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 | Rolls-Royce Holdings 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 |
Distributable profits We questioned whether the dividend receivable from Rolls-Royce Group Limited met the criteria for qualifying consideration when determining the realised profits and distributable reserves of Rolls-Royce Holdings plc, in accordance with the provisions of the Companies Act 2006. The response from the company satisfactorily addressed our query. Provision for Trent 1000 costs We asked the company to provide further information to help us understand the basis for recognising the Trent 1000 exceptional costs provision and the nature of the costs provided for, including an explanation of how the requirements of IAS 37, ‘Provisions, Contingent Liabilities and Contingent Assets’ had been satisfied. The company’s response addressed the concerns that we had raised. The company committed to improve the disclosure in its future accounts by providing additional explanation of the basis for the recognition and measurement of the provision in accordance with IAS 37. Free cash flow and the summary funds flow statement It was unclear how the summary funds flow statement, which includes a key performance indicator, had been derived from the reported cash flow statement. We asked the company to supply us with a reconciliation along with an explanation of the purpose of the summary funds flow statement. We also queried whether the reconciliation was clear enough to render equal prominence of IFRS performance measures as compared to alternative measures (APMs) in the financial review. We held a discussion with the company to understand the group’s process for compiling the detailed reconciliation between the IFRS cash flow statement and the summary funds flow statement. On the basis of this discussion, the company agreed to provide the source of the numbers presented in future summary funds flow statements, along with additional explanations as necessary for users to understand the basis for any significant reconciling items. We were satisfied by the company’s explanation of the basis on which it had considered the requirement for equal prominence to have been achieved between APMs and IFRS measures. Nevertheless, the company agreed to deliver further improvements in the 2020 strategic report, including additional narrative about the statutory cash flow movements. |
| Entity | Rotork 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 | Senior 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 |
Deferred tax assets We asked how the adoption of a new accounting policy for the recognition of deferred tax assets for interest carried forward met the requirements of IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’ since there had been no change to the relevant guidance in IAS 12, ‘Income Taxes’. The company agreed that IAS 12 includes relevant guidance for the company’s accounting policy for the recognition of these deferred tax assets. However, it considered that the change in accounting policy reflected new emerging best practice specific to the company’s facts and circumstances, rather than the correction of an error. Given that these changes do not impact the company’s future reporting, and the amounts involved were not significant in relation to the company’s financial position, we did not consider it proportionate to pursue this further. Uncertainty over income tax treatments The accounts explained that the accounting policies had been changed to reflect the requirements of IFRIC 23, ‘Uncertainty over Income Tax Treatments’ resulting in an adjustment to opening retained earnings. We asked for details of the changes made as the new policy wording was similar to that disclosed in the company’s previous accounts. The company’s response addressed the concerns that we had raised. We recommended that in future it would be helpful if the company disclosed whether the most likely amount method or the expected value method is applied when providing for an uncertain tax position. Adjusted earnings The accounts disclose that items considered to be outside the earnings for the year are excluded from the Company’s measure of adjusted earnings per share. We questioned why a one-off benefit arising from the clarification of tax incentives available on historical profits was not excluded from adjusted earnings. The response from the company satisfactorily addressed our query. |
| Entity | Severn Trent Plc |
| Balance Sheet Date | 31 March 2020 |
| 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. Treatment of contract liabilities We requested additional information about deferred income balances disclosed within the accounts, and for clarification as to whether they were considered to be contract liabilities under IFRS 15. The company confirmed that these balances should be classified as contract liabilities under IFRS 15 as they represented consideration received in return for performance obligations that were yet to be satisfied. As they had not been accounted for as such, the company agreed to amend its accounting policy. It explained that the change in policy will result in the liabilities being released to revenue, rather than operating costs over the life of the associated assets. The change will be made prospectively given that, historically, the amounts involved had been immaterial. The company also agreed to provide additional disclosures about contract liabilities going forward, and to disclose the recognition of amounts received as deferred income rather than as in-period revenue as a significant judgement under IAS 1 ‘Presentation of Financial Statements’. |
| Entity | Sirius Real Estate Limited |
| Balance Sheet Date | 31 March 2020 |
| 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 | Smith & Nephew plc |
| Balance Sheet Date | 31 December 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 | Spirent Communications 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 |
Recognition of revenue from contracts with multiple elements We asked the company to explain its accounting policy for identifying contracts with more than one distinct performance obligation. We were satisfied with the company’s explanation of its application of the relevant criteria in IFRS 15, ‘Revenue from Contracts with Customers’. The company committed to enhance the accounting policy for revenue recognition and the disclosure of the judgements involved in determining separate performance obligations within contracts with multiple elements. We also sought clarification of significant judgements exercised in relation to the timing of revenue recognition and price allocation across multiple elements. The company acknowledged that there was no incremental judgement, beyond that applied to standalone elements, around the timing of, and price allocation to, individual elements within multi-component contracts, and agreed to clarify the disclosure in this respect. |
| Entity | SSP Group 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 | Templeton Emerging Markets Investment Trust PLC |
| Balance Sheet Date | 31 March 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Alternative performance measures The company presents alternative performance measures (‘APMs’) identified as the ongoing charges ratio and net asset value return in its annual report and accounts The company did not present reconciliations from these measures to equivalent information provided in accordance with IFRS. It committed to present these in its next annual report and accounts and provided them in its most recent half-yearly report. Special dividend income The company received a special dividend in the year. The Audit Committee report included a reference to discussing the treatment of the dividend as either revenue or capital with the auditors. However, we did not identify any further information explaining how the special dividend had been treated, or the amounts involved. The company explained that the dividend had been classified as revenue and no significant judgement had been required in reaching this conclusion. We were satisfied with this explanation. The company agreed to disclose the amounts of any special dividends received in future. |
| Entity | The City of London Investment Trust plc |
| Balance Sheet Date | 30 June 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 | The Law Debenture Corporation p.l.c. |
| 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 |
Alternative performance measures A number of alternative performance measures (‘APMs’) were disclosed in the annual report and accounts but it was not clear how these measures had been computed. We asked the company to provide reconciliations in future annual reports where the basis of computing an APM cannot be immediately derived from amounts in the accounts, which the company agreed to do. |
| Entity | The Restaurant Group Plc |
| Balance Sheet Date | 29 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 | Trainline plc |
| Balance Sheet Date | 28 February 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
This company was part of our thematic review of cash flow and liquidity disclosures and, as such, only the disclosures relating to the cash flow statement and liquidity were reviewed. Redemption of other non-current liabilities We enquired about the presentation of the redemption of other non-current liabilities in the note of changes in liabilities arising from financing activities, observing that this presentation was inconsistent with the cash flow statement. The company acknowledged that the presentation of this redemption in the note of changes in liabilities was incorrectly shown as a cash flow and committed to correct this note in the forthcoming annual report and accounts. The treatment of the redemption in the cash flow statement was correct. Interest on CPEC repayment We enquired about the accounting for the interest paid on the CPEC repayment which is presented in the cash flow statement and statement of changes in equity. Based on the information provided by the company, we accepted the company’s accounting for the CPEC and the presentation of the interest paid in the cash flow statement. Changes in working capital We asked the company to explain the changes in working capital presented in the cash flow statement. The company provided a reconciliation of the changes in working capital, which satisfactorily explained these movements. |
| Entity | Travis Perkins plc |
| Balance Sheet Date | 31 December 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 | Unilever 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 |