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 | The Berkeley Group Holdings 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 |
Revenue recognition We asked the company to provide further details of the revenue recognition policy applied to commercial sales and affordable housing sales. The company explained how revenue from commercial sales and affordable housing sales was recognised. The company also agreed to enhance its revenue recognition accounting policy in future reports and accounts if sales in respect of freehold affordable housing contracts were to become material. We requested further information on the way in which new property deposits, on-account contract receipts and reservation fees are measured. The company explained satisfactorily how these balances arose and the way in which they were accounted for with reference to IFRS 9, ‘Financial Instruments’ and IFRS 15, ‘Revenue from Contracts with Customers’. Significant estimates We queried whether the carrying value of inventory and profit recognition had been identified as a significant area of estimation uncertainty. We also asked the company to explain how they considered the accounts met IAS 1 ‘Presentation of Financial Statements’ disclosure requirements in respect of certain areas of significant estimation uncertainty. The company confirmed that the carrying value of inventory and profit recognition had been identified as an area of significant estimation uncertainty. The company also agreed to enhance the estimation uncertainty disclosures in respect of inventory and profit recognition, and provisions for liabilities and charges by providing sensitivity information in its future report and accounts. Alternative performance measures We asked the company to provide reconciliations for net asset value per share and pre-tax return on equity alternative performance measures (APMs) to the relevant IFRS component. We also asked the company to provide the definition for net asset value per share. The company provided the reconcilations and definitions requested and agreed to include a specific note reconciling these APMs in future reports and accounts. |
| Entity | Vodafone Group 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 |
Parent company’s investments in subsidiaries We asked how the impairment assessments performed at a group level were adapted for the purposes of the impairment review of the parent company’s investments in subsidiaries and the extent to which separate sensitivity disclosures should be provided for the parent company. The company provided a satisfactory explanation and confirmed that there was no significant risk of material adjustment to the carrying values of the investments in the next financial year. The company agreed to amend the disclosure to clarify this and to provide additional disclosure in respect of the impairment review of the investments in subsidiaries. Review of goodwill for impairment We questioned the company about the capital expenditure assumptions made in its value in use (‘VIU’) calculations. The company provided a satisfactory analysis and confirmed that all material capital expenditure included in its VIU calculations is incurred to maintain, rather than improve, the level of economic benefits obtained from its network and infrastructure. The company agreed to amend its disclosure to clarify this judgement. Deferred tax assets We asked for further information about the nature of evidence supporting the recoverability of the deferred tax assets for tax losses in Luxembourg and Germany. We also requested the company explain how the change in tax legislation in Luxembourg in 2017 affected the assessment of recoverability of the deferred tax asset. The company provided a satisfactory analysis, which included confirmation that the change in the tax regime in Luxembourg in 2017 does not impact the recoverability of the pre tax reform tax losses for which the deferred tax asset has been recognised. |
| Entity | Watkin Jones plc |
| Balance Sheet Date | 30 September 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | September 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
This company was selected as part of our thematic review of streamlined energy and carbon reporting (‘SECR’) disclosures and, as such, only these disclosures were reviewed. Streamlined energy and carbon reporting We asked the company to explain why it had not satisfied the SECR disclosure requirements relating to emissions, energy use and energy efficiency measures, which applied for the first time to the company’s 2020 annual report and accounts. The company explained why it did not include this information in the 2020 accounts and agreed to make the required disclosures in the 2021 and future annual reports and accounts. |
| Entity | Wizz Air Holding Plc (3) |
| 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 |
Sale and lease-back transactions We asked the company for further information on gains and losses on sale and leaseback transactions. The company provided this information noting that, in the year under review, total gross gains were immaterial and that no losses had been incurred. We encouraged the company to clarify its future disclosures in light of our enquiries in this area. On-board catering revenues We sought an explanation of how the company had concluded that it acts as agent, rather than principal, in respect of on-board catering services. We were satisfied with the explanation provided. Cash and cash equivalents We asked the company to explain the basis on which financial assets with an original maturity of between three and 12 months had been classified as ‘cash equivalents’. Following correspondence and discussions with the company, it agreed to separate from cash and cash equivalents deposits with an original maturity of greater than three months, even if they were accessible within three months at insignificant cost, where those deposits were being held for purposes other than meeting short-term cash commitments. In accordance with IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’, the company accounted for this change as a prior period adjustment in its annual report and accounts for the year ended 31 March 2021. As the change 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. Other enquiries In view of the proximity of our enquiries to the company’s 2021 reporting date, we asked the company to consider some observations in respect of disclosures included in its 2020 annual report and accounts and to provide, after publication of its 2021 annual report and accounts, explanations of how those matters had been addressed. The observations covered:
The company made satisfactory improvements to disclosures in its 2021 annual report and accounts. |
| Entity | Airtel Africa plc |
| Balance Sheet Date | 31 March 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Revenue recognised on customer onboarding We questioned the company’s accounting policy of recognising revenue upfront on customer onboarding. The company explained that this revenue related to the sale of mobile sim cards. As this was not a separate performance obligation, the revenue should have been deferred. However, the company further explained that neither the revenue stream in aggregate, nor the difference between this treatment and that required by IFRS 15 ‘Revenue from Contracts with Customers’, was material. The company undertook to remove this accounting policy from its 2021 annual report and accounts. |
| Entity | Alliance Pharma plc |
| Balance Sheet Date | 31 December 2019 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | June 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
This company was selected as part of our thematic review related to the application of IFRS 15 ‘Revenue from Contracts with Customers’ and, as such, only the disclosures relating to revenue recognition were reviewed. Variable consideration We asked for information about the variable consideration to which the company may be entitled; particularly relating to rebates and sales-based royalties. The company provided the information requested and agreed to clarify in its 2020 accounts that estimates of variable consideration do not include amounts related to sales-based royalties. Contract balances We questioned the company about an amount disclosed as accrued income and enquired about any contract asset or contract liability balances that existed. The company clarified that the accrued income comprised unbilled receivables subject only to the passage of time, rather than a contract asset, and that there were no contract assets or contract liabilities at the year end. The company agreed to provide an accounting policy and explanation for the accrued income balance in its 2020 accounts. |
| Entity | Amerisur Resources Limited |
| Balance Sheet Date | 31 December 2018 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Ashmore Group plc |
| Balance Sheet Date | 30 June 2020 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | June 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Ashtead Group plc |
| Balance Sheet Date | 30 April 2020 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | June 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | AVEVA Group plc |
| Balance Sheet Date | 31 March 2020 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | June 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Balfour Beatty plc |
| Balance Sheet Date | 31 December 2019 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Revenue recognition We asked the company to provide further information about its accounting treatment applied to claims recoverable from customers and third parties as well as variations to contracts and incentive payments. The company’s response satisfactorily addressed our queries. Interests in other entities It was unclear which of the various concession companies had been reflected in the group’s balance sheet through their consolidation and those to which the equity method had been applied. The company enhanced its disclosure in its 2020 accounts by listing the consolidation method for each concession company. We also asked for further information to help us understand the basis for the company’s accounting for its US military housing projects where it holds a majority interest. The company’s response satisfactorily explained the basis for the directors’ conclusion that it does not control those projects where its shareholding interest is more than 50%. Judgements and key sources of estimation uncertainty It was not clear whether there was a significant risk of a material adjustment within the next financial year for all seven matters disclosed where management had made judgements, estimates and assumptions. The company enhanced the disclosure in its 2020 accounts by removing those matters where there is not a significant risk and clarifying whether each matter is a judgement, an estimate, or both. We also queried whether the company had considered providing quantitative information about the impact of reasonably possible changes in key assumptions, or the range of reasonably possible outcomes within the next year, for any of the seven matters. The company explained the rationale for its disclosure and committed to providing certain quantitative information and sensitivity analysis in future accounts. We also strongly encouraged the directors to consider making further disclosure enhancements to help users gain an understanding of the potential for upward and downward adjustments to revenue, margin and provisions arising from the resolution of estimation uncertainty. We note that the company has provided further information in this regard in its 2020 accounts. Impairment testing of the parent company’s investment in subsidiaries We asked how the directors had concluded that the parent company’s investment in subsidiaries was fully recoverable at 31 December 2019. The company’s response satisfactorily addressed our concern. |
| Entity | Bellway p.l.c. |
| Balance Sheet Date | 31 July 2020 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | June 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | BHP Group Plc |
| Balance Sheet Date | 30 June 2020 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | June 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | BigBlu Broadband |
| Balance Sheet Date | 30 November 2019 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | June 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | BP p.l.c. |
| Balance Sheet Date | 31 December 2019 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | June 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
The company was selected as part of our thematic review into companies’ financial reporting in respect of climate change. As such, only climate-related aspects of the company’s disclosures were reviewed. Impairment testing We requested further information about the following matters in respect of the company’s impairment assessments:
The company provided satisfactory responses in respect of the conditions existing at the 2019 balance sheet date, together with further information about the assumptions and sensitivities that management expected to disclose in the 2020 financial statements. The company stated its intention to explain more clearly the sensitivities to direct impairments of assets in cash generating units, as distinct from the risks of impairment of goodwill. We also highlighted relevant expectations and best practice for future reporting on these matters, as set out in our November 2020 thematic report. |