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 | United Utilities Group 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 |
Grants and contributions received We questioned the company’s basis for classifying grants and customer contributions received as investing activities within the statement of cash flows. The company explained that they believed this presentation was more meaningful to the users of accounts. We acknowledged that there was diversity in practice with some companies presenting these receipts as investing cash inflows and other companies recognising them as part of their operating activities, and that this may involve a degree of judgement. The company agreed to disclose the nature of this judgement and its effect on the cash flow statement in future accounts. Additions to property, plant and equipment We asked the company to explain the difference between the cash outflows in relation to the purchase of property, plant and equipment in the cash flow statement and amounts presented in the notes. The company explained the differences and agreed to provide additional information in future accounts. |
| Entity | Watches of Switzerland Group PLC |
| Balance Sheet Date | 26 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 | Wincanton 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 recognition We asked the company to provide further details of the accounting applied to extensions and modifications of customer contracts. The company explained that the contract renewals entered into during the year resulted in the group providing additional distinct services at a stand-alone price. As such, they were accounted for as separate contracts in accordance with IFRS 15, ‘Revenue from Contracts with Customers’. In the light of our comments, the company agreed to consider the accounting policy disclosures in respect of contract modifications when preparing its 2021 annual report and accounts. Cash and cash equivalents We asked the company to explain why restricted cash met the criteria to be classified as cash and cash equivalents, as the notes to the accounts indicated that the cash and cash equivalents included deposits that had a mix of maturities, none of which were greater than 12 months. IAS 7 ‘Statement of Cash Flows’ notes that an investment only normally qualifies as a cash and cash equivalent when it has a short maturity of three months or less from the date of acquisition. The company explained that most of the deposits held were repayable on demand, or had a maximum notice period of 32 days, and so were appropriately classified as cash and cash equivalents. As a result of our letter, the company identified one deposit that was incorrectly classified as cash and cash equivalents as the deposit had an original maturity date of 12 months and no early termination option. However, it concluded that the effect of this error was not material and did not propose correcting it in its 2021 annual report and accounts. The company agreed to carefully consider the specific terms of any future deposits made to ensure that fixed term deposits are classified and presented correctly in the financial statements. |
| Entity | Workspace Group PLC |
| Balance Sheet Date | 31 March 2020 |
| 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 of financial reporting effects of Covid-19 and, as such, only the disclosures of the impact of the pandemic were considered. Occupancy assumptions underlying the fair valuation of the investment properties The company’s accounts highlighted the valuation of its investment properties as an area of material estimation uncertainty. The disclosure and sensitivity analysis of key unobservable inputs, underlying the fair valuation of the investment properties, did not feature occupancy although it was identified as a key performance indicator and a key assumption in the viability and going concern assessments. We asked the company whether the occupancy assumptions represented a major source of estimation uncertainty. The company explained why they do not consider this to be the case. We encouraged the company to include the explanation in its future report and accounts. |
| Entity | 3i Infrastructure plc |
| Balance Sheet Date | 31 March 2020 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | AA plc |
| Balance Sheet Date | 31 January 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Impairment of intangible assets and investments in subsidiaries We questioned the difference between the discount rate the company used in the parent company accounts when performing impairment testing of the investment in subsidiaries and that used when testing goodwill in the consolidated accounts. The company provided a satisfactory explanation of the basis for the discount rates used in different circumstances. It agreed to disclose the pre-tax discount rate used to test the parent company investment in subsidiaries for impairment in future accounts. We also asked for information about the sensitivity of the recoverable amounts of the company’s cash generating units (CGUs) to changes in key assumptions, together with information about the differences between the CGU recoverable amounts and their carrying values. The company provided the information. We considered that it would be helpful if the company disclosed, in future accounts, its conclusion that there were no reasonably possible changes in key assumptions that would result in the recoverable amount of any CGU being less than its carrying amount. Classification of excess cash The company’s accounts indicated that it had been required to set aside ‘excess cash’ in a separate bank account, in advance of a class of notes payable becoming due. We asked for the basis of the company’s conclusion that this excess cash met the definition of cash and cash equivalents in IAS 7 ‘Statement of Cash Flows’, which the company provided. We explained that it would be helpful to disclose, in future accounts, the basis for including excess cash in cash and cash equivalents if the matter was still relevant. |
| Entity | Admiral Group Plc |
| Balance Sheet Date | 31 December 2019 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Aggreko PLC |
| Balance Sheet Date | 31 December 2019 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | AJ Bell plc |
| Balance Sheet Date | 30 September 2019 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Anglo Pacific Group PLC |
| Balance Sheet Date | 31 December 2019 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Impairment testing and useful economic life The company’s narrative reporting identified that the long-term demand for minerals in its royalty portfolio may change due to societal demands for climate change abatement and growth in the circular economy. We asked how this was taken into account in its impairment assessment of the Narrabri thermal coal asset. We also sought clarification of the period over which the mine is expected to generate returns and how changes expected from climate transition are factored into the determination of its useful economic life. In response to our question, the company gave a satisfactory explanation of the factors that it had considered in deciding which scenarios and ranges of outcomes to include in its impairment assessment of the Narrabri asset, and committed to enhancing its future disclosure to clarify this. It also explained the reason why there is a difference between the reserves-based life and the useful life over which the asset is being amortised, and committed to clarifying this in its future reports. Segmental reporting We also asked the company to explain the extent to which operations with differing economic characteristics are aggregated into operating segments and the extent to which discrete financial information for individual royalty arrangements are reviewed by the Executive Committee as chief operating decision-maker (CODM). The CODM considers that royalties within the same geography have similar economic characteristics which are expected to result in similar long-term performance despite being exposed to different commodities; we were satisfied with this response. The company committed to provide additional disclosure in future explaining the rationale for its grouping of royalty assets in their respective segments. |
| Entity | Aptitude Software Group plc |
| Balance Sheet Date | 31 December 2019 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | March 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. Revenue accounting policy We asked the company for further information about its accounting policy for revenue from software-based activity. The company provided the information. In its next accounts, the company agreed to make clearer its accounting policy for recognising revenue on these services. We questioned the policy for capping revenues on software-based contracts to either the invoice value or total transaction price. The company satisfactorily explained the circumstances under which revenue was capped to ensure that amounts in excess of its contractual entitlement were not recognised at any point in time during the contract term. The company’s disclosures implied that there may be instances when the licence in a Software-as-a-Service contract is distinct from the other ongoing contractual obligations, with the licence fee recognised at a point in time. We requested further information about the nature of licences which supported that impression. The company clarified that all existing software license fees, including those related to Software-as-a-Service contracts, were recognised over time. It confirmed that it would make these facts clear in its accounting policy for these contracts in future accounts provided this continued to be the case. Disclosure about significant estimates Disclosures about the nature, amount and sensitivities or ranges of potential outcomes of estimation uncertainties relating to revenue did not appear to have been provided. The company clarified that there was not a significant risk of material adjustment to the related contract assets or liabilities in the next year. Accordingly, we noted that the company should clearly differentiate in their accounts between those major sources of estimation uncertainties intended to satisfy the requirements of paragraph 125 of IAS 1, ‘Presentation of Financial Statements’, where there is a significant risk of a material adjustment in the next year, and those disclosures which do not represent major sources of estimation uncertainty but are provided as additional helpful information. |
| Entity | Aston Martin Lagonda Global Holdings plc |
| Balance Sheet Date | 31 December 2019 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Augean plc |
| Balance Sheet Date | 31 December 2019 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Measurement basis of the tax deposit It was not clear how the tax deposit asset in respect of a landfill tax assessment was measured after initial recognition. We asked the company to clarify the measurement basis. The company explained the basis of subsequent measurement and agreed to clarify this in the next annual report and accounts. The company also decided to present the tax deposit as a separate line item on the face of the statement of financial position in view of its size and unusual nature. Estimation uncertainty relating to the tax deposit We asked the company to provide further information about the estimation uncertainty relating to the tax deposit. The company provided this information and agreed to enhance the IAS 1, ‘Presentation of Financial Statements’, estimation uncertainty disclosures in the next annual report and accounts. Presentation of the tax deposit as current We asked the company to explain the rationale for classifying the tax deposit asset as current. We accepted the company’s explanation and observed that users would find this information helpful. We also asked the company, if relevant, to disclose any accounting judgement about this matter in line with the requirements of paragraph 122 of IAS 1. Deferred tax We asked the company to clarify how the amount of deferred tax on provisions was determined. The company provided this information and explained that a deferred tax asset in respect of tax losses had been incorrectly included within the deferred tax amounts attributable to provisions. The company agreed to restate the comparative amounts in the next annual report and accounts to present separately the deferred tax asset relating to tax losses. In closing this matter, we also drew the company’s attention to the disclosure requirements of paragraph 82 of IAS 12, ‘Income Taxes’, and to the disclosure requirements of IAS 1 to explain any accounting judgements and estimation uncertainty relating to the recognition and measurement of deferred tax assets on tax losses. |
| Entity | Augmentum Fintech plc |
| Balance Sheet Date | 31 March 2020 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | BAE Systems plc |
| Balance Sheet Date | 31 December 2019 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |