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 | Wates Group 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 | Xaar PLC |
| Balance Sheet Date | 31 December 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | December 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
This company was selected as part of our thematic review of companies’ disclosure of alternative performance measures (‘APMs’); as such, only the disclosures in relation to APMs were reviewed. Adjusted EBITDA We asked the company to explain the difference between the amount of depreciation of property plant and equipment disclosed within the reconciliation of adjusted EBITDA, and the depreciation charge disclosed elsewhere in the notes to the accounts. The company provided a satisfactory analysis and clarified that the main difference related to an impairment charge. The company also stated that the depreciation of right of use assets was not added back when arriving at the adjusted EBITDA. In closing this matter, we observed that we would expect the nature of the reconciling items, and the reasons for their selection, to be clarified in future. |
| Entity | XP Power 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 | Young & Co’s Brewery P.L.C. |
| 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 | Anexo Group Plc (3) |
| Balance Sheet Date | 31 December 2019 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | September 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
This company was part of our thematic review of cash flow and liquidity disclosures and, as such, only the disclosures relating to the cash flow statement and liquidity were reviewed. Invoice discounting facility in the cash flow statement We asked the company why an invoice discounting facility was included within cash and cash equivalents in the cash flow statement as the balance did not appear to fluctuate between negative and positive. The company acknowledged that the invoice discounting facility did not meet the criteria for classification as cash and cash equivalents, and agreed to restate the comparatives in its next report and accounts to present the cash flows from the facility within financing activities. New lease arrangements The statement of cash flows presented a cash inflow within financing activities, in relation to new leases. We asked the company to explain this presentation because cash flows would not usually arise on the inception of a lease. The company acknowledged that the cash flow statement had been incorrectly grossed up for a non-cash transaction. The company agreed to restate the comparatives in its next report and accounts to remove the gross up associated with leases. The company also agreed to present cash flows associated with hire purchase leases and other leases within a single line in the statement of cash flows. As the changes to both the composition of cash and cash equivalents, and the presentation of cash flows from leases 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 | Anglo American plc |
| Balance Sheet Date | 31 December 2020 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | September 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | ASOS Plc |
| Balance Sheet Date | 31 August 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Revenue recognition We asked the company to provide further details in respect of the revenue recognition accounting policy applied to brand and collaboration sales and delivery receipts. In particular, we enquired about the basis on which the company acted as principal in these arrangements. The company provided satisfactory explanations and undertook to enhance the revenue recognition disclosures in its 2021 report and accounts. We also requested details of the way in which sales returns are recognised and measured. The company provided these details and agreed to expand the disclosures in this area in its 2021 reports and accounts. Significant estimates and judgements We queried whether all the accounting estimates identified in the 2020 report and accounts gave rise to a significant risk of material adjustment to the carrying value of an asset or liability in the next financial year. We also asked the company to explain how it considered the accounts met the requirements of IAS 1 ‘Presentation of Financial Statements’ paragraphs 125 and 129. The company confirmed that all the accounting estimates identified in the 2020 annual report and accounts gave rise to a significant risk of material adjustment in the next financial year. The company also agreed to enhance the estimation uncertainty disclosures in future reports and accounts. |
| Entity | Aviva plc |
| Balance Sheet Date | 31 December 2020 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | September 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Beazley plc |
| Balance Sheet Date | 31 December 2020 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | September 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | BlackRock World Mining Trust plc |
| Balance Sheet Date | 31 December 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Disclosure of significant unobservable inputs used in Level 3 fair value measurements We asked the company why quantitative information about the significant unobservable inputs used in Level 3 fair value measurements, as required by IFRS 13 ‘Fair Value Measurement’, had not been disclosed. The company agreed to provide the disclosure in its future accounts. |
| Entity | Centrica plc |
| Balance Sheet Date | 31 December 2020 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | September 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Chemring Group PLC |
| Balance Sheet Date | 31 October 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Defined benefit pension scheme We questioned the company’s description of its defined benefit pension scheme as a multi-employer plan. The company clarified that the scheme was a group plan rather than a multi-employer plan and undertook to amend the description in its 2021 accounts. We asked for further information about the basis for accounting for the scheme in the parent company and were satisfied with the company’s explanation. Key management personnel We asked the company to explain how it had determined that the members of the Executive Committee who were not directors were also not key management personnel. The company provided the explanation requested and undertook to ensure that its description of the Executive Committee in its 2021 annual report was aligned to the committee’s terms of reference. Tax impact of non-underlying items We sought an explanation for the fluctuation in the tax rate on non-underlying items between 2019 and 2020 as the reason for the inconsistent rate was unclear, particularly given that the non-underlying items were predominantly the same in each year. We were satisfied with the company’s explanation and its undertaking to enhance its disclosures about the tax on non-underlying items in future accounts, when necessary, to provide users with a better understanding of the balance. |
| Entity | City of London Investment Group PLC (3) |
| Balance Sheet Date | 30 June 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Lawfulness of dividends and share repurchases We observed that over a number of years, the company’s dividends and share repurchases exceeded retained earnings and other reserves available for distribution as shown in the annual accounts. No interim accounts were filed at Companies House to support the distributions, as required by section 836(2)(a) of the Companies Act 2006 (the Act). We asked how the directors were satisfied that the distributions were lawful. The company acknowledged that its historical distributions did not comply with the requirements of the Act, and explained the steps that it intended to take to rectify the situation. We closed the matter on the basis that the company had taken legal advice and satisfactorily explained how it intended to rectify the unlawful distributions. Cash flow statement - classification of acquisition-related expenses We questioned why acquisition-related expenses of £1,248k were classified as investing activities, rather than as operating activities in the cash flow statement. The company acknowledged that it was not appropriate to classify the amounts as investing cash flows because paragraph 16 of IAS 7, ‘Statement of Cash Flows’, explains that only expenditures relating to amounts recognised as assets in the statement of financial position can be classified as investing activities. It agreed to restate the comparative cash flow statement in its next accounts to classify the amounts as operating cash flows. Consolidation of the International REIT fund Disclosures in the report and accounts indicated that the company’s investment in the International REIT fund was consolidated on a net asset basis. It was unclear how the method of consolidation complied with IFRS 10, ‘Consolidated Financial Statements’. The company confirmed that the International REIT fund was consolidated on a line-by-line basis, as required by paragraph B86 of IFRS 10, and agreed to clarify its disclosures in future accounts. Nature of interest in the EM REIT fund The company disclosed that it had stopped consolidating its EM REIT fund after a substantial investment in the fund by a client, which reduced the company’s holding to 21%. We asked the directors to explain why the company does not control or have significant influence over the fund. We were satisfied with the company’s analysis that it did not control the fund, and with its basis for concluding that the control assessment did not require significant judgement. The company also provided a satisfactory analysis to support its conclusion that it did not have significant influence and committed to disclosing the matter as a significant judgement in its next accounts. |
| Entity | Compass Group Plc |
| Balance Sheet Date | 30 September 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Offset of bank overdrafts and cash and cash equivalents We asked for clarification of the basis on which bank overdrafts have been offset against cash and cash equivalent balances in a ‘multi-currency notional pooling cash management arrangement’. The company provided a satisfactory explanation for the treatment adopted and agreed to clarify disclosures in its next annual report and accounts, including the existence of cash sweeps soon after the reporting date. Contract fulfilment assets We sought to understand better the nature of and accounting treatment adopted for contributions towards service assets, such as kitchen and restaurant fit out costs and equipment, which the group uses in the performance of its obligations in its contracts with clients. These contributions are capitalised as contract fulfilment assets in the balance sheet and presented as investing cash flows in the cash flow statement. The company provided further information about these contributions and the basis for the accounting treatment adopted. We did not consider it proportionate to pursue the balance sheet and income statement presentation of the relevant amounts further, as the effect of any alternative treatment would have been immaterial. The company agreed to include the presentation of cash flows arising on the acquisition of contract fulfilment assets as a significant judgement in the company’s annual report and accounts for the year ending 30 September 2021. |
| Entity | Countryside Properties plc |
| Balance Sheet Date | 30 September 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | September 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Auditor appointment and length of tenure We asked the company to explain how the directors had determined the auditor’s length of tenure prior to recommending to members that PricewaterhouseCoopers LLP (‘PwC’) be reappointed at the 2020 AGM. The company’s response satisfactorily addressed our concern. We note that the 2020 annual report explains that PwC will not be invited to participate in the tender process for the September 2022 audit. |