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 | Avon Protection plc |
|---|---|
| Balance Sheet Date | 30 September 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | December 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Explanations for using alternative performance measures ‘APMs’ We noted an apparent inconsistency between references to non-adjusted measures in the segment reporting accounting policy and adjusted profit measures used for internal reporting. We asked for clarification of the metrics used internally by the Directors and Group Executive team to measure and manage the business. The company acknowledged the apparent inconsistency and clarified that adjusted measures are used to manage and assess the performance of operating segments. The company agreed to enhance both the segment reporting accounting policy and operating segments note in future annual reports and accounts. APM Reconciliations We commented on the lack of reconciliations for organic cash conversion and return on capital employed (‘ROCE’) to amounts presented in the financial statements. We also highlighted that explanations had not been provided for the adjustments to profit detailed in the financial review. We asked how the directors had satisfied themselves that they had complied with the guidance in paragraphs 26 and 28 of the ESMA Guidelines1. The company agreed to include reconciliations for organic cash conversion and ROCE to the financial statements and explanations for items excluded from adjusted operating profit in future annual reports and accounts. The company undertook that additional disclosures in respect of adjustments to reported measures would similarly be provided. The company’s response detailed misstatements in the reported FY20 ROCE metric. The directors did not consider the misstatements to be material. The company committed to disclosing the corrected FY20 ROCE in future annual reports and accounts. Classification of revolving credit facility as a current liability We asked for more information about the classification of an amount of £31.0m presented as a current liability which appeared to relate to the company’s revolving credit facility. The company confirmed that the balance had been correctly classified as current since, at the balance sheet date, it expected to repay the £31.0m drawing on the revolving credit facility in less than twelve months. 1 https://www.esma.europa.eu/sites/default/files/library /2015/10/2015 -esma-1415en.pdf |
| Entity | Bakkavor 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 | Balfour Beatty 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 | Barclays 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 | Big Yellow Group PLC |
| Balance Sheet Date | 31 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 | BP p.l.c. |
| 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 | Brighton Pier Group PLC |
| Balance Sheet Date | 28 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 |
Going concern The company disclosed that its going concern assessment required the Directors to make a number of estimates and assumptions (for example, about the impact and duration of the Covid-19 pandemic and the company’s ability to renegotiate debt covenants where necessary). We asked whether the going concern conclusion required significant judgement, which should be disclosed in accordance with paragraph 122 of IAS 1, ‘Presentation of Financial Statements’. We closed the matter after the company satisfactorily explained why it believed the assessment did not require significant judgement. Terminal growth rate used in impairment reviews The company had applied a higher terminal growth rate in its 2020 impairment reviews than in the previous year. We asked why it was appropriate to use the higher rate, given the operational challenges faced by the company as a result of the pandemic. We closed the matter after the company satisfactorily explained the external evidence that it had used to determine the 2020 rate. The company also satisfactorily explained that, based on the same evidence, a similar growth rate should have been used in 2019; however, any resulting revisions to the previous impairment reviews would not have resulted in an impairment loss in that year. Sensitivity of impairment reviews We asked the company to clarify the sensitivity of its impairment calculations to changes in assumptions. In particular, we asked why certain cash generating units (‘CGUs’) were not affected by large decreases in the long-term growth rate. In addition, we noted that the company’s disclosures stated that certain CGUs were sensitive to small to moderate changes in the discount rate or the long-term growth rate. We asked for the basis on which the company was satisfied that additional impairment losses should not have been recognised for those CGUs. We closed the matter after the company provided us with satisfactory explanations, as well as an undertaking to reconsider its disclosures when it prepares its 2021 report and accounts. In closing the matter, we explained our expectation that the company should quantify the small to moderate changes referred to in its disclosures. Forecast periods used in impairment reviews We asked the company to explain why impairment reviews for certain CGUs included cash flow forecasts for periods longer than the CGU’s property leases. We were satisfied by the company’s explanation of the basis on which it complied with IAS 36, ‘Impairment of Assets’, and its undertaking to improve its future disclosures. We were also satisfied with the company’s explanation that the matter did not require significant judgement, as described in paragraph 122 of IAS 1. |
| Entity | British American Tobacco p.l.c. |
| Balance Sheet Date | 30 June 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 | Calisen Group (Holdings) 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 | Camellia 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 | Capita 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 |
Parent company balance sheet- investments in subsidiaries and amounts owed by subsidiary undertakings We asked the company to clarify whether the recoverable amount of the company’s investments in subsidiaries had been calculated as at 31 December 2020, and, if so, explain the analysis undertaken. The company confirmed that an impairment review had been performed and provided a summary of its analysis. The company undertook to enhance the disclosures in relation to any impairment reviews and to include in the strategic report an explanation of why the directors consider the market value of the company is significantly less than the net assets of the parent company, where this continues to be the case. The company satisfactorily explained its policy for the assessment of credit risk in relation to amounts owed by subsidiary undertakings. |
| Entity | C&C Group Plc |
| Balance Sheet Date | 28 February 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 | Centamin 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 | Chesnara 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 |
Fair value measurement of mortgage-backed assets We asked the company for quantitative details of the significant unobservable inputs used to measure the fair value of mortgage-backed assets held at level 3 in the fair value hierarchy. We also asked for quantitative information regarding the effect of reasonably possible changes in unobservable inputs on level 3 financial assets. The company provided the information requested and agreed to enhance its disclosures in this respect in future annual reports and accounts. |
| Entity | Coats 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 |