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 | Craneware plc |
|---|---|
| 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 |
Share-based payments We questioned the difference between the total share-based payments charge and the related movement included in the statement of changes in equity. The company explained that the main difference related to the employer national insurance contributions, which met the definition of cash-settled share-based transactions. The associated obligation was recognised within ‘other reserves’ in equity. It should, however, have been included within liabilities on the balance sheet, as required by IFRS 2 ‘Share-based Payment’. The company further explained that the effect of reclassifying this amount would not currently be material but agreed to keep this area under review. In closing this matter, we drew the company’s attention to the fact that, as cash-settled share-based payment obligations should not be a component of equity, we would not expect the related cash flows to meet the definition of cash flows from financing activities. We also asked the company to explain the difference between the cash inflows relating to the proceeds from the issuance of shares and the related amounts included in the statement of changes in equity. The company satisfactorily explained the differences and agreed to improve the relevant disclosures in future accounts. Shares purchased by the Employee Benefit Trust We questioned the cash outflows in relation to the shares purchased by the Employee Benefit Trust (‘EBT’) as the amounts shown in the Consolidated cash flow statement differed from those included in the narrative within the notes. The company explained that there was a difference in relation to the funds transferred to the EBT for which the share purchase was not completed in the year. It further explained that this amount should not have been treated as a cash outflow for the group as the EBT was consolidated. There was a corresponding understatement in the amounts of cash and cash equivalents, and equity in the statement of financial position.The company explained that the error was not material. It undertook to disclose the accounting policies in relation to its transactions with the EBT and to correct the cash flow presentation of such amounts in future parent company and consolidated accounts. Tax disclosures We asked the company to explain items included within the reconciliation of the tax charge to accounting profit described as ‘tax deduction in relation to share plan charges’ and ‘origination and reversal of temporary differences’. The company clarified the nature of the items and agreed to improve their presentation and description in future reconciliations. |
| Entity | DWF Group PLC |
| Balance Sheet Date | 30 April 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Discontinued operations We questioned the company’s classification of an office closure as a discontinued operation. The company explained that the office operated as a separate geographic area and was considered ‘major’ by reference to its material effect on the group’s results. The company agreed to include disclosure, where relevant to future accounts, about the judgement exercised in determining whether a geographical area of operations (or line of business) is both separate and major. Revenue recognition We asked the company to clarify its use of the terms ‘revenue’ and ‘net revenue’. The company agreed to clarify that ‘net revenue’ is an alternative performance measure, to refer to it consistently as such and to use ‘revenue’ only when referring to the IFRS measure, in future annual reports and accounts. The company also undertook to include commentary on the characteristics of its revenue and recoverable expenses in the narrative on trading performance. We sought explanations of: the company’s principal types of performance obligations, the timing of their satisfaction, the method(s) used for measuring progress towards satisfying performance obligations over time and the nature of variable consideration receivable. We considered the information and explanations the company provided, and observed that users would benefit from more specific descriptions of the extent of variability within contracts and of how the company applies the constraint on variable consideration. The company also agreed to remove disclosure relating to combining contracts, on the basis that the relevant contracts are neither individually nor collectively material. Impairment of goodwill and investment in subsidiaries We asked the company to explain the basis on which it allocated goodwill to cash generating units and tested it for impairment. The company confirmed that the only individually significant amount of goodwill allocated was to the ‘Managed Services’ practice group, which, at the balance sheet date, was within the Commercial Services division. The company undertook to clarify in its next annual report and accounts when the term ‘Managed Services’ was being used to refer to the practice group or the services themselves. We also asked for clarification of the testing performed on the carrying amount of the parent company’s investment in subsidiaries. The company confirmed that it had identified indicators of impairment, prompting a test for impairment, and that the recoverable amount of the investment, calculated on a ‘value in use’ basis, exceeded the carrying amount. It volunteered to enhance its disclosures of these matters. Share-based payment expenses We requested an analysis of share-based payment expenses, which the company provided with satisfactory explanations of individual components. Supplier financing arrangements We asked the company to clarify disclosures about a supplier payment facility, including its treatment of related cash flows as arising from financing activities. The company provided a satisfactory explanation. The company agreed to disclose, in future accounts, the 'non-cash' changes in the level of borrowing under the facility in accordance with paragraphs 44A to 44E of IAS 7 ‘Statement of Cash Flows’. We encouraged the company to disclose a description of the arrangement, given the level of interest among users of accounts in supplier payment arrangements. Professional indemnity provision We questioned the presentation within ‘other payables’ of a liability arising from professional indemnity claims that appeared to have characteristics of a provision. The company explained that an amount that is subject to uncertainty relating to disputed claims had become material in the period. It agreed to restate the balances for ‘other payables’ and provisions to reclassify that amount in its next annual report and accounts. |
| Entity | Eden Research 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 |
Transactions with associate We asked for more information about the group’s sale of geraniol to its associate and the group’s acquisition of an intangible asset from the associate. We also queried the existence of, and accounting for, any unrealised gain or loss (in applying the equity method) arising from such transactions. The company explained that it had reconsidered the guidance in IFRS 15 'Revenue from Contracts with Customers' in relation to its arrangement with the associate for the sale of geraniol. As a result, the company acknowledged that the group accounts (in addition to recognising the group’s share of the result of the associate through the normal equity accounting) should have recognised revenue based upon the margin it was entitled to receive from the associate’s sale of geraniol instead of on a gross basis. Consequently, the company agreed to restate comparative amounts in the following year’s income statement accordingly. 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 provided a satisfactory explanation in respect of the purchase of the intangible asset. The company also acknowledged that there was a gain on the sale of the intangible asset by the associate for which its share had not been eliminated when preparing the group accounts, but explained that the adjustment was considered immaterial. Impairment review of investment in associate We requested information about the impairment review performed for the company’s investment in its associate, Terpene Tech (UK). The company provided a satisfactory analysis of the assessment performed. The company agreed to enhance the disclosure in respect of the impairment review in future annual accounts, including an improved analysis of the key assumptions made. Investment in subsidiary We asked the company to clarify its judgement made in determining that the company controls Terpene Tech (Ireland). The company provided a satisfactory explanation and agreed to improve the disclosure in future annual accounts to more clearly explain the basis for its conclusion. |
| Entity | Euromoney Institutional Investor PLC |
| Balance Sheet Date | 30 September 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 | Foresight Solar Fund Limited |
| 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 | Future 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 |
Acquired intangible assets We asked the company for information to assist us in understanding the nature of acquired intangible assets. In particular, we asked for an analysis of the carrying value and useful economic lives for each class of acquired intangible asset, and details of any such assets which were individually material. The company provided a satisfactory response and committed to enhance the related disclosures in its future reports and accounts where the information remained material and relevant. |
| Entity | GCP Student Living plc |
| Balance Sheet Date | 30 June 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 | GlaxoSmithKline 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 | Halfords Group plc |
| Balance Sheet Date | 3 April 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Cash flow relating to leases We asked the company to provide clarification of an apparent inconsistency in the disclosure of cash outflows on leases in the cash flow statement. The company explained that during the preparation of its subsequent interim accounts for the six months ending 2 October 2020, it had identified an error in presentation of the interest on lease liabilities, which explained this inconsistency. The resulting restatement of amounts for the period to 3 April 2020 was disclosed in the interim report to 2 October 2020. Classification of provisions for closure costs We questioned the company’s approach to correcting a misclassification of provisions for costs relating to the closure of Cycle Republic stores in the 3 April 2020 balance sheet. The company explained that it planned to record a current year reclassification from trade and other payables to provisions in FY21 to correct the misclassification. The company agreed to provide additional explanatory disclosure making it clear that the reclassification corrected an error in the prior year, identifying relevant line items in the statement of financial position affected by it, and explaining any significant judgements exercised in concluding that the error was not material. We were not fully persuaded by the company’s arguments for not restating prior period comparatives, but did not consider it proportionate to pursue this further. Impairment testing sensitivity analysis We asked the company for more information about its sensitivity testing of the estimated recoverable amount of the Retail group of cash generating units (‘CGU’). We considered the information and explanations the company provided about its approach, which was based on downside scenarios developed for the assessment of going concern and viability. The company agreed to provide additional disclosure of how those assessments had been extended to a five-year period and the basis on which the company concluded that no reasonable change in long term growth rate or discount rate would reduce the recoverable amount of the CGU to its carrying amount. |
| Entity | Hays plc |
| 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 |
Receivables We questioned why no quantitative information about the provision matrix used to measure expected credit losses (‘ECLs’) for receivable balances had been provided and why no sensitivity information was disclosed despite the ECL provision being identified as a significant estimate. The company agreed to include these disclosures in its future reporting, including details of the range and impact of the assumptions used. We also asked the company why the ECL analysis in the receivables note did not refer to the accrued income balance of £301.5 million. It agreed to be more explicit in its future reporting that the ECL provision applied to both trade receivables and accrued income, and to demonstrate how the provision is apportioned between those two balances. Leases We asked for more information about the judgements made in relation to the transition adjustment for extension and termination options in leases, which resulted in the recognition of significant additional liabilities on the initial application of IFRS 16 ‘Leases’ on 1 July 2019. We also asked for details of the basis on which management concluded that these were not significant judgements required to be disclosed by IAS 1 ‘Presentation of Financial Statements’. The company provided a satisfactory explanation and acknowledged that the rationale and basis of this adjustment could have been explained more clearly. Goodwill We questioned the company’s disclosures relating to the sensitivity of the goodwill impairment testing calculations to changes in assumptions. The company committed to distinguish clearly the disclosure of reasonably possible changes in key assumptions that could lead to an impairment (made to satisfy the requirements of IAS 36 ‘Impairment of Assets’) from any additional voluntary disclosures made to inform the reader, in its future accounts. We also asked whether the cash flows arising from future investment, referred to in the goodwill disclosures, were excluded from its impairment calculations in accordance with IAS 36. The company confirmed that the cash flow projections used to measure value-in-use did not include any cash inflows or outflows expected from any future restructurings or from other asset enhancements. Litigation We asked for further information about the legal proceedings against the company, referred to in the Audit Committee Report, and the basis on which the disclosures required by IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’ were not made. The company provided more information and explained that these disclosures were not made as the outflows, excluding amounts for which the likelihood is remote, were not considered to be material. |
| Entity | InterContinental Hotels Group 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 | Johnson Matthey Plc |
| Balance Sheet Date | 31 March 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 – refining business The company’s revenue recognition policy stated that refining revenue is recognised over time because it is earned from enhancing an asset controlled by the customer. We asked the company to explain the basis on which it concluded that metal within its refinery is controlled by customers. The company provided a satisfactory explanation and agreed to enhance its disclosures in future accounts to enable readers to better understand the nature of the metal refining arrangements and the related performance obligations. The accounting policy also indicated that the revenue is recognised based on costs incurred as a proportion of estimated total contract costs. We asked for a description of how the methodology was applied in practice, including a description of the relevant performance obligations and transaction prices. The company acknowledged that the input method described in the accounting policy was general in nature and did not apply to refining revenue. It explained the specific method applied in the context of refining revenue and gave an undertaking to update its accounting policy in its future accounts. |
| Entity | J Smart & Co. (Contractors) PLC |
| Balance Sheet Date | 31 July 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 | Marshalls 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 | Mothercare plc (3) |
| Balance Sheet Date | 28 March 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 information about the basis for recognising revenue from sales of goods to franchise partners on dispatch of those goods. The company’s response satisfactorily addressed our concern. The company will enhance the wording of its accounting policy in future accounts to explain its rationale. Earnings per share The loss from continuing operations did not appear to have been used as the control number when determining whether the potential ordinary shares were dilutive for the purposes of diluted earnings per share from continuing and discontinued operations and from discontinued operations. The company confirmed that it did not use the loss from continuing operations as the control number and that it would restate the 2020 amounts presented for EPS from continuing and discontinued operations and from discontinued operations. The company agreed to include an FRC reference in its 2021 accounts explaining that the enquiry from the Financial Reporting Council led to the correction. The diluted loss per share from continuing operations was determined in accordance with IAS 33 ‘Earnings per Share’. We also asked for further information about the determination of the weighted average number of shares used in the diluted EPS amounts. The company explained that the number had been calculated incorrectly and that it would present restated amounts for 2020 in its 2021 accounts. Related parties We queried whether the directors considered a certain shareholder to be a related party. This shareholder had an interest in excess of 20% of the company’s ordinary share capital on 28 March 2020 and had provided a loan to the company in 2019. The company confirmed that the shareholder was a related party and that it would give the disclosures required by IAS 24 ‘Related Party Disclosures’ in future accounts. |