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 Supervision Committee’s Operating Procedures, 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 | Whitbread PLC |
|---|---|
| Balance Sheet Date | 25 February 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | March 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Workspace Group PLC |
| Balance Sheet Date | 31 March 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | March 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | WPP plc |
| Balance Sheet Date | 31 December 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Revenue recognition We asked the company why volume rebates received from suppliers for transactions entered into on behalf of clients are recognised as revenue in cases where the rebates are retained by the Group. The company explained that this treatment is adopted only when it is acting as agent; where it acts as principal, the rebates reduce the associated cost line. Investments in associates We requested an explanation of the way in which the group’s share of other comprehensive income from associates had been recorded in the consolidated financial statements. The company clarified that the group’s share of other comprehensive income from associates had been recognised in the consolidated statement of comprehensive income within ‘Exchange adjustments on foreign currency net investments’. The company undertook to separately disclose its share of other comprehensive income from associate undertakings in both the statement of comprehensive income and the note to the accounts that reconciles the opening and closing carrying values of interests in associates in its 2021 financial statements. Consolidated statement of changes in equity We questioned the nature of, and the accounting policy applied to, the transactions giving rise to the credit entry recorded directly in reserves described as ‘recognition/remeasurement of financial instruments’. The company noted that the transactions related to the recognition and derecognition of non-controlling interest put option agreement liabilities that arose in acquisitions and provided a satisfactory explanation of the accounting applied to the transaction. The company agreed to clarify the accounting policy in this area and to amend the description in the consolidated statement of changes in equity to ‘Recognition/derecognition of liabilities in respect of put options’. |
| Entity | Zotefoams plc |
| Balance Sheet Date | 30 June 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | March 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | AB Dynamics plc (3) |
| Balance Sheet Date | 31 August 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | December 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Inventory write-down We requested further information about the write-down of inventories in the year including the specific circumstances giving rise to this adjustment. To the extent the write-down related to inventory brought forward from the prior year, we asked for the rationale for treating the adjustment as a change in accounting estimate rather than a prior period error in accordance with IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’. We were satisfied by the company’s response. Acquisition of DRI In relation to the acquisition of Dynamic Research Incorporated (“DRI”) in 2019, we sought an explanation for the adjustment to the provisional fair value of goodwill following finalisation of the deferred tax position. We were satisfied with the company’s explanation and its undertaking to disclose, in the 2021 accounts, why no deferred tax liability arose on the assets acquired. Impairment testing of goodwill We asked the company to explain how the pre-tax discount of 6%, used to determine the value in use of the principal cash generating units, was calculated, including how it was derived from the company’s post-tax weighted average cost of capital, which was also 6%. The company provided the information requested, indicating in its response that there had been no adjustment to the post-tax weighted average cost of capital to reflect a pre-tax rate. In this instance, we considered that this issue was unlikely to have a significant impact on the company’s accounts. In closing the matter, we requested that the company apply paragraph A20 of IAS 36 ‘Impairment of Assets’ in the future, which states that when the basis used to estimate the discount rate is post-tax, that basis is adjusted to reflect a pre-tax rate. Policy for leases We asked the company to describe its accounting policy for leases which it provided together with an undertaking to disclose the policy in its next accounts. Short term deposits We queried whether the maturity threshold of short-term deposits included in cash and cash equivalents related to three months or less remaining from the date of acquisition or the reporting date and, where relevant, requested details of those deposits with a maturity greater than three months from the date of acquisition. The company clarified that short term deposits included an amount of £5m with a maturity date of more than three months from the date of acquisition. As, on reflection, the company did not consider the £5m deposit to meet the definition of cash equivalents in paragraph 7 of IAS 7 ‘Statement of Cash Flows’, it undertook to reclassify retrospectively those deposits from cash and cash equivalents to short term investments in its 2021 accounts. Other finance expense We asked for an explanation of other finance expense of £0.6m included in the consolidated statement of comprehensive income. The company provided the information requested and undertook to make clear the nature of this expense in the comparative information to the 2021 accounts. |
| Entity | A.G. Barr P.L.C. |
| Balance Sheet Date | 31 January 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | December 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Alliance Pharma plc |
| Balance Sheet Date | 31 December 2020 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | December 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Allianz Technology Trust Plc |
| Balance Sheet Date | 31 December 2020 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | December 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Anglo-Eastern Plantations Plc |
| Balance Sheet Date | 30 June 2020 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | December 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Ascential plc |
| Balance Sheet Date | 31 December 2020 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | December 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Avon Protection plc |
| Balance Sheet Date | 30 September 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | December 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Explanations for using alternative performance measures ‘APMs’ We noted an apparent inconsistency between references to non-adjusted measures in the segment reporting accounting policy and adjusted profit measures used for internal reporting. We asked for clarification of the metrics used internally by the Directors and Group Executive team to measure and manage the business. The company acknowledged the apparent inconsistency and clarified that adjusted measures are used to manage and assess the performance of operating segments. The company agreed to enhance both the segment reporting accounting policy and operating segments note in future annual reports and accounts. APM Reconciliations We commented on the lack of reconciliations for organic cash conversion and return on capital employed (‘ROCE’) to amounts presented in the financial statements. We also highlighted that explanations had not been provided for the adjustments to profit detailed in the financial review. We asked how the directors had satisfied themselves that they had complied with the guidance in paragraphs 26 and 28 of the ESMA Guidelines1. The company agreed to include reconciliations for organic cash conversion and ROCE to the financial statements and explanations for items excluded from adjusted operating profit in future annual reports and accounts. The company undertook that additional disclosures in respect of adjustments to reported measures would similarly be provided. The company’s response detailed misstatements in the reported FY20 ROCE metric. The directors did not consider the misstatements to be material. The company committed to disclosing the corrected FY20 ROCE in future annual reports and accounts. Classification of revolving credit facility as a current liability We asked for more information about the classification of an amount of £31.0m presented as a current liability which appeared to relate to the company’s revolving credit facility. The company confirmed that the balance had been correctly classified as current since, at the balance sheet date, it expected to repay the £31.0m drawing on the revolving credit facility in less than twelve months. 1 https://www.esma.europa.eu/sites/default/files/library /2015/10/2015 -esma-1415en.pdf |
| Entity | Bakkavor Group Plc |
| Balance Sheet Date | 31 December 2020 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | December 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Balfour Beatty plc |
| Balance Sheet Date | 31 December 2020 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | December 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Barclays PLC |
| Balance Sheet Date | 31 December 2020 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | December 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Big Yellow Group PLC |
| Balance Sheet Date | 31 March 2021 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | December 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |