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 | Royal Dutch Shell 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 |
The company was selected as part of our thematic reviews into companies’ financial reporting in respect of climate change and the application of IFRS 16 ‘Leases’. As such, only disclosures relating to leases or climate-related aspects of the company’s reporting were reviewed. We did not ask any substantive questions in respect of leasing. Impairment testing We asked for further information about the following matters in respect of the company’s impairment assessments:
The company confirmed that oil and gas prices met the criteria in IAS 1, and provided undertakings to clarify which assumptions meet the criteria and to disclose sensitivities for commodity prices and other assumptions, where required, in its 2020 financial statements. The company provided satisfactory responses in respect of the other matters. We also highlighted relevant expectations and best practice for future reporting on these matters, as set out in our November 2020 thematic report. Deferred tax We requested clarification of how climate change uncertainties had been incorporated into the company’s assessment of the recoverability of deferred tax assets. The company provided a satisfactory response. Decommissioning liabilities We asked for further information about the following matters in respect of decommissioning and restoration (D&R) liabilities:
The company confirmed that the discount rate met the criteria in IAS 1, and provided an undertaking to disclose sensitivities to changes in the rate in its future accounts. The company stated its intention to review the D&R provision policy in 2020 in response to operational changes. We highlighted that the basis for non-recognition of certain liabilities may involve a judgement requiring disclosure under IAS 1. We were satisfied with the company’s response on these matters. |
| Entity | Signature Aviation 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 | Consent withheld |
| Entity | SolGold 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 | St James House plc (3) |
| Balance Sheet Date | 31 January 2019 |
| 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 | Tate & Lyle 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 | The British United Provident Association Limited |
| Balance Sheet Date | 30 June 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | June 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Claims reserving policy We asked the company for further details of its accounting policy for claims reserving. This was in the light of an additional provision established at 30 June 2020 for the cost of treatments deferred as a result of COVID-19 related lockdowns and disruption to healthcare services that were ultimately still expected to be provided. The company provided a satisfactory explanation of the accounting adopted and agreed to enhance the disclosures in its next set of accounts to make this clearer. Return of exceptional profits We also asked for details of the accounting for a public commitment made to pass any exceptional financial benefit ultimately arising from COVID-19 onto UK health insurance customers. The company provided a satisfactory explanation of this and agreed to provide further disclosures in its next annual report and accounts of the amount, basis of calculation and presentation of the resulting provision, as well as any key assumptions and sensitivities. |
| Entity | Tullow Oil 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 |
Going concern disclosures We were not able to locate, in the accounts, certain of the disclosures required by IAS 1, ‘Presentation of Financial Statements’ when a company identifies material uncertainties about its ability to continue as a going concern. The company agreed to include the disclosures within its accounts in the future, if they remain relevant. Loan covenants We asked the company for further information about its main loan covenants, and the performance against those covenants in the period. The company explained the nature of the main covenants under their Reserve Based Lending facility, and their performance against those covenants. The company agreed to include enhanced disclosures about its main borrowing covenants in its next annual report and accounts. Uncertain tax and regulatory positions The company identified uncertain tax and regulatory positions as a key source of estimation uncertainty. We asked the company for further information about the nature of the amounts provided, and drew its attention to certain of the disclosure requirements of IAS 1 in relation to major sources of estimation uncertainty. The company responded satisfactorily to our questions, and agreed to provide additional information about these sources of estimation uncertainty. Critical accounting judgements The company disclosed a critical accounting judgement in relation to certain joint venture leases. We asked the company to explain the judgement involved, and to provide some further information about the leases in question. The company satisfactorily explained the nature of the judgement. The company also agreed to enhance the disclosure, if applicable, in future periods, to clarify that the judgement relates to accounting for the lease as a short-term lease, consistent with the principles of paragraph 6 of IFRS 16, ‘Leases’. |
| 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 |