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 | Kier Group plc (3) |
|---|---|
| Balance Sheet Date | 30 June 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | December 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Cash flow statement We questioned why loan repayments from joint ventures were classified as financing, rather than investing, activities in the consolidated cash flow statement. The company acknowledged that this was incorrect and agreed to correct this in its next 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 result of our enquiry. Deferred taxation We asked for more information on the nature of the evidence supporting the recognition of the deferred tax asset included in the accounts and the basis on which the company determined that the disclosures complied with the requirements of IAS 12 ‘Income Taxes’. The company provided the information requested. It agreed to enhance the disclosures in its future reporting,including disclosure of the period over which the deferred tax asset is expected to be utilised, the forecasts used, and the methodology applied. We suggested that it would be helpful to disclose details of the sensitivity analysis performed. We also enquired about the company’s disclosures of estimation uncertainty relating to deferred taxation under IAS 1 'Presentation of Financial Statements'. The company explained that its disclosures of estimation uncertainty in relation to deferred taxation were not required by IAS 1. It agreed to clearly distinguish additional voluntary disclosures from those made to satisfy the requirements of IAS 1, paragraph 125 in its future reporting. Free cash flow and movements in net debt We asked for more information about the measures of free cash flow and movements in net debt included as alternative performance measures (APMs). We asked the company to explain how it concluded that the reconciliations, labelling and commentary on these measures were in line with the requirements of the ESMA Guidelines on APMs. We also asked whether the strategic report should have included more details about the Group’s cash flow performance. The company provided the information requested and agreed to provide clearer, more granular, reconciliations and labelling, and enhanced commentary on these APMs in its future reporting. The company also acknowledged that the commentary provided on cash flow performance in the strategic report could have been clearer. It agreed to provide a more comprehensive commentary in future reports. |
| Entity | Kingfisher plc |
| Balance Sheet Date | 28 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 | Linklaters LLP |
| Balance Sheet Date | 30 April 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 | Lookers 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 | Macfarlane 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 | Man Group 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 | Marston’s PLC |
| Balance Sheet Date | 31 December 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | December 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Debt covenants We asked the company to provide more information about the covenants attaching to certain borrowings, which had been waived or amended in the period under review. The company satisfactorily responded to our query. It agreed to disclose the nature of its financial covenants and the extent of headroom available in its future annual reports and accounts for any period in which there is a material uncertainty as to going concern or where significant judgement has been exercised in determining that no material uncertainty exists. Fair value measurement of land and buildings We challenged the company’s classification of the fair value measurement of its pub estate in Level 2 of the hierarchy set out in IFRS 13 ‘Fair Value Measurement’. We noted that ‘fair maintainable trade’ (‘FMT’), an unobservable input into the fair valuation calculation, appeared significant to the overall measurement. IFRS 13 states that the lowest-level input that is significant to the entire measurement determines the level of that measurement in the hierarchy. The company agreed to adopt Level 3 classification and to provide the relevant additional disclosures required by IFRS 13, paragraph 93, in its future annual reports and accounts. Impairment testing and value in use estimation We sought an explanation for the significant increase in the discount rate used for testing goodwill for impairment. The company provided a satisfactory response and agreed to include explanatory disclosure in the future, were there to be a significant movement in the discount rate used in an impairment review. We asked the company for further details about the key assumptions used in its ‘value in use’ impairment calculations, the sensitivity of carrying amounts to changes those assumptions and the carrying amount calculated for the ‘Pubs and Bars’ segment. We considered the information and explanations the company provided. We observed that, where estimation uncertainty over key assumptions used in asset-by-asset assessments (individually immaterial) carries significant risk of resulting in a material adjustment on an aggregated basis, we expect future disclosures of estimation uncertainty to reflect this. Impairment of financial assets in the parent company accounts We sought clarification of disclosures in the parent company accounts relating to subordinated intercompany loan notes. The company acknowledged that an amount disclosed as ‘accumulated impairment losses’ included the effect of discounting at the original effective interest rate. It agreed to distinguish that element from impairment losses in its future annual reports and accounts. The company also agreed to disclose details of the estimation uncertainty relating to impairment of this asset. Depreciation of effective freehold land and buildings We asked the company to explain its calculation of depreciation on effective freehold land and buildings. The company provided details of the charge on non-pub properties and explained that the pub estate is considered to have a residual value equal to its carrying amount (hence no depreciation). We encouraged the company to include disclosure of that assumption to aid users’ understanding of the accounting treatment. Cash flows from operating activities In response to our enquiry, the company agreed to present the net cash flow from operating activities starting from an IFRS measure of profit or loss in its future financial statements. Deferred tax We asked for further information about the recognition of deferred tax assets and liabilities and the calculation of deferred tax movements on the revaluation of properties. We considered the information and explanations provided. The company agreed to disclose the evidence supporting the recognition of deferred tax assets in its future accounts. We also observed that we expect to see relevant disclosure where management exercises significant judgement in forecasting taxable profitability when assessing the utilisation of tax losses. |
| Entity | Melrose Industries 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 | Midwich 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 | Morgan Advanced Materials 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 | M.P. Evans 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 | Naked Wines plc |
| Balance Sheet Date | 29 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 |
| Entity | Natwest Group 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 | Neptune Group Midco Limited |
| 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 | Network International Holdings 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 |