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 | Supply@ME Capital Plc |
|---|---|
| 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 |
Accounting for an inventory monetisation transaction We observed that the company had claimed in various regulatory documents that it provided a platform for client companies (“clients”) to generate cashflows via a non-credit approach and without incurring debt. We questioned the basis on which this statement had been made as it was not clear, based on other details the company had publicly disclosed, how such an outcome would be achieved by a client. Whilst the company attempted to explain the basis on which it had made the statement, we expressed reservations that the claimed accounting treatment for a client was appropriate when reporting under International Financial Reporting Standards. We did not pursue this matter further given that at the time of the enquiry, an inventory monetisation transaction had yet to be facilitated, but we were not persuaded by the company’s explanations. Revenue recognition We asked the company to explain how it had determined that it was appropriate to recognise revenue in the period for due diligence services provided to potential clients. We asked what the company’s performance obligations were in relation to these services and to clarify whether this revenue came from a contract with a related party. The company explained that it had concluded that the provision of due diligence services comprised a distinct performance obligation under IFRS 15 ‘Revenue from Contracts with Customers’, and that this provision resulted in a beneficial service to the prospective clients; it was on this basis that the revenue had been recognised. The company acknowledged that in reaching this conclusion it had made significant judgements and agreed to disclose these judgements in future annual reports. The company also clarified that the revenue was from a related party and would disclose this fact in future annual reports. Serious loss of capital We noted that the net assets of the company were less than half of its called-up shared capital which, under section 656 of the Companies Act 2006 (the “Act”), constitutes a serious loss of capital. We asked whether the company had called a general meeting, as required by the Act, to consider steps to deal with the situation. The company called such a meeting on 30 December 2021. Deferred taxation We questioned why a deferred tax asset had been recognised at 31 December 2020. The company explained that the asset arose from deferred revenue that had been recognised as a liability in the balance sheet which had not yet been taxed. The company agreed to provide the disclosures required by IAS 12 ‘Income Taxes’ in respect of such balances in future annual reports, and undertook to present deferred tax assets as non-current assets in the balance sheet. |
| Entity | The Renewables Infrastructure Group Limited |
| 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 | Tullow Oil plc |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | September 2022 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice | N/A |
| Entity | Union Arch Properties 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 |
Strategic report business review We challenged the company’s business review disclosures under s414C of the Companies Act 2006. We specifically questioned the lack of company-specific discussion of the development and performance of the business, and its position at the reporting date, and the extent to which the directors considered the business review to be ‘fair, balanced and comprehensive’. We also asked the company to provide an overview of the nature and number of investment properties and properties held for resale classified as stock in the balance sheet, together with an explanation as to why no changes in the respective carrying amounts had arisen in the year. The company provided the requested information and undertook to review the key performance indicators disclosed, and to provide more company-specific discussion of the nature and performance of the investment property and trading property portfolio in future strategic reports. We highlighted that the strategic report disclosure should be sufficient for a reader to be able to understand the basis for any movement (or lack of movement) in the property valuations in the period. Investment property We asked the company to clarify the accounting policy applied in relation to investment properties and whether their valuation is considered to be a key source of estimation uncertainty under paragraph 8.7 of FRS 102, ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’. We also asked the company to provide the valuation disclosures required by paragraph 16.10 of FRS 102 and Schedule 1 to Statutory Instrument 2008 No. 410, ‘The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008’, (‘SI 2008/410’). The company confirmed that investment properties are measured at fair value at each reporting date, as required by paragraph 16.7 of FRS 102, and that their valuation is considered to be a key source of estimation uncertainty. The company agreed to include the required disclosures in future financial statements. We also asked the company to disclose information in relation to leases entered into, as required by paragraph 20.30 of FRS 102, and to include an accounting policy in respect of lease income, in future financial statements, which the company committed to do. Deferred tax We requested more information on the nature and calculation of the company’s deferred tax liability. The company explained that this relates to fair value adjustments on properties held for resale acquired in past business combinations, classified as stock, and satisfactorily explained the basis of calculation of the deferred tax liability. The company undertook to clarify the related disclosures in future financial statements in this respect. Borrowings We asked the company to provide the total carrying amount of inventories (stock) pledged as security for liabilities as required to be disclosed under paragraph 13.22(e) of FRS 102, as well as the disclosures in relation to the terms of borrowings required under section 11 of FRS 102 and Schedule 1 to SI 2008/410. The company provided these disclosures and agreed to include them in future financial statements, to the extent they are material. |
| Entity | Victoria PLC |
| Balance Sheet Date | 3 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 |
Share buy-back The accounts disclosed that during the year a share buy-back took place. The parent company’s last audited accounts showed accumulated losses, in which case the Companies Act 2006 requires interim accounts to be delivered to the Registrar of Companies before a distribution is made. We noted that the interim accounts were included on the Companies House record for the parent company after the date of the share buy-back. In view of this, we asked for details of how the company had complied with the requirements of the Companies Act 2006. The company explained that it had delivered interim accounts before the share buy-back but that Companies House did not initially accept the document as the Registrar had not been able to capture an electronic image of acceptable quality. As the interim accounts were not accepted by Companies House until after the date of the share buyback, the company agreed to obtain legal advice regarding the lawfulness of the share buy-back. As this is a primarily a legal matter, on which the company agreed to obtain legal advice, we closed our enquiry. |
| 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 |