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 | GB Group plc (3) |
|---|---|
| Balance Sheet Date | 31 March 2023 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2024 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice |
Impairment testing of goodwill We sought further information about the company’s projection of growth from 2028 to 2032. For the 2023 impairment test, this assumed annual growth rates in excess of the long-run average growth rate for the geographic markets in which the company operates. The company elaborated on its disclosure of the third-party sources used and explained other factors taken into account in determining the estimated rate of growth. It acknowledged that clearer disclosure of the change in approach from prior periods, and the basis on which the estimate was considered more relevant and reliable, would have been helpful to users. In closing this matter, we recommended that the company enhance its explanation of the methodology applied and of significant changes in estimates. We also queried the sensitivity of the recoverable amounts of groups of cash-generating units to changes in the cash conversion ratio and operating margin, which appeared to be key assumptions in the value in use calculation. The company explained why it did not consider the values assigned to these assumptions to be subject to significant variability. The company agreed to clarify its future disclosure of key assumptions and to provide sensitivity analysis should the circumstances change. We also encouraged the company to disclose reasonably possible positive changes in estimated operating margins, to enhance users’ understanding of management’s view of the uncertainty involved. Impairment of parent company investment in subsidiaries We questioned the basis on which the company estimated the recoverable amount of its investment in GBG (US) Holdings LLC. The company explained its approach and acknowledged that the recoverable amount as at 31 March 2023 did not take full account of loan liabilities of the subsidiary. The company agreed to restate the comparative figures in its 2024 annual report and accounts. As this change affected the parent company’s primary statements, we asked the company to disclose that the matter had come to its attention as a result of the FRC’s enquiries. Deferred revenue We asked the company to explain apparent inconsistencies in disclosure between deferred revenue balances and the revenue recognised in the year. The company agreed to correct an error it had identified in the revenue note disclosure and enhance its presentation of movements in deferred revenue to reflect more clearly the effect of movements in exchange rates. Deferred tax on losses carried forward We sought to clarify the apparently low effective tax rate applied in the disclosure of losses carried forward. The company acknowledged and agreed to correct a disclosure error, which accounted for part of the effect. We also encouraged the company to enhance its disclosure relating to losses eligible for more than one type of tax relief, which would address much of the rest. Intercompany debt owed to and by the parent company We asked the company to explain movements in intercompany balances relating to group restructuring transactions. We received a satisfactory response. |
| Entity | Genuit Group plc |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2024 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice |
Impairment In its 2022 annual report and accounts, the company disclosed that its value in use model for the impairment testing of goodwill used five-year forecasts of cash flows. However, information provided to us by the FRC’s Audit Quality Review Team (AQR) indicated that 2022 actual cash flows were also included in the model. Consequently, we asked the company to explain the rationale for doing so. The company explained that its model applied year-end discounting to the future cash flow estimates as if they all arose at the end of each year, whereas actual cash flows arise evenly throughout the year. An additional year of cash flows was included to approximate the effect of mid-year discounting. We closed our correspondence on the basis that the effect of this compensating adjustment was not materially different to applying a mid-year discount rate. The company also explained that it will apply a mid-year discounting approach in its 2023 value in use model and will not include current year cash flows. It also agreed to disclose that recoverable amount is determined using mid-year discounting. The company’s 2022 annual report and accounts disclosed the use of a terminal growth rate of 2%. However, information provided by AQR indicated that a terminal growth rate of 2.3% was applied in the cash flow model for one CGU whereas 2.0% was applied to the others. We queried the basis for doing so. The company provided a satisfactory explanation and stated that it would provide more specific information about the terminal growth rate in future accounts. We asked the company to explain the basis on which the directors concluded that sufficient information was disclosed about the sensitivity of the assumptions used to measure the recoverable amount of CGUs to meet the requirements of IAS 36 and IAS 1. The company provided a satisfactory explanation. |
| Entity | Global Ports Holding PLC |
| Balance Sheet Date | 31 March 2023 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2024 |
| Auditor (5) | PKF Littlejohn LLP |
| Case Summary / Press Notice |
Warrants over ordinary shares We asked the company to explain the accounting treatment applied to certain warrants which were issued in connection with a financing agreement. The company explained the accounting policy applied to the warrants, noted that the equity element was immaterial, and confirmed that they had since been settled. Task Force on Climate-related Financial Disclosures (‘TCFD’) We questioned why TCFD-aligned disclosures had not been presented. The company undertook to present a statement of consistency with TCFD aligned disclosures in their 2024 annual report and accounts. Accounting for Global Ports Canary Islands S.L. We sought clarification of the basis on which the group’s investment in Global Ports Canary Islands S.L. was included in the consolidated financial statements. The company clarified that Global Ports Canary Islands S.L. is a subsidiary and is consolidated within the group’s accounts. Cash flow statement We asked the company to explain the way in which amounts included in the cash flow statement in respect of related party receivables, related party payables, proceeds from loans and borrowings, and repayment of borrowings, reconcile to corresponding amounts reported elsewhere in the annual report and accounts. The company provided a satisfactory reconciliation. Parent company investments We asked the company to explain how the Directors had satisfied themselves that there was no impairment to recognise in respect of the parent company’s investments in subsidiary undertakings. The company provided a satisfactory response. |
| Entity | Greggs plc |
| Balance Sheet Date | 30 December 2023 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | June 2024 |
| Auditor (5) | RSM UK Audit LLP |
| Case Summary / Press Notice | N/A |
| Entity | Halfords Group plc |
| Balance Sheet Date | 31 March 2023 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2024 |
| Auditor (5) | BDO LLP |
| Case Summary / Press Notice |
Third-party logistics arrangement and supplier financing We asked the company to clarify how the third-party logistics arrangement mentioned in the auditor’s report related to the supplier financing and third-party supplier invoicing arrangements mentioned in the accounts. We also asked it to explain the rationale for the arrangements and the linkage between them. The company provided us with satisfactory explanations. We observed that it would be helpful if the company included this information in its future accounts. Cash flow statement We asked the company to provide reconciliations to help us understand how increases in inventories and purchases of property, plant and equipment presented in its cash flow statement related to amounts presented elsewhere in its accounts. We closed our enquiries after the company provided the requested information. |
| Entity | Hays Plc |
| Balance Sheet Date | 31 December 2023 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | June 2024 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice | N/A |
| Entity | HGCapital Trust plc |
| Balance Sheet Date | 31 December 2023 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | June 2024 |
| Auditor (5) | Grant Thornton UK LLP |
| Case Summary / Press Notice | N/A |
| Entity | Hostelworld Group PLC |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2024 |
| Auditor (5) | Deloitte Ireland LLP |
| Case Summary / Press Notice |
Impairment review We requested information about the cash generating units (‘CGUs’) identified and the basis on which goodwill was allocated to those CGUs for the purposes of the group’s impairment review. The company explained its previous approach and informed us that it had undertaken a review of its CGUs, and concluded that it would report one CGU, instead of two CGUs, for the purposes of its impairment review in 2023. It confirmed that no impairment would have been recognised in 2022 had the same approach been taken. We also asked the company to explain the basis for determining the different discount rates disclosed for the group’s and parent company’s impairment reviews, for which it provided a satisfactory response. Revenue recognition We asked the company to explain the basis on which it accounts for its offering to provide social network features to consumers. It confirmed that it does not receive consideration from the consumer for use of the social network. The company clarified that it regards accommodation providers to be its customers from the perspective of IFRS 15, 'Revenue from Contracts with Customers'. The company satisfactorily explained that substantially all of its revenue is derived from fees charged to accommodation providers and that the social network features do not represent a service provided to them. |
| Entity | Impax Asset Management Group plc |
| Balance Sheet Date | 30 September 2023 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2024 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice |
Revenue recognition We asked the company to clarify whether management advisory fees included an element of variable consideration, as defined in IFRS 15 ‘Revenue from Contract with Customers’. The company confirmed that there is an element of variable consideration, and satisfactorily explained how management estimates it, how the revenue constraint is applied, and why they did not believe this to involve significant judgement. The company agreed to enhance the relevant disclosures in future. |
| Entity | INEOS Enterprises Holdings Limited |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | June 2024 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice | N/A |
| Entity | iomart Group plc |
| Balance Sheet Date | 31 March 2023 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2024 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice |
The company’s disclosures explained that the total consideration payable upon its acquisition of two subsidiaries included contingent consideration payable to the vendors. Corresponding RNS announcements explained that the previous shareholders had joined the company after the acquisition date. We requested further information to help us understand how the company had applied the requirements of IFRS 3 ‘Business Combinations’ in relation to whether contingent consideration should be classified as acquisition consideration or as post-acquisition remuneration. We closed our enquiries after the company explained that the vendors were not contractually required to remain in employment after the acquisition date to be entitled to the payments. |
| Entity | James Latham Plc (3) |
| Balance Sheet Date | 31 March 2023 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2024 |
| Auditor (5) | RSM UK Audit LLP |
| Case Summary / Press Notice |
Parent company cash flow statement and balance sheet We asked the company for further information about certain parent company working capital movements in its cash flow statement and its presentation of the bank overdraft as part of cash and cash equivalents in the balance sheet. The company provided the requested information and concluded that:
The company agreed to restate the comparative figures presented in the parent company cash flow statement and balance sheet in its next report and accounts. As the changes affected primary statements, we asked the company to disclose the fact that the matters had come to its attention as result of our enquiry. Foreign currency derivatives We asked about the effect of foreign currency derivatives on the measurement of the company’s inventories and revenue. The company provided a satisfactory response. |
| Entity | John Wood Group PLC (3) |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2024 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice |
Exchange movements on disposal of foreign operations We asked the Company to explain why the net exchange movements on disposal of foreign currency operations of $54.5m, which was included in the statement of changes in equity, was not included within the statement of comprehensive income. The Company acknowledged the error and agreed to restate the statement of comprehensive income, by including this amount, in its next set of accounts. Significant estimates We enquired about the Company’s estimation uncertainty disclosures relating to liquidated damages and recognition of revenue from variation orders. The Company provided a satisfactory response and agreed to enhance their disclosures in the future. |
| Entity | JPMorgan Global Growth & Income plc |
| Balance Sheet Date | 30 June 2023 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | June 2024 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice | N/A |
| Entity | JPMorgan Investment Trust plc |
| Balance Sheet Date | 30 September 2023 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | June 2024 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice | N/A |