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 | ICG Enterprise Trust Plc |
|---|---|
| Balance Sheet Date | 31 January 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 | Impax Environmental Markets plc |
| Balance Sheet Date | 31 December 2020 |
| 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 | Impellam Group plc |
| Balance Sheet Date | 1 January 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Non-recourse financing agreements We asked the company to provide further information about the nature of its non-recourse financing agreements and their terms conditions, and to explain how the resulting transactions had been accounted for and presented in the annual accounts. The company provided the information requested, explained the accounting and presentation, and agreed to clarify its disclosure of such arrangements in the 2021 annual report and accounts if applicable. Impairment testing In response to our query, the company confirmed that impairment tests had been performed at both the interim and year-end reporting dates. It confirmed that the tests had taken account of the indication of impairment provided by the company’s market capitalisation, clarified the basis on which the company’s Information Technology cash generating unit (CGU) had been impaired and explained the recoverable amount disclosed for the CGU. The company agreed to ensure that its future disclosures clarify the timing and impact of impairment tests where similar circumstances arise. Lease terms We requested an explanation of how the company’s approach to determining the lease term reflected the requirement of IFRS 16, ‘Leases’, to include periods covered by extension and termination options only when it is ‘reasonably certain’ that the option will, or will not, be exercised. The company clarified that, although its disclosures referred to the ‘expected’ lease term, it had applied the IFRS 16 requirement. It agreed to revise its disclosures in the 2021 annual report and accounts to refer to the ‘reasonably certain’ criterion. |
| Entity | Intermediate Capital Group plc (3) |
| Balance Sheet Date | 31 March 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Non-consolidation of carried interest partnerships Parent company accounts We asked for details about the line ‘Cash flow on behalf of subsidiary undertakings’ and the reasons for classifying these cash flows within investing activities in the parent company’s cash flow statement. We also asked for an explanation about the increase in investments in subsidiaries and how these were reported in the cash flow statement. The company explained that the line in question included cash outflows in respect of investment in subsidiaries. The line reported netted off aggregated cash flows of dissimilar nature and included some financing cash flows. The company agreed to disaggregate cash flows of a dissimilar nature, to ensure gross presentation, to reclassify items of a financing nature and to restate comparative period information as appropriate. In responding to our queries, the company also performed a review of intercompany receivables and identified that some amounts related to long-term investments. The company undertook to reclassify these balances from current to non-current assets and to restate comparative period information accordingly. Consolidated accounts We requested an explanation of the difference between the amounts in respect of the purchase of own shares reported in the statement of changes in equity (SOCE) and the consolidated cash flow statement. The company explained that the SOCE included an incorrect amount in respect of the shares retained by the employee benefit trust. The company agreed to restate the SOCE accordingly. As these restatements affected the primary statements, we asked the company to disclose the fact that the matters had come to its attention as a result of our enquiry. |
| Entity | Intermediate Capital Group plc (3) |
| Balance Sheet Date | 31 March 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | March 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
The following matters arose as a result our limited scope review of how the undertakings the company gave during our review of its 2020 annual report and accounts were addressed in its 2021 report and accounts. Prior year restatements We queried a number of significant prior-year restatements of the group and parent company cash flow statements, which were not explained in the notes to the financial statements. The company provided us with adequate explanations for the restatements and agreed to include the missing disclosures in the forthcoming interim financial statements. As the disclosures related to prior-year restatements of the primary statements, we asked the company to disclose the fact that the matters had come to its attention as a result of our enquiry. Other matters in relation to the cash flow statements We asked for reconciliations of a number of items in the parent company and group cash flow statements to the corresponding movements in the statements of financial position. This highlighted that the dividends declared by subsidiary undertakings were aggregated within ‘Net investment returns’ line, rather than reported in the ‘Interest and dividend income’ line. The company agreed to report such amounts separately in the future and to restate the comparative amounts accordingly. In closing the case we noted that we expect material non-cash movements in the parent company investments in subsidiaries to be disclosed in the future. We also explained that we expect the captions used for financial line items to reflect their contents and items of dissimilar nature to be disaggregated. |
| Entity | International Consolidated Airlines Group S.A. |
| Balance Sheet Date | 31 December 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | March 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
This company was selected as part of our thematic review of alternative performance measures (‘APMs’) and, as such, only these disclosures were reviewed. Exceptional items – tax The company’s accounting policy for exceptional items explained that exceptional items are those that require separate disclosure due to their size, nature or incidence. The policy included a list of examples of exceptional items, none of which related to tax. We asked the company to explain the extent to which it considered tax-related items when applying the accounting policy. We closed the matter after the company explained that its accounting policy for exceptional items applies to both tax and non-tax items. In closing the matter, we observed that, as the existing accounting policy is generic, it may be helpful if the company clarified that the policy applies to both tax and non-tax items. We also asked for the company’s basis for concluding that certain tax credits and charges disclosed in its IFRS accounts should not be classified as exceptional items. We were satisfied with the company’s response, which explained that gains or losses due to changes in tax rates were not classified as exceptional items because such changes occur on a regular basis. It also explained that a tax charge from the derecognition of deferred tax assets was not classified as an exceptional item in view of guidance in our 2020 Covid-19 thematic review, which discourages the arbitrary splitting of items between Covid-19 and non-Covid-19 elements, as such allocations are likely to be highly subjective and, therefore, unreliable. Tax repayment We asked the company to provide us with additional information to enable us to understand the nature of a tax repayment recognised during the year and the basis on which it had been included in the company’s alternative performance measures. The company explained that the tax repayment was recognised when it elected to partially carry back tax losses incurred during 2020 to the previous 12-month period, as allowed by the Corporation Tax Act 2010. We closed our query in view of the above guidance contained in our Covid-19 thematic review. |
| Entity | IP Group 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 |
Investment entity exemption We asked for an explanation of the basis on which the company determined it did not qualify for the investment entity exemption in IFRS 10 ‘Consolidated Financial Statements’. The company’s response satisfactorily addressed the question we had raised and included a commitment to provide specific disclosure about the assessment of the investment entity exemption in future annual reports to improve the clarity over the basis of preparation of the financial statements. Fair value measurement We asked for further information about the fair value measurements of unquoted equity investments categorised within ‘other valuation methods’ and the sensitivity of these measurements to changes in unobservable inputs. The company provided the information requested and agreed to expand and clarify the description of its valuation techniques and to more explicitly link those techniques to numerical analysis in future annual reports. It also agreed to further disaggregate the ‘other valuation methods’ category in the numerical analysis included in the notes to the financial statements. |
| Entity | JPMorgan European Discovery Trust 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 | Keller Group plc (3) |
| Balance Sheet Date | 31 December 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | March 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
This company was selected as part of our thematic review related to the application of IAS 37, ‘Provisions, Contingent Liabilities and Contingent Assets’; only the disclosures relating to those matters were reviewed. We sought further explanation of the company’s arrangements for insurance and self-insurance, in connection with its disclosure of ‘insurance and legal provisions’. The company provided a detailed response and acknowledged that it had presented these provisions net of insurance reimbursements which were virtually certain to be received. It also acknowledged that the reimbursement assets should have been presented separately, and agreed to restate the relevant balance sheet lines. 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. The company also agreed to ensure that the recognition criteria for these provisions are more clearly described in its future disclosures. |
| Entity | Lloyds Banking Group plc |
| Balance Sheet Date | 31 December 2020 |
| 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 | London Stock Exchange Group plc |
| Balance Sheet Date | 30 June 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Alternative performance measures We questioned the prominence given to alternative performance measures in the company’s interim report following material business combinations and divestments in the period. We asked the company to explain how it will ensure that the strategic report to be published in the 2021 annual report would be fair, balanced and comprehensive. The company explained the steps it will take to ensure this, which include providing detailed reconciliations from the statutory results to adjusted measures, making sure adjusted measures are appropriately labelled and ensuring that there is sufficient commentary on both the statutory and adjusted financial information. Valuation of shares As part of consideration for a business combination, the company issued unlisted, limited voting ordinary shares in addition to ordinary shares. We asked the company how it had valued the different shares issued. The company provided a satisfactory explanation and undertook to disclose the value of the shares issued, how the unlisted, limited-voting ordinary shares have been valued, and whether that determination required the exercise of significant judgement. |
| Entity | Loungers plc |
| Balance Sheet Date | 18 April 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 | Metro Bank Plc |
| Balance Sheet Date | 31 December 2020 |
| 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 | M&G 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 |
Fair value measurement of level 3 assets We asked the company for quantitative details of the significant unobservable inputs used to measure the fair value of assets held at level 3 in the fair value hierarchy. The company provided the information requested and agreed to enhance its disclosures in this respect in future annual reports and accounts. |
| Entity | Micro Focus International plc |
| Balance Sheet Date | 31 October 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | March 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
This company was selected as part of our thematic review of alternative performance measures (‘APMs’) and, as such, only these disclosures were reviewed. Tax relating to APMs We asked the company to explain its policy for classifying individual tax charges or credits as exceptional items. We also asked for its basis for concluding that certain tax credits and charges disclosed in its IFRS accounts should not be classified as exceptional items. We closed the matter after the company explained that its existing accounting policy for exceptional items applies to both tax and non-tax items. It explained that tax credits or charges arising from changes in statutory tax rates are not classified as exceptional items because such changes routinely occur in the ordinary course of its business. It also explained its rationale for adjusting a tax-related APM, presented in the previous year, for a deferred tax charge that had not been classified as an exceptional item. We were satisfied with the response and closed our enquiry. In closing the matter, we recommended that the company provides specific explanations for any tax amounts classified as exceptional items in its future accounts. Multi-year integration and restructuring programmes We questioned why exceptional costs from certain multi-year integration and restructuring programmes were described as ‘one-off’, as the company has incurred such costs over several years, and the strategic report highlighted that in 2020 the company began implementing a three-year transformation programme. We closed our enquiry after the company agreed that its future disclosures would not imply that all its exceptional items are due to ‘one-off’ events. We also asked the company to include certain additional information in its future APM disclosures in relation to any multi-year restructuring and other strategic programmes that are treated as exceptional or adjusting items. The company agreed to provide the information. |