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 | J D Wetherspoon plc |
|---|---|
| Balance Sheet Date | 25 July 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 | LondonMetric Property 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 | Mediclinic International plc |
| Balance Sheet Date | 31 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 |
Defined benefit pension schemes We asked the company for more information on the basis of recognition of a defined benefit pension scheme surplus in relation to certain of its Swiss pension schemes under IFRIC Interpretation 14, ‘IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction’. The company satisfactorily explained that the recoverability of the surplus was assessed by reference to the present value of economic benefits available from reductions in future contributions, having taken into account the minimum funding requirements under Swiss pension law. The company undertook to update its accounting policy wording in relation to unrecognised actuarial gains and losses and past service costs for consistency with the current version of IAS 19, ‘Employee Benefits’. Tariff risk provisions and variable consideration accruals We asked the company to explain the classification of tariff adjustments as provisions rather than contract liabilities in the balance sheet, and for more information on contract liabilities in relation to variable consideration included in other payables and accrued expenses. The company satisfactorily explained that the tariff risk provision comprises variable consideration refund liabilities in respect of its Swiss operations. Due to the particular level of estimation uncertainty as regards timing and/or amount, it has judged that presentation within provisions is appropriate although the provision is outside the scope of IAS 37, ‘Provisions, Contingent Liabilities and Contingent Assets’. The company undertook to clarify the refund liability nature of the tariff risk provision in future financial statements. The company also undertook to disclose additional information in future financial statements, to the extent material, in relation to the separate amount of variable consideration refund liabilities included in other payables and accrued expenses. Alternative performance measures (‘APMs’) We questioned various aspects of the company’s disclosure of APMs in accordance with the European Securities and Markets Authority (‘ESMA’) ‘Guidelines on Alternative Performance Measures’, including labelling, consistency, reconciliations, and prominence. The company undertook to consider the recommendations of the FRC Thematic Review on APMs, published in October 2021, in preparing its 2022 annual report. The company agreed to include the reconciliations of APMs to IFRS measures, previously presented in the company’s separate results announcements, in future annual reports and to include the tax effect of adjustments made to IFRS profit in the reconciliations. The company also undertook to label and define APMs more clearly, to provide an explanation of the basis of calculation of constant currency measures, and to present comparable statutory measures for each APM. |
| Entity | Monzo Bank Limited |
| Balance Sheet Date | 28 February 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Interest income in respect of personal loans We asked the company to explain an inconsistency between the auditor’s report, which stated that interest income in respect of personal loans was determined using a simple interest rate method, and the accounting policy, which stated an effective interest rate (‘EIR’) method was used. Paragraph 5.4.1 of IFRS 9 ‘Financial Instruments’ requires interest income to be calculated using the EIR method. The company explained that interest income in respect of personal loans is determined using the simple interest rate method as a proxy for the EIR method given the business does not charge fees, premiums or apply discounts to their products. The company has assessed that the difference between the two methods is immaterial as the lack of fees does not cause the two methods to deviate when applying either a contractual or expected life. Going forward, we would expect this assessment to be repeated each year until such time as the company adopts an effective interest rate model. |
| Entity | Mulberry Group plc |
| Balance Sheet Date | 27 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 |
Leases The company’s accounting policy in relation to its leases assumed that in the event that leases include a break clause, it will be exercised at the first available opportunity. We asked the company to explain whether this assumption was consistent with the requirements of IFRS 16 ‘Leases’, whereby the exercise of a break option should be assumed only if it is considered to be reasonably certain. The company provided a satisfactory explanation and agreed to clarify, in its 2022 accounts, that the leases with a break clause would be evaluated on a case-by-case basis. The company agreed to enhance the disclosure of potential future cash outflows arising from break clauses. The company also undertook to improve its disclosure of the treatment of lease extensions in determining the forecast period when calculating value-in-use for the right-of-use assets cash generating units. We also asked the company for a reconciliation of the movements in the lease liabilities. The company provided this analysis and undertook to enhance the disclosure by separately disclosing material components, such as disposals and rent concessions. |
| Entity | Murray Income Trust PLC (3) |
| Balance Sheet Date | 30 June 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Classification of cash inflow in relation to asset purchase We questioned the company’s classification of a cash inflow of £40,248,000 associated with the acquisition of a pool of investment assets, satisfied by the issue of shares and assumption of debt, as an investing cash flow in the Statement of Cash Flows. As the transaction was not accounted for as a business combination, this cash inflow did not meet the definition of investing activities set out in paragraph 7.5(c) of FRS 102, ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’. The company undertook to restate the comparatives to the Statement of Cash Flows for the period ending 30 June 2022 to reclassify the cash inflow associated with the transaction as a financing inflow, in accordance with paragraph 7.6 of FRS 102. As the restatement 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 | N Brown Group plc |
| Balance Sheet Date | 27 February 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Securitisation of trade receivables We asked for details of the specific factors relevant to the conclusion that the company has control over the securitisation trust to support the consolidation of the securitisation trust under IFRS 10 ‘Consolidated Financial Statements’. The company’s response satisfactorily addressed the question we had raised and included a commitment to enhance its accounting policy to explain how the securitisation trust meets the requirement for consolidation under IFRS 10 in future annual reports. Parent company accounts: impairment of investment in subsidiaries We asked for further details of the impairment review undertaken in accordance with IAS 36 ‘Impairment of Assets’ to support the carrying value of investments in subsidiaries in the parent company accounts. The company clarified that the valuation in use calculation used for the Group impairment review also supports the carrying value of investments in subsidiaries in the parent company accounts. The company agreed to make this clearer within the parent company financial statement disclosures in future annual reports. Expected credit losses We asked for further details about post model adjustments that are made by management in the calculation of expected credit loss provisions. The company provided the information requested and agreed to include clearer disclosures of the nature and amount of post model adjustments, including details of inputs, assumptions and estimation techniques, in future annual reports if such adjustments are required. |
| Entity | NEXT plc (3) |
| Balance Sheet Date | 30 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 |
Cash flow statement The Chief Executive’s review disclosed that, during the year, a gain was recognised on sale and leaseback transactions in relation to the ‘portion’ of the assets that were not leased back and which were, in effect, disposed of. In view of this, we questioned why all the proceeds from sale and leaseback transactions were classified as financing activities in the cash flow statement. The company acknowledged that the proceeds from the sale of the portion of assets that were not leased back should have been classified as investing activities in the cash flow statement included in its 2021 accounts. While the company did not consider this to be material to its 2021 report and accounts, it considered it appropriate to restate the comparatives in its next report and accounts to reflect the requirements of IAS 7, ‘Statement of Cash Flows’, and to be consistent with the presentation of any subsequent sale and leaseback transactions. The company agreed to provide an explanation of the change in accordance with the requirements of IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’. As the restatement 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. |
| Entity | Ninety One Plc |
| Balance Sheet Date | 31 March 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 | Oxford Biomedica plc (3) |
| Balance Sheet Date | 31 December 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Revenue recognition We asked the company to describe its accounting policy for the capacity reservation fee referred to in its strategic report. The company provided this information and undertook to disclose the policy in its future accounts. We noted an inconsistency in amounts disclosed for contract assets between the disclosures about critical judgements and estimates, and the trade and other receivables note to the accounts. The company explained the inconsistency and undertook to improve the clarity of its disclosures in this area in future accounts. Operating EBITDA We requested further information about certain items in the reconciliation of operating EBITDA to operating loss as we were unable to trace these items to figures disclosed elsewhere in the accounts. The company provided the information requested and undertook to ensure, in future annual reports, that figures reported in the finance review could be agreed to amounts in the notes to the accounts. The company also undertook to amend its definition of operating EBITDA to make clear that this measure excluded share-based payment charges, except those charges deemed to be “cash related”. In closing this matter, we observed that we expected the disclosures to make clear the basis on which the company considered certain share-based payment charges to be cash-related items, and thus included in operating EBITDA. Taxation We sought an explanation for the movement in current tax assets as this was not clear from the accounts. The company provided the explanation requested, which prompted a follow-up question on the composition of the other tax receivable balance included within trade and other receivables. The company acknowledged that it had offset VAT payable against the other tax receivable balance and undertook to ensure such balances were appropriately classified as liabilities within trade and other payables in future accounts. As the company did not consider the misclassification of VAT payable to be material we did not consider it proportionate to pursue the matter further. Company cash flow statement We questioned why cash flows from a loan to subsidiary were classified as arising from financing, rather than investing, activities in the parent company’s cash flow statement. The company acknowledged that the amount should have been classified as an investing cash flow and undertook to correct this in its 2021 report and accounts, and to restate the comparatives. 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 | Purplebricks Group plc |
| Balance Sheet Date | 30 April 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Receivables factoring arrangement We asked for information about the company’s factoring of customer receivables, including the facilities committed and utilised, changes in fee rates and the treatment of receipts in the cash flow statement. The company provided the information requested and agreed to enhance its disclosures about the arrangement in future annual reports and accounts. Investment in associate We asked the company to explain its reclassification of an investment from joint venture to associate, and to provide its calculations of the changes both in the carrying amount, arising on additional investments by the other investor, and in the share of gains and losses recognised by the company. We also sought clarification of the basis on which the adjustments arising on reclassification had been recognised prospectively. The company provided us with satisfactory responses. |
| Entity | RBG Holdings plc |
| Balance Sheet Date | 31 December 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Accounting policy for legal claims against the company We questioned whether the company’s accounting policy for provisions was consistent with IAS 37, ‘Provisions, Contingent Liabilities and Contingent Assets’, because it implied that provisions for legal claims are offset against any expected insurance reimbursements. We also asked it to provide details of material legal claims, before considering any insurance reimbursements. The company explained that they did not believe that there were any material legal claims requiring recognition of a provision under IAS 37, and considered the prospect of any material settlement in respect of legal claims remote. They acknowledged that their disclosed accounting policy was not correct and agreed to revise it in future accounts to clarify that any liability and reimbursement asset are shown separately on the balance sheet. Impact of an historical business combination on the company’s provisions and related disclosures We closed our enquiry after the company explained that the acquisition specifically excluded assets and liabilities associated with the customer. |
| Entity | R.E.A. Holdings plc (3) |
| Balance Sheet Date | 31 December 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Inconsistencies in reported amounts in total comprehensive income We asked the company to explain several inconsistencies between certain amounts recognised in total comprehensive income and those disclosed elsewhere in the primary statements or in the notes. The company acknowledged that there were errors in the amounts presented for: the tax credit in the income statement; deferred tax, actuarial gains/losses and foreign exchange in the statement of other comprehensive income; and equity attributable to non-controlling interests. The company agreed to restate the comparatives in its next annual report and accounts. As the restatements affected primary statements, we asked the company to disclose the fact that the matter had come to its attention as a result of our enquiry. Disclosure of covenants Although the company had disclosed the breach, and subsequent waiver of the breach, of certain loan covenants, it had not provided any explanation of the covenant terms or quantification of the headroom thresholds that were breached. The company agreed to our request that it should disclose more information about its loan covenant arrangements in future if there are instances of breaches or potential breaches of covenant terms. Obligations from tax disputes We asked the company to clarify the potential obligations to which it was exposed as a result of its ongoing tax disputes and how the obligations were reflected in the annual accounts. The company provided further explanation of the obligations and their accounting treatment, and agreed to provide clearer disclosures and quantification of the amounts in its 2021 annual report and accounts. Advance payment of taxation We requested further information about the balance reported as ‘Advance payment of taxation’ within trade and other receivables. The company provided further analysis of the balance and agreed to present the amount of the balance that related to corporate income tax as a separate line item in the balance sheet in the 2021 annual report, as required by IAS 1, ‘Presentation of Financial Statements’. It will also provide a clearer description of the amount remaining within trade and other receivables. Capitalisation of administrative expenses We asked for information about the type of costs that were included in the amounts described as capitalised from administrative expenses and how they met the criteria for capitalisation in accordance with IAS 16, ‘Property, plant and equipment’. The company satisfactorily explained that the costs involved were directly related to the supervision of its plantations and that the amount capitalised represented the proportion of those costs relating to its immature palm oil plantings. |
| Entity | Revolution Bars Group Plc |
| Balance Sheet Date | 3 July 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Exceptional items We asked the company to explain why exceptional gains arising from a number of lease surrenders were treated as finance exceptionals in FY20 and as operating exceptionals in FY21. The company explained the differing circumstances for the inconsistent presentation. While we were not fully persuaded by the company’s arguments, we did not consider it proportionate to pursue this matter further since the company envisages that future gains and losses will be presented in operating exceptionals. Carrying value of property, plant and equipment and right of use assets We sought to understand better why management had included revenue uplifts for refurbishments yet to be completed within the cash flows used to determine the value in use of a cash generating unit. We also queried the apparent inconsistency between the five-year refurbishment cycle referred to in the impairment disclosures and the useful economic lives over which short leasehold premises and improvements are depreciated. Management provided a satisfactory explanation and undertook to improve relevant disclosures in their FY22 accounts. Supplier rebates The narrative within the Audit Committee Report and the Audit Report suggested that the measurement of supplier rebates may be an area involving significant estimation uncertainty. We asked the company to explain whether significant estimation uncertainty arose in respect of the measurement of supplier rebates as no IAS 1 ‘Presentation of Financial Statements’ disclosures were provided in respect of them. The company provided a satisfactory explanation as to why the measurement of supplier rebates did not involve significant estimation uncertainty and undertook to explain or remove the inconsistency in this area. |
| Entity | Schroder Asia Pacific Fund Plc |
| Balance Sheet Date | 30 September 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 |