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 | Bellevue Healthcare Trust Plc |
|---|---|
| Balance Sheet Date | 30 November 2023 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2024 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice |
Redemption of ordinary share capital We requested an explanation of the basis on which the company had recognised a liability at the reporting date for the redemption of share capital effected after this date, which was described as being at the directors’ discretion. We also sought clarification of the non-recognition of a liability at the preceding reporting date for an apparently similar post balance sheet redemption. The company satisfactorily explained the basis for the timing of the recognition of the liability and the legal advice received that supported this treatment. The company agreed to explain fully the timing of the share redemption process, and the effect on the financial statements, in future annual reports. |
| Entity | Breedon Group plc |
| Balance Sheet Date | 31 December 2023 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | September 2024 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice | N/A |
| Entity | Burford Capital PLC (3) |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2024 |
| Auditor (5) | Ernst & Young LLP, Guernsey |
| Case Summary / Press Notice | Consent withheld |
| Entity | DLA Piper International LLP |
| Balance Sheet Date | 30 April 2023 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | September 2024 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice | N/A |
| Entity | Fidelity European Trust PLC |
| Balance Sheet Date | 31 December 2023 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | September 2024 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice | N/A |
| Entity | Herald Investment Trust plc |
| Balance Sheet Date | 31 December 2023 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | September 2024 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice | N/A |
| Entity | Hornby PLC |
| Balance Sheet Date | 31 March 2023 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2024 |
| Auditor (5) | Crowe U.K. LLP |
| Case Summary / Press Notice |
Impairment testing of goodwill We sought clarification of the forecast period used by the company in its impairment review of goodwill, and of how it derived the gross margins used in those forecasts. The company clarified the forecast period, explained the calculation of gross margin for the purposes of the impairment review, and agreed to enhance its disclosures in its next annual report and accounts. Share-based payments Equity settled share-based payments We asked the company to explain how it had accounted for cash payments made to employees in respect of shared-based payments identified as equity settled. The company provided a satisfactory explanation and agreed to include a clearer accounting policy in future annual report and accounts, if material and relevant. CEO bonus scheme We asked the company to explain why it had not recognised an income statement charge for a new bonus scheme for the CEO that was based on the increase in the market capitalisation of the group over the period of the bonus scheme. After reconsideration of the matter, the company concluded that the arrangement was a cash-settled share-based payment, and agreed to account for it as such in future financial periods. However, it concluded that the charge for 2023 was not material. The company also agreed to include an explanation of the revised accounting policy for the scheme in its 2024 annual report and accounts, and to update other parts of the annual report where the CEO bonus scheme is referenced. Parent company financial statements In the absence of an accounting policy, we asked the company to explain why the carrying value of the investment in subsidiary undertakings had been adjusted in the year for capital contributions relating to share-based payments. The company satisfactorily answered our question and agreed to include a clear explanation of how it accounts for such transactions in future annual report and accounts, should they reoccur. Intercompany balances We questioned why a liability was recognised in the unconsolidated balance sheet of Hornby Plc in relation to intercompany receivables recognised by a subsidiary entity as at 31 March 2023. The company provided a satisfactory explanation and agreed to include an accounting policy for these guarantees in its next annual report and accounts. |
| Entity | Howden Joinery Group Plc |
| Balance Sheet Date | 30 December 2023 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | September 2024 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice |
This company was selected as part of our focus on issues arising in the retail sector and, as such, only disclosures included in the scope of this particular work were reviewed. Please see the Annual Review of Corporate Reporting 2023/24 for further information. Impairment testing of property, plant and equipment We asked the company to explain how cash-generating units (CGUs) are identified for the purposes of testing property, plant and equipment for impairment. The company confirmed that it regards individual depots as CGUs and clarified that the unit to which goodwill has been allocated, Howden Joinery UK, is a group of CGUs. The company agreed to enhance its future disclosures to make these points clearer. |
| Entity | International Public Partnerships Limited |
| Balance Sheet Date | 31 December 2023 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | September 2024 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice | N/A |
| Entity | Ivy Holdco Limited |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2024 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice |
Derivative financial instruments We asked the company to explain the basis for the allocation of total gains and losses recognised on derivative financial liabilities between interest receivable and payable on swaps, and other changes in fair value. The company explained that interest settlements on the pay and receive legs of the swaps had been presented gross in interest income and expense, respectively. It confirmed that it had re-assessed this presentation prior to receiving our correspondence and restated the comparative income statement in its 2023 annual report and accounts to present these amounts on a net basis, reflecting the net settlement of these legs. We requested information about the presentation of cash flows in respect of interest and derivatives in the cash flow statement. The company provided the requested information and explained that net cash inflows from derivative financial instruments had been offset against total interest paid. In this respect, we observed that it was unclear how the conditions for net presentation in IAS 7, 'Statement of Cash Flows' had been met. We did not pursue the matter further, as it was not relevant to the comparatives in the 2024 financial statements; however, the company agreed to consider our comments in preparing its next annual report and accounts. |
| Entity | JPMorgan American Investment Trust Plc |
| Balance Sheet Date | 31 December 2023 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | September 2024 |
| Auditor (5) | BDO LLP |
| Case Summary / Press Notice | N/A |
| Entity | Kingfisher plc |
| Balance Sheet Date | 31 January 2024 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | September 2024 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice |
This company was selected as part of our focus on issues arising in the retail sector and, as such, only disclosures included in the scope of this particular work were reviewed. Please see the Annual Review of Corporate Reporting 2023/24 for further information. Impairment of property, plant and equipment We asked the company to explain its methodology for allocating e-commerce sales and associated non-store costs to individual stores, when estimating the recoverable amount of each store as a cash-generating unit, and to quantify the proportions of sales and costs allocated. The company provided a satisfactory response and agreed to enhance its future disclosures to clarify for readers how e-commerce revenues and related costs are attributed to stores for the purposes of impairment testing. |
| Entity | Luceco plc |
| Balance Sheet Date | 31 December 2023 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | September 2024 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice | N/A |
| Entity | Market Topco Limited |
| Balance Sheet Date | 29 October 2023 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | September 2024 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice |
This company was selected as part of our focus on issues arising in the retail sector and, as such, only disclosures included in the scope of this particular work were reviewed. Please see the Annual Review of Corporate Reporting 2023/24 for further information. Impairment testing of property, plant and equipment We asked the company to explain its methodology for allocating online sales and associated costs to individual stores, when estimating the recoverable amount of each store as a cash-generating unit, and to quantify the proportions of sales and costs allocated. The company provided a satisfactory response and agreed to consider whether additional disclosures are required in its next annual financial statements. |
| Entity | Marks Electrical Group plc (3) |
| Balance Sheet Date | 31 March 2023 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2024 |
| Auditor (5) | BDO LLP |
| Case Summary / Press Notice |
Revenue recognition We sought clarification of the accounting policies applied to revenue arising from installation services, credit arrangements, and extended warranties. The company satisfactorily responded to our enquiries and agreed to expand the policy disclosures in its next annual report to provide further detail on these transactions. Equity investment We requested details of the basis of the fair value measurement of an equity investment. The company explained that this represented an investment in a buying group and, having reconsidered the most appropriate accounting treatment, concluded that the amount due under the arrangement should be accounted for as a rebate receivable, with a corresponding reclassification from fair value gains to cost of sales in the consolidated statement of comprehensive income for the year ended 31 March 2023. As the restatement affected a primary statement, we asked the company to disclose the fact that the matter had come to its attention as a result of our enquiry. Impairment of parent company investment in subsidiary We asked for more information about the estimated recoverable amount of the parent company’s investment in its subsidiary. As a result of our enquiry, the company identified that a post-tax discount rate had been applied to pre-tax cash flows, resulting in an overstatement of the value in use. The company agreed to restate the carrying amount of its investment in its subsidiary as at 31 March 2022 to recognise a consequential impairment charge. As the restatement affected a primary statement, we asked the company to disclose the fact that this matter had also come to its attention as a result of our enquiry. |