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 | 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. |
| Entity | BT Group plc |
| Balance Sheet Date | 31 March 2020 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | June 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Card Factory PLC |
| Balance Sheet Date | 31 January 2020 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | June 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Ceres Power Holdings plc |
| Balance Sheet Date | 30 June 2019 |
| 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 | CLS Holdings 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 |
Disposal of business We questioned why the proceeds from the disposal of a business disclosed in the strategic report differed significantly from the equivalent amount included in the cash flow statement. The company acknowledged that details of the final consideration receivable for the disposal should have been provided in the strategic report. It agreed to include these details in its next annual report and accounts. We also asked for more information about how the disposal had been reflected in the financial statements. The company provided a satisfactory explanation. |
| Entity | ContourGlobal 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 |
Development costs We asked for further information about the recoverability of development costs capitalised in respect of a project in Kosovo and the basis for their reclassification as a non-current asset in the company’s June 2020 interim financial statements. The company provided a satisfactory explanation and agreed to include additional disclosure in its 2020 annual accounts in respect of the transactions and amounts recognised. Business combinations We questioned the company about the method used to determine the fair value of the identifiable assets, assumed and liabilities acquired, in respect of its acquisition in Mexico. The company provided a satisfactory analysis and explained that, for an acquisition of this type, no significant goodwill was expected. Additionally, as there were no indicators of overpayment for the transaction, the fair value of the identifiable assets assumed and liabilities acquired equalled the fair value of the consideration. The company also agreed to clarify the sensitivity disclosures provided in respect of the carrying values of the separate intangibles recognised on the acquisition. De-recognition of borrowings We requested further information to explain the accounting for the transfer of project financing debt following the sale of a non-controlling interest. The company confirmed that the transfer of the project financing debt was accounted for as a de-recognition event in accordance with IFRS 9 'Financial Instruments', with no material gain or loss on de-recognition. Non-controlling interests (‘NCIs’) We asked for more information to explain cash payments to NCI and cash receipts from NCIs in the statement of cash flows. The company provided satisfactory explanations and agreed to provide additional disclosure to explain the nature of both cash flows. We also asked the company to explain why summarised financial information for subsidiaries with material NCIs was not disclosed. The company provided this for 2019 and agreed to include the additional disclosure, as required by paragraph 12 of IFRS 12 'Disclosure of Interests in Other Entities' in its future annual accounts. Alternative performance measures (‘APMs’) We asked the company to explain how it had met the requirements of the ESMA Guidelines on APMs in respect of its adjusted EBITDA measure and to provide more information to explain a reconciling item included in the reconciliation to the relevant IFRS number. The company provided a satisfactory explanation, and agreed to amend the definition of its adjusted EBITDA measure to clarify that the inclusion of the cash gain on disposal of the NCI was included as well as 100% of the results of the related subsidiary. The company also agreed to include additional disclosures in respect of reconciling items included in the APM reconciliations. Emission quotas We questioned the company’s presentation of emission quotas as inventory, which the company satisfactorily explained. |
| Entity | Co-operative Group Limited (3) |
| Balance Sheet Date | 4 January 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 for prepaid funeral plans We asked the company for information about the judgement disclosed in relation to revenue recognition for prepaid funeral plans, which was the subject of a qualified audit opinion. We questioned its basis for concluding that the proceeds from whole of life insurance policies, in which payments from customers were invested, represented variable consideration from a contract with a customer. We also asked the company to explain the basis for recognising fair value gains and losses on revaluing these insurance policies as changes to deferred revenue; that is, on the balance sheet rather than in the income statement. Following correspondence and discussions with the company, it agreed to change its treatment. Under the revised policy it recognises fair value movements on life insurance policies in the income statement, as required by IFRS 9 ‘Financial Instruments’. The company now treats the amounts initially received from customers as revenue, in accordance with IFRS 15 ‘Revenue from Contracts with Customers’. As these amounts are received in advance of the performance of the funeral, it defers the revenue and increases this liability by recognising an effective interest charge in the income statement until the plan is redeemed. In accordance with IAS 8 ‘Accounting, policies, Changes in Accounting Estimates and Errors’, the company has accounted for this change as a prior period adjustment in the next annual report and accounts, with a restatement of comparative figures. 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. Consolidation of the Reclaim Fund We asked the company for further information about the judgement it disclosed in relation to the consolidation of the Reclaim Fund. The company had been in the process of reconsidering the extent to which it had power over the Reclaim Fund, and its exposure or rights to any variable returns from its investment in the Fund. Following discussions with the company, it concluded that it had neither power over, nor exposure or rights to, variable returns from the Reclaim Fund and agreed to deconsolidate it. The company agreed to restate the comparative amounts in its next annual report to reflect this revised accounting policy and to refer to the FRC’s involvement in this decision as described above. Alternative performance measures The company’s annual report described underlying profit before tax, an APM, as giving a ‘truer’ measure of performance than reported profit. We explained that APMs should not be given more authority than their IFRS equivalents. The company has agreed to reflect this in its future annual reports. |
| Entity | Countrywide 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 |
Provisions and contingencies We questioned why possible litigation and regulatory enforcement actions that had been identified in a prospectus issued by the company in August 2018, were not disclosed in the 2018 or 2019 annual reports. The company provided details of these matters and explained why, under the requirements of IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’, no provision or disclosure was required. |
| Entity | Cranswick plc |
| Balance Sheet Date | 28 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 |
Repayment of borrowings in the cash flow statement We asked for further information about a cash outflow from the repayment of borrowings disclosed in the cashflow statement. In addition, we asked for an explanation as to how this outflow was reflected in the analysis of net debt and, if relevant, where the borrowings were recognised in the prior year statement of financial position. The company explained that the amounts arose during the financial year as a result of acquisitions, and were repaid immediately following the acquisitions. The company agreed to separately identify this type of transaction in the net debt reconciliation in future annual reports and accounts, where relevant. Defined benefit pension asset The company had recognised a pension scheme asset, which was restricted by the ‘asset ceiling’ test. We asked the company to confirm whether the directors expected to realise the economic benefit of the surplus from a refund, a reduction in future contributions or a combination of both. The company agreed to augment the defined benefit pension asset disclosures in the next annual report and accounts to explain the trustees’ rights on winding up the relevant schemes and the basis for concluding that the company had a right to a refund of any surplus. Additionally, the company explained that the IAS 19, ‘Employee Benefits’, surplus should have been recognised in full, without restriction, but that the effect of the misstatement was immaterial. Fair values of biological assets We asked the company about the growth and mortality rate assumptions used in its fair value measurements of biological assets. We asked for an explanation as to whether these rates were significant and unobservable inputs and, therefore, whether biological assets should be classified within Level 3 of the fair value hierarchy. The company’s response addressed the questions that we had raised and concluded that its biological assets should be classified as Level 2. The company committed to describing the change of those assets previously categorised as Level 1 as a restatement and clarifying the wording in future annual reports and accounts where references to the basis of valuation and assumptions are made. Movements in working capital balances We asked for an explanation of the large increases in trade and other receivables, and trade and other payables disclosed in the statement of cash flows. The company explained the movements and agreed that additional disclosure would be provided in future annual reports and accounts for key balance sheet movements, where an explanation would assist the reader's understanding of the Group's financial position. |