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 | Personal Assets Trust plc |
|---|---|
| Balance Sheet Date | 30 April 2023 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | March 2024 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice | N/A |
| Entity | Phoenix Group Holdings plc |
| Balance Sheet Date | 30 June 2023 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | March 2024 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice | N/A |
| Entity | Pinewood Technologies Group PLC (formerly Pendragon PLC) |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2024 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice |
Parent company’s investment in subsidiaries We asked the company to clarify its approach to assessing the recoverable amount of its directly-held subsidiaries, with particular reference to amounts excluded from cash flow forecasting for cash generating units (CGUs) and adjustments overlaid on value-in-use estimates, and an apparent inconsistency relating to the extent of estimation uncertainty involved. Having received a satisfactory response to our enquiries, we encouraged the company to enhance its explanation of the methodology applied, where that differs from the assessment of CGUs for the consolidated accounts. The company also agreed to ensure that the key estimates disclosure relating to assets and liabilities in the parent company’s balance sheet in the 2023 annual report and accounts is reflective of any significant risk at 31 December 2023. Environmental report We invited the company to comment on our observations on aspects of its compliance with the Taskforce for Climate-related Financial Disclosures (TCFD) recommendations, as required by the Listing Rules, principally in respect of climate-related effects on strategy and relevant metrics and targets. The company agreed to enhance its TCFD disclosures by including in its 2023 annual report and accounts: an analysis of the key risks over defined short-, medium- and long-term horizons; risks, impacts and mitigations that are specific to its circumstances; further detail linking metrics to material risks and opportunities; clarification of the nature of metrics used to form views on likely trends in demand; and further details of carbon reduction targets, with the related timeline |
| Entity | Poundland Limited |
| Balance Sheet Date | 25 September 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | March 2024 |
| Auditor (5) | Mazars LLP |
| Case Summary / Press Notice | N/A |
| Entity | PPHE Hotel Group Limited |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2024 |
| Auditor (5) | Kost Forer Gabbay & Kasierer, member of Ernst & Young Global |
| Case Summary / Press Notice |
Financial liability in respect of income units sold to investors We sought to understand how changes in estimated future cash flows associated with the financial liability in respect of income units sold to investors were reflected in its measurement. The Company provided a satisfactory response, agreed to enhance its accounting policy, and committed to disclose the significant judgements taken in accounting for this transaction. Significant estimates We asked the Company to clarify whether deferred tax assets and fair value measurement of financial instruments were key sources of estimation uncertainty as defined by IAS 1, ‘Presentation of Financial Statements’. The Company explained these areas were not key sources of estimation uncertainty as defined by IAS 1 and agreed to revise their disclosure in this area. Restricted deposits and cash We questioned why assets classified as ‘Restricted deposits and cash’ were not included within cash and cash equivalents in the consolidated statement of financial position. The Company provided a satisfactory response. |
| Entity | Prudential plc |
| Balance Sheet Date | 30 June 2023 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | March 2024 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice | N/A |
| Entity | RM plc |
| Balance Sheet Date | 30 November 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2024 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice |
Financial covenants in debt facilities We asked the company to enhance its disclosure of loan covenants, to include ratio calculations and headroom. The company agreed to do so in its 2023 annual report and accounts, and to consider in future periods the continuing relevance of this additional information. Contract balances We sought an explanation for apparent inconsistency in, and omissions from, the company’s disclosure of contract balances. We received a satisfactory response, in which the company agreed to enhance its disclosures to comply with the requirements of IFRS 15, ‘Revenue from Contracts with Customers’ and to present separately amounts receivable from customers in respect of sales taxes. Impairment testing of goodwill We asked for information about the key assumptions used in estimating the recoverable amount of the RM Resources group of cash generating units and sensitivity to changes in those assumptions. The company explained its key assumptions and sensitivity, and agreed to provide relevant disclosures, in its 2023 comparative information and for future periods, where a reasonably possible change in one of the key assumptions could give rise to an impairment. Local Government Pension Scheme obligations We questioned the accounting policy applied by the company, which confirmed that it calculated the liability for benefits using an actuarial method in accordance with IAS 19, ‘Employee Benefits’. The company agreed to update its accounting policy disclosure and present the liability, which it considered not material at 30 November 2022, as a defined benefit obligation in future accounts. Assets subject to dilapidation obligations We sought clarification of the accounting entries made on recognising an increase in the provision for property dilapidations. The company explained that the relevant amount had been debited in error to profit or loss, rather than to the cost of the assets. It considered the effect to be immaterial to users of the financial statements owing to the short period over which the additional cost would have been depreciated. On that basis, we concluded it would not be proportionate to pursue this matter further. |
| Entity | Rolls Royce Holdings Plc (3) |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2024 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice |
Cash flows on settlement of excess derivatives We asked the company to explain the basis for classifying the cash flows associated with the settlement of excess derivatives within financing activities in the Statement of Cash Flows, rather than operating activities, as the cash flows did not appear to fall within the IAS 7 ‘Statement of Cash Flows’ definition of financing activities. The company acknowledged that classification within operating activities would be consistent with the definition of the company’s net debt alternative performance measure, which excluded these derivatives. Consequently, the company has decided to amend its accounting policy and will present the settlement of excess derivatives cash flows within operating activities in the 2023 annual report and accounts and restate the 2022 comparative amounts. Payments in advance of performance The company disclosed significant current and non-current contract liabilities, representing instances where the customer has paid in advance of the company performing its associated obligations. We asked the company to describe the nature and anticipated timing of the contract liabilities disclosed, and how the company has considered the requirements of IFRS 15 ‘Revenue from Contracts with Customers’ regarding the existence of a significant financing component when measuring the associated contract revenue. The company explained the primary purpose for the customer’s payment in advance for these services is for reasons other than to provide financing to the customer. The company has agreed to enhance disclosures in future annual reports to explain management’s judgement in this area. Customer concession credits We asked the company to explain the nature of the contracts which include customer concession credits, how the credits have been reflected in the transaction price, and whether there was any significant judgement or estimation uncertainty associated with them. The company satisfactorily explained the various circumstances that led to these concessions and agreed to enhance disclosures in this area in future annual reports. Risk and revenue sharing agreements (RRSAs) – cash entry fees We asked for some clarification around the accounting treatment applied to RRSAs and the associated cash entry fees, such as why the fees are recognised as a reduction to cost of sales, and whether they differ from the ‘contributions and fees’ presented within the research and development note. The company satisfactorily explained their accounting policy further, and also confirmed that the amounts recognised in the income statement in relation to the RRSAs are not material. Provisions for onerous contracts and impairment testing We asked the company to further explain the impact on its onerous contracts provision of the amendment to IAS 37 ‘Onerous Contracts – Cost of Fulfilling a Contract’ and why no impairment loss had been recognised in respect of these assets before recognising a separate onerous contract provision. The company explained that the risk of impairment of the assets is relatively low, and that the assets have a significantly longer life than the contracts which have been recognised as onerous. Deferred tax assets Significant UK deferred tax assets were recognised in relation to carried forward tax losses which were expected to be recovered by the taxable profits generated by new civil aerospace large engine programmes over timeframes in excess of 30 years. Given that these programmes are typically loss-making in their investment phases, we asked the company to provide more detail about the timeframe over which the deferred tax assets were expected to be recovered. The company explained their judgements associated with the recognition and measurement of the assets and clarified that the forecasts of taxable profits only include existing engine programmes, with an assumption of a certain level of research and technology investment. The company confirmed that it would provide additional clarity over the timeframe of recovery of the deferred tax assets in the 2023 annual report. |
| Entity | RWS (Overseas) Limited |
| Balance Sheet Date | 30 September 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | March 2024 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Exemption from audit We questioned the company’s eligibility to take advantage of the small company audit exemption under s. 477 of the Companies Act 2006. The company explained that it had identified that the audit exemption had been taken incorrectly. It confirmed that an auditor had been appointed to audit revised annual accounts to 30 September 2021 and that the audited revised annual report and accounts had recently been filed at Companies House. |
| Entity | Scirocco Energy plc |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | March 2024 |
| Auditor (5) | PKF Littlejohn LLP |
| Case Summary / Press Notice |
Measurement of a disposal group held for sale We asked the company to explain its estimate of the fair value less costs to sell of assets and related liabilities held for sale. The company provided a satisfactory response in which it agreed to enhance its disclosures by including commentary on the valuation methodology, the key inputs and assumptions, and the sensitivity of the recoverable amount to changes in those inputs. The company also agreed to provide additional commentary in its future annual reports and accounts about the quantitative impact of significant transactions. Disposal of an investment We sought clarification of the timing of, and consideration for, a disposal transaction, where external information indicated that completion had occurred before the end of the period. The company acknowledged that it should have recognised the relevant balance as consideration receivable rather than as an investment at the year end and agreed to make this clear in the 2023 annual report and accounts. |
| Entity | Scottish Mortgage Investment Trust PLC |
| Balance Sheet Date | 31 March 2023 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | March 2024 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice | N/A |
| Entity | Secure Trust Bank PLC |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | March 2024 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice | N/A |
| Entity | Shell plc |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2024 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice |
Impairment of property, plant and equipment We asked the company to explain how changes in conditions towards the end of 2022, including market interest rates, affected the determination of discount rates used to estimate the value in use of property, plant and equipment. The company described its approach to considering market movements during the year and their implications for the rate of return expected by investors from assets with the same risk profile as those under assessment for impairment. This included exercising judgement as to when increasing market rates represented an underlying change in investors’ expectations for returns from long-term assets, rather than short-term variability. The company also explained that its cash flow assumptions were developed using inflation forecasts and commodity price projections considered consistent with the macroeconomic outlook informing its assessment of expected rates of return. Analysis of an alternative set of internally consistent assumptions, including discount rates derived from market interest rates at the end of 2022, indicated to the company that no material incremental impairment losses would be recognised. On that basis we did not consider it proportionate to pursue the matter further. The company agreed to enhance its disclosures relating to: impairments; its approach to determining the discount rate; key judgements exercised in doing so; and interdependencies between key assumptions. |
| Entity | SigmaRoc plc |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2024 |
| Auditor (5) | PKF Littlejohn LLP |
| Case Summary / Press Notice |
Business combinations During the year ended 31 December 2022, following completion of a purchase price allocation exercise, the company recognised significant adjustments to the fair value of acquired assets of Nordkalk and B-Mix, which were acquired during the year ended 31 December 2021. We asked about the initial accounting for these business combinations and why the fair value adjustments to provisional amounts made during the measurement period had not been made retrospectively as required by IFRS 3. The company agreed to include an explanatory note explaining that the provisional amounts should have been retrospectively adjusted and agreed to ensure that they complied with the standard when undertaking future acquisitions. Alternative performance measures (‘APMs’) We questioned whether there was undue prominence of APMs in the company’s strategic report. The company provided an explanation for their use of adjusted measures and agreed to ensure that there was not undue prominence of the adjusted measures in future reports. Impairment of goodwill The company identified long-term growth rates, discount rates and cash flow projections as key assumptions used to perform the goodwill impairment review. We questioned why the company disclosed only the long-term growth rate and the discount rate but did not quantify the assumptions underlying the cash flow projections, and why they did not provide sensitivity analysis for each of the key assumptions or comparative information. The company agreed to enhance its disclosure of the key assumptions and related sensitivities in future annual reports and accounts. Leases We asked the company to explain the basis on which it accounted for leases, as it was unclear from the accounting policy and description of lease balances in the accounts. We received a satisfactory response, in which the company agreed to clarify the disclosure in the next annual report and accounts. |
| Entity | Staffline Group PLC |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2024 |
| Auditor (5) | Grant Thornton UK LLP |
| Case Summary / Press Notice |
Revenue from contracts with customers We asked the company for details of revenue and related contract balances subject to the variable consideration constraint, and the amounts of revenue not recognised in 2022 owing to the application of this constraint, including details about the estimation of variable consideration and the potential effect of reasonably possible changes in key assumptions. We were satisfied with the information and explanations received. The company agreed to enhance its future accounting policy disclosure by including a more specific description of the costs-to-date method that was applied in recognising revenue. We also sought further information about the prior year adjustment that had been recognised to correct overstated revenue in periods prior to 1 January 2021. The company provided a satisfactory response, including an explanation of improvements in its process for recognising revenue from complex contracts. |