payment reserve on initial recognition. Spectrum acquisition We observed that the description of the acquisition of Spectrum Corporate Finance Limited (‘Spectrum’) in the accounts and an announcement of the transaction did not appear consistent. Accordingly, we requested further information to enable us to better understand the accounting for the transaction. The company provided the information requested which included details of the terms and structure of the deal. In closing the matter, we encouraged the company to ensure that, in future, information provided in the accounts and other public sources of information can be easily reconciled. Revenue from non-refundable retainer fees We asked the company to explain its rationale for recognising non-refundable retainer fees up-front. The company clarified that these fees were recognised ‘over time’ rather than upfront at a ‘point in time’ and undertook to amend its policy wording going forward. Unbilled revenue We requested further information about the credit risk associated with unbilled revenue which the company provided together with a commitment to expand its unbilled revenue credit risk disclosures, in view of the significance of this balance. Trade and other payables Within current and non-current liabilities, the company disclosed balances described as “liabilities to partners go forward”. We asked the company how these arose and were accounted for as this was not clear from the accounts. The company provided the information requested and undertook to include an accounting policy for partner liabilities in its next accounts. We also requested an explanation for the movement in current other payables and accruals which the company provided. Provisions We sought further information about the company’s provisions and the accounting for claims covered by insurance. The company confirmed that there were no claims which required provisioning or disclosure and also committed to review its policy for provisions in its next accounts. Dividend liability We asked the company to explain the basis for recognising a liability for interim dividends declared but not paid. The company acknowledged that no legal or constructive obligation existed at year end to support recognition of the liability. The company undertook to change its policy for interim dividends, so that they are recognised when paid rather than declared, and to derecognise retrospectively the interim dividend accrued in 2021 of £1.8m, in its2022 consolidated and parent company 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. |
| Entity | Galliford Try Holdings plc |
| Balance Sheet Date | 30 June 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Revenue - contract modifications We asked for more details of the accounting policy for the recognition of revenue arising from contract modifications. The company provided the information requested and agreed to clarify the accounting policy for contract modifications in its 2022 accounts. PPP and other investments – debt instruments We asked whether a lifetime expected credit loss (‘ECL’) allowance had been recognised for these debt instruments. The company explained that the amount of the ECL had been assessed to be minimal and agreed to clarify this in its future disclosures. We noted that the accounting policy for the recognition of an expected credit loss allowance should be disclosed if the amounts of these debt instruments continue to be significant in future. Taxation We sought an explanation of the material reconciling items included in the reconciliation of the tax charge included in the accounts. The company provided a satisfactory response and agreed to include additional explanatory disclosure in its 2022 accounts, both in respect of 2021 and, if relevant, 2022. We also asked the company to explain how the commentary on the effective tax rate in the financial review is consistent with the tax reconciliation included in the accounts. The company provided a satisfactory explanation and agreed to improve the clarity of the disclosure in the financial review in future. |