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 | Genel Energy plc |
|---|---|
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | September 2022 |
| Auditor (5) | BDO LLP |
| Case Summary / Press Notice | N/A |
| Entity | Hollywood Bowl Group 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 |
Rent concessions We asked the company to clarify how rent concessions were reflected within the consolidated cash flow statement. The company acknowledged that it reduced financing cash flows for the forgiveness of rent, instead of adjusting the operating cash flows to remove the effect of this non-cash item. The company agreed to restate the comparatives in its next 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. Provision for dilapidation costs We questioned whether provision for dilapidation costs is recognised for properties covered by the Landlord and Tenant Act 1985 (‘LTA’). The company explained that for these properties, where it neither anticipates or intends exiting the lease, the circumstances in which the lease would end mean that an outflow of resources is not considered probable. We encouraged the company to disclose this rationale in its future annual report and accounts. Parent company cash flow statement We questioned the parent company’s classification of a cash outflow arising from amounts distributed to group companies to settle the group’s borrowing facilities as an operating cash flow within the statement of cash flows. The company acknowledged that the amount should have been classified as a financing cash flow representing movement in finance related amounts owed by, and to, group companies. The company undertook to restate the comparatives in its 2022 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. |
| Entity | Howden Joinery Group Plc |
| Balance Sheet Date | 25 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 | Joules Group plc |
| Balance Sheet Date | 31 May 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Contingent consideration We asked the company whether any amount of the contingent consideration payable in respect of the acquisition of The Garden Trading Company Limited is dependent on that entity’s founder and managing director being employed by the company until 31 December 2021. The company confirmed that the contingent consideration is not dependent on continuing employment, which addressed our concern that some of the consideration should have been treated as employee expense rather than as an adjustment to goodwill. Impairment testing of goodwill We queried whether a goodwill impairment test was performed at 31 May 2021 and why certain of the relevant IAS 36 ‘Impairment of Assets’ disclosures were not given. The company confirmed that such a test was performed and that it would provide the disclosures in future accounts. Tax We asked the company for further information about tax adjustments in respect of prior periods presented in the income tax note. The company explained that the line-item ‘Deferred tax on share-based compensation’ should have read ‘Adjustment in respect of prior periods’ and agreed to amend this in its 2022 accounts. We also asked the company to explain the types of temporary difference included within ‘short-term timing differences’ and ‘other timing differences’ in the analysis of the deferred tax balance, as well as a reconciliation of the amounts credited or charged to the income statement for each type of temporary difference to the line items in the tax charge. The company clarified the nature of the temporary differences and provided a revised version of the 2021 deferred tax note which presents separately the prior year restatement, and the amounts credited or charged to the income statement in respect of prior periods and the current year. The company will use this format in future accounts. |
| Entity | Lion/Heaven UK Limited |
| Balance Sheet Date | 30 January 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Balance sheet date 31 January 2021 Income taxes We asked the company for a breakdown of certain reconciling items included in the tax rate reconciliation. The company provided this information and agreed to enhance its income tax disclosures in its future annual report and accounts by including descriptions or labels that clearly describe the nature of any material tax reconciling items. The company also agreed to consider disaggregating these items going forward and to reanalyse the comparative amounts to provide more granular disclosure in its next annual report and accounts. Recoverability of investments in subsidiaries and amounts owed by subsidiaries We requested clarification of whether investments in subsidiary undertakings and non-current amounts owed by subsidiary undertakings were assessed for impairment during the year. The company responded to this enquiry satisfactorily and undertook to update its accounting policies in future reporting periods to assess amounts owed by subsidiary undertakings for impairment under the general approach in IFRS 9 ‘Financial Instruments’ as opposed to the simplified approach. Goodwill impairment assessment The annual report and accounts did not disclose the carrying amount of goodwill allocated to each cash generating unit (‘CGU’). We asked the company to explain how it had performed this allocation for the purposes of impairment testing and to provide the carrying amount allocated to each CGU. The company explained the judgements it had made in determining that it had only one CGU and undertook to disclose the CGU determination in its next annual report and accounts. |
| Entity | Liontrust Asset Management 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 |
Accounting for share based payments We asked the company to clarify some of the amounts recognised in the financial statements relating to share based payments as it was not clear from the disclosures how the amounts had arisen. We also asked for an explanation as to how the company accounted for such payments. The company provided satisfactory explanations and undertook to enhance its disclosures of share-based payments in future annual reports. As a result of our review, the company identified that it had incorrectly classified some amounts in the Consolidated Statement of Comprehensive Income, the Consolidated Cash Flow Statement and the Consolidated Statement of Changes in Equity. The company concluded that these misclassifications did not have a material impact on the financial statements and undertook to ensure that amounts were correctly classified in future financial statements. |
| Entity | Melrose Industries 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 | Mitchells & Butlers plc |
| Balance Sheet Date | 25 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 |
Revaluation policy We queried whether the reversal of past revaluation deficits recognised in the income statement during the year related to the same individual assets that gave rise to the original impairment. The company confirmed that the reversals were against the individual assets that gave rise to the initial impairment in line with the requirements of paragraph 39 of IAS 16, ‘Property, Plant and Equipment.’ The company agreed to review their disclosures and provide further explanation, where relevant, in their 2022 annual report and accounts. |
| Entity | Mode Global Holdings Plc (3) |
| Balance Sheet Date | 31 December 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Convertible loan notes We asked the company for further information about why the initial $USD consideration for the convertible loan notes had been allocated to both liability and equity components, as we would not expect a convertible bond denominated in a foreign currency to have an equity component. We also questioned why a gain was recognised on the settlement of the convertible loan notes. The company provided an explanation of the terms of the convertible loan notes and stated that following further review of the matter the company had determined that the convertible loan notes should have been recognised as a liability in full, with no gain recognised on settlement. The company agreed to restate the comparative period in its 2021 Annual Report and Accounts for this error. 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 | Mondi plc |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | September 2022 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice | N/A |
| Entity | Numis Corporation 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 | On the Beach Group plc (3) |
| 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 |
Disclosure of engagement with regulators We questioned the disclosure in the Audit Committee Report that referred to an FRC Corporate Reporting Review (CRR) team review of the 2020 Annual Report. The company confirmed that its correspondence with the FRC in the year ended 30 September 2021 in fact related to a review of the company’s 2020 audit by the FRC’s Audit Quality Review (AQR) team. We also drew the company’s attention to the FRC Guidance on Audit Committees, which states that when disclosing the fact that a company’s audit has been reviewed by the AQR team, companies should not disclose the audit quality category. The company undertook to publish a correction its 2022 Annual Report to clarify the nature of its correspondence with the FRC in the year ended 30 September 2021 and to confirm that the CRR team did not make any assessment as to the quality of the disclosures given in the 2020 Annual Report and Accounts. Deferred tax asset classification and disclosure We challenged the classification of a material net deferred tax asset as a current asset in the balance sheet. The company undertook to restate the comparative balance sheet in its 2022 Annual Report and Accounts, to present deferred tax as non-current, as required by paragraph 56 of IAS 1, ‘Presentation of Financial Statements’. The company agreed to disclose the fact that the matter had come to its attention as a result of our enquiry. We asked the company to provide more information on the nature of the evidence supporting the recognition of a net deferred tax asset, given that the company suffered a loss in both the current and preceding financial years. The company satisfactorily responded to our enquiries and, should the balance remain material, we encouraged the inclusion of more company-specific disclosure in future reporting, in accordance with the 2019 ESMA public statement ‘Considerations on recognition of deferred tax assets arising from the carry-forward of unused tax losses’. We also enquired whether the company considered the measurement of the deferred tax asset to be a major source of estimation uncertainty that has a significant risk of resulting in a material adjustment within the next financial year, as set out in paragraph 125 of IAS 1. The company clarified that it did not consider there to be a significant risk of a material adjustment within the next financial year, and undertook to enhance its future disclosures under paragraph 122 of IAS 1 in relation to the critical judgements made in relation to the expected timing of recovery of the deferred tax asset. |
| Entity | Paragon Banking Group 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 | Reach plc |
| Balance Sheet Date | 27 December 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | September 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Provision for historical legal issues We requested information about the method used to determine the amount recognised as a provision for historical legal issues as of 27 December 2020 and asked why a range of potential outcomes relating to the provision was not disclosed. The company provided information about the method used and agreed to make improvements to the disclosures for the provision for historical legal issues, which included a commitment to disclose a range of outcomes for the provision in its 2021 annual report and accounts. We asked for further information about the company’s measurement of, and the uncertainties affecting the provision as of 26 December 2021 as well as of 27 December 2020. The company provided satisfactory explanations, which included details about the assumptions and judgements made in determining the amounts recognised for the different parts of the provision between known claims, potential future claims and common court costs. In closing the matter, we acknowledged the improvements the company had made to the disclosures in 2021 and encouraged the company to continue to assess the level of disclosure required to explain the uncertainties, judgements and assumptions made which affect the provision and contingent liability at each reporting date and update the disclosure accordingly, to the extent that the matter remains relevant. |
| Entity | Spirax-Sarco Engineering 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 |
We asked the company to clarify its use of a cash flow forecasting period longer than five years for estimating the value in use of the Electric Thermal Solutions (‘ETS’) group of cash generating units. The company explained that it anticipated growth in the period to 2030 in excess of the long-run growth rate used to estimate a terminal value, attributable to demand for its products in customers’ publicised decarbonisation initiatives. Accordingly, a forecasting period to 2030 had been adopted in 2020 but inadvertently disclosed in 2021 as still covering ten years. The company agreed to enhance its disclosure of key assumptions to clarify both the link to decarbonisation commitments within the market in which ETS operates and the year-on-year reduction in the forecasting period. We also encouraged disclosure of the significance of the judgement made over the forecasting period and of management’s past experience of forecasting reliably over periods greater than five years.
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