Company Names Published in March 2021

On 18 March, the Government published a consultation Restoring trust in audit and corporate governance, which contains a number of proposals for enhancing the regulation of corporate reporting. One proposal is to give the regulator a statutory power to publish a summary of its findings of its individual reviews of company reports and accounts.  
 
As an interim step towards greater transparency of its corporate reporting review function, the FRC is publishing summaries of its findings of recently closed substantive reviews.  As, currently, we are subject to existing legal restrictions on disclosing confidential information received from companies, the summaries can only be disclosed with the consent of the relevant companies. These case summaries are presented in the second table below. 
 
The companies listed in the first table are those performed under the Conduct Committee’s previous operating procedures, which did not allow for the publication of case summaries. As a result, no summary has been provided for those cases in which we entered into substantive correspondence. The following key relates to both tables. 

Key 
 
  1. Only a certain number of CRR’s reviews of company reports and accounts result in substantive questioning of the Board. Matters raised may cover questions of recognition, measurement and/or disclosure.
  2. CRR’s routine reviews generally cover all parts of companies’ reports and accounts over which the FRC’s Conduct Committee has statutory powers (that is, strategic reports, directors’ reports and accounts). Limited scope reviews arise for a number of reasons, including those conducted when company reports and accounts are selected for thematic review, and may include reviews that have been prompted by a complaint. In accordance with the Conduct Committee’s operating procedures, CRR does not identify those companies whose reviews were prompted by a complaint.
  3. 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 report and accounts in response to a review.
 
Entity Balance Sheet Date Exchange of Substantive Correspondence (1) Scope of Review (2)
AJ Bell plc 30 September 2019 No Full
Britvic PLC 29 September 2019 Yes Full
Celtic plc 30 June 2019 Yes Limited
Cemex Investments Limited 31 December 2017 Yes Full
Crest Nicholson plc 31 October 2019 No Full
Dixons Carphone plc 27 April 2019 Yes Full
Gama Aviation Plc 31 December 2018 Yes Full
Grainger plc 30 September 2019 No Full
Imperial Brands PLC 30 September 2019 Yes Full
IntegraFin Holdings plc 30 September 2019 No Full
Multiplex Construction Europe Limited 31 December 2018 Yes Full
SSP Group plc 30 September 2019 No Full
Virgin Money UK PLC 30 September 2019 Yes Full
WH Smith PLC 31 August 2019 No Full

In the table below, we list the names of those companies with whom we have recently closed substantive enquiries into their reports and accounts. We indicate whether or not they have consented to publication; where they have, the case summary is provided in an expandable section.
 
We also list the names of those companies whose reports and accounts we have recently reviewed but where we did not raise a substantive enquiry and where, therefore, there are no matters to summarise and consent was not sought. 

 
Entity
Balance Sheet date
Exchange of Substantive Correspondence (1)
Scope of Review (2)
Consent to Publish Summary
3i Infrastructure plc
31 March 2020
No
Full
N/A
AA plc
31 January 2020
Yes
Full
Yes
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.
 
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Admiral Group Plc
31 December 2019
No
Limited
N/A
Aggreko PLC
31 December 2019
No
Limited
N/A
Anglo Pacific Group PLC
31 December 2019
Yes
Limited
Yes
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.
 
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Aptitude Software Group plc
31 December 2019
Yes
Limited
Yes
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.
 
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Aston Martin Lagonda Global Holdings plc
31 December 2019
No
Limited
N/A
Augean plc
31 December 2019
Yes
Full
Yes
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.
 
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Augmentum Fintech plc
31 March 2020
No
Full
N/A
BAE Systems plc
31 December 2019
No
Limited
N/A
Barclays PLC
31 December 2019
No
Limited
N/A
Biffa plc
27 March 2020
Yes
Limited
Yes
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 could not discern from the company’s disclosures: (i) the nature of the performance obligations satisfied over time, (ii) which criterion for over-time recognition had been met or (iii) the specific methods used to measure progress of delivery of the over-time performance obligations. The company agreed to enhance its accounting policy for revenue recognition to enable users to understand the performance obligations arising in different contracts and the point, or period over which, these were satisfied.

Variable consideration

We asked for further information about trade discounts and commodity rebates arising in the company’s contracts with customers, as these pricing features typically represent forms of variable consideration. The company clarified that the calculation of trade discounts and commodity rebates did not involve estimation uncertainty and, accordingly, application of the variable consideration constraint was not necessary. We suggested it would be helpful to users if the company provided a more detailed description of commodity rebates in its accounts.
 
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Bunzl plc
31 December 2019
No
Full
N/A
Burberry Group plc
28 March 2020
No
Full
N/A
Cadogan Petroleum Plc
31 December 2019
Yes
Full
Yes
Relationship with Proger Managers & Partners Srl (PMP)

We asked the company to explain whether a call option it held over the shares of PMP, together with the right to appoint two directors of PMP, gave rise to significant influence. We accepted the company’s rationale that it did not have significant influence.

Fair value assessment of the loan to PMP

The annual report and accounts disclosed that the company had been unable to obtain relevant financial information from PMP in order to perform a fair value assessment at 31 December 2019. In the light of this, we asked for further information about how the company had determined fair value.

We accepted the company’s approach to determining fair value. The company agreed to improve the disclosures around fair value measurement in accordance with IFRS 13 ‘Fair Value Measurement’ and, to the extent that the IFRS 13 disclosures do not sufficiently explain estimation uncertainty, IAS 1 ‘Presentation of Financial Statements’.

Accounting policy for cash and cash equivalents

We asked the company to clarify what maturity threshold is used for determining which short-term investments qualify as cash equivalents for the purposes of IAS 7 ‘Statement of Cash Flows’. The company confirmed that it made this assessment by reference to their maturity from acquisition and agreed to clarify the accounting policy and the nature of amounts within cash and cash equivalents in its 2020 annual report and accounts.
 
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Caledonia Investments plc
31 March 2020
Yes
Full
Yes
Alternative performance measures (‘APMs’)

We asked the company to clarify how the ongoing charges ratio had been calculated. Although a methodology for the calculation was disclosed in the report and accounts, we were unable to reconcile the ongoing charges ratio using numbers from the accounts.

The company agreed to provide reconciliations of APMs in future annual reports where the basis of computing an APM cannot be immediately derived from amounts in the financial statements.
 
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Capita plc
31 December 2019
Yes
Limited
Yes
This company was selected as part of our thematic review related to the application of IFRS 16 ‘Leases’ and, as such, only the disclosures relating to leases were reviewed.

Purchase of leased property

We asked for information on the company’s accounting for the acquisition of a property it had been leasing previously, and an explanation of the basis on which this complied with IFRS 16. We also requested a reconciliation between the various amounts disclosed in the report and accounts relating to the transaction. The company satisfactorily explained that the lease contract did not contain a purchase option and, therefore, it was correct not to anticipate the property acquisition until it had occurred. It provided a reconciliation that demonstrated how various amounts in the report and accounts related to each other.
 
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Centrica Plc
31 December 2019
Yes
Full
Yes
Estimated useful life

We questioned the basis on which the directors estimated the life of Sizewell B Nuclear Power Station. This was relevant for estimating the recoverable amount of the investment in Lake Acquisitions Limited. The company responded satisfactorily to our enquiry.

Revenue recognition

The company had disclosed an accounting policy referring to application of the entitlement method to revenue from working interests in the production of natural gas, oil and condensates. This policy is generally not applied under IFRS 15 ‘Revenue from Contracts with Customers’. The company explained that this accounting policy had not been applied, and was disclosed in error and would be removed from future accounts.

Restructuring programmes

We asked for more information about the cost efficiency programme expenses treated as exceptional items. The company provided this information and undertook to disclose additional detail about the anticipated timetable, cumulative incurred costs and total estimated costs for any multi-year restructuring programmes in future accounts.
 
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Clarkson PLC
31 December 2019
No
Limited
N/A
Computacenter plc
31 December 2019
Yes
Full
Yes
Contract provisions

We asked for clarification of the disclosures regarding the range of potential outcomes in relation to contract provisions. The company explained that an amount had been disclosed in error and clarified what was intended. If contract provisions are considered a major source of estimation uncertainty at future reporting dates, the company agreed to enhance the related disclosures and include information about the range of reasonably possible outcomes.
 
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Countrywide plc
31 December 2019
No
Limited
N/A
Drax Group plc
31 December 2019
Yes
Limited
Yes
Significant estimates disclosure

The company’s narrative reporting identified uncertainties associated with future developments in subsidy schemes and related initiatives to reduce production costs in the biomass generation business. We asked for information about how these uncertainties had been addressed in the company’s asset impairment assessments, and about which specific assumptions met the ‘estimation uncertainty’ criteria in IAS 1, ‘Presentation of Financial Statements’. The company gave a satisfactory explanation and committed to make clearer disclosures about these matters in its 2020 accounts. We also asked for an explanation of how these uncertainties had been considered in assessing the recoverability of deferred tax assets. The company provided a satisfactory explanation.

Disclosure related to impairment tests

We asked the company for further information about impairment sensitivity disclosures provided in respect of recently acquired generation businesses. The company provided a satisfactory response and agreed to clearly distinguish those disclosures which relate to ‘reasonably possible’ changes in key assumptions, which are required under IAS 36, ‘Impairment of assets’, from additional sensitivity disclosures provided voluntarily.

Segmental reporting

We requested information about the company’s segmental disclosures and overall reporting on changes in the relative importance of different fuel types to the business. The company provided a satisfactory explanation and a commitment to enhance narrative reporting on the changing mix of generation by fuel type.
 
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Electrocomponents plc
31 March 2020
No
Full
N/A
FirstGroup plc
31 March 2020
No
Limited
N/A
GoCo Group plc
31 December 2019
Yes
Limited
Yes
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.

Disclosure about significant estimates

We requested additional information about the estimation uncertainty associated with the accrued income balance. The company provided this information, including an explanation of how it estimates accrued income. It acknowledged that additional disclosure under IAS 1 ‘Presentation of Financial Statements’ about the significant estimation uncertainty associated with the balance should have been disclosed within the accounts. Where significant estimation uncertainty exists, the company agreed to disclose additional information about:
  • the process to determine the accrued income balances;
  • the nature of the estimation uncertainty;
  • ranges of reasonably possible outcomes; and
  • sensitivities of the reported amounts to changes in assumptions.
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Hammerson plc
31 December 2019
No
Limited
N/A
HICL Infrastructure PLC
31 March 2020
No
Full
N/A
Homeserve plc
31 March 2020
No
Full
N/A
HSBC Holdings plc
31 December 2019
Yes
Full
Yes
Impairment

We asked the company to provide us with further information regarding the allocation of impairment losses to the ‘Middle East and North Africa – CMB’ cash-generating unit (‘CGU’). In its December 2019 Annual Report and Accounts, the company had provided an analysis of the carrying amount and value in use of those CGUs where goodwill had been impaired during the year. The carrying amount of the ‘Middle East and North Africa – CMB’ CGU was $2.6 billion compared to a value in use of $1.5 billion. However, we noted that, of the $1.1 billion difference, only $0.1 billion had been recognised as an impairment against goodwill.

The company satisfactorily responded to our query, explaining that the non-financial assets of the group were insignificant, meaning that the residual deficit of $1 billion could not be allocated once goodwill had been impaired. In addition, the company concluded that the unallocated deficit did not meet the definition of a liability under another accounting standard.
 
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Ibstock plc
31 December 2019
No
Full
N/A
IMI plc
31 December 2019
Yes
Full
Yes
Revenue recognition

The company’s revenue accounting policy did not explain the accounting treatment applied to customer discounts and promotions in one of its three divisions. In response to our enquiry, the company explained its policies and said that it considered the level of uncertainty involved in estimating these items to be minimal. It agreed to enhance its disclosures of these items in its next report and accounts.

Derivatives

We were unable to reconcile movements in balance sheet items relating to derivatives to the relevant gains and losses recognised in the statement of comprehensive income. The company provided further details on the nature of the derivatives used in its activities and explained how the movements reconciled. In response to our queries, it committed to disaggregate certain line items relating to gains and losses on derivatives in future statements of comprehensive income. We explained that there were additional disclosures relating to other comprehensive income and hedge accounting that we would expect the company to provide in the following year’s report and accounts.
 
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John Lewis Partnership Plc
25 January 2020
No
Limited
N/A
Man Group Plc
31 December 2019
No
Limited
N/A
Marks and Spencer Group plc
28 March 2020
Yes
Full
Yes
Measurement of liabilities at amortised cost

We asked the company to explain how it had reflected the effect of changes in estimated interest cash flows on the measurement of liabilities at amortised cost, following a downgrade in credit rating, with reference to the requirements of IFRS 9, ‘Financial Instruments’, paragraph B5.4.6.

The company set out the basis of its treatment of the change in credit rating, noting that because the step-up arose because of a change in the company’s credit rating, this was considered to represent a movement in the market rate of interest. As such, the related liabilities were treated as floating rate instruments and the increased interest cost was accounted for prospectively and the liability was not remeasured. On the basis that IFRS 9 does not define ‘floating rate instruments’ or ‘market rate of interest’ and the IASB considers that it is a matter of judgement, we accepted the company’s treatment. The company committed to explain the judgement that it had applied in arriving at this treatment, along with the alternative treatment considered, in its future annual report and accounts.

Analysis of inventory and related provisions

We asked the company for information to assist us in understanding the nature of inventory held and related provisions. In particular, we asked for details of the carrying value of the Clothing and Home inventory and queried whether this category should be disaggregated and shown separately, since the risks relating to these components appeared to us to be different in nature.

The company provided the information requested and explained that disaggregating the information for Clothing and Home inventories would be inconsistent with the way that inventories were reported across all of its business units, and that its current disclosure is in line with other similar retailers. The company committed to disclose the inventory balance and related provisions by business unit in its 2020/21 interim financial statements, given the increased focus on inventory levels during Covid-19 disruption.
 
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Mondi plc
31 December 2019
No
Limited
N/A
National Express Group PLC
31 December 2019
No
Limited
N/A
Pearson Plc
31 December 2019
Yes
Full
Yes
Goodwill

We requested information about the basis on which the company had allocated goodwill to cash generating units for the purpose of impairment testing. The company responded satisfactorily and explained the judgements it had made.

Priority Account Service programme – supplier financing

We asked for information about the company’s Priority Account Service programme, which is available to suppliers. The company provided more information on the programme’s nature and use. It explained that the programme provided supplier financing but was not mentioned in the company’s report and accounts as it was not considered to be material. It does not engage in any other supplier finance arrangements but stated that if, in future, it did, it would make the appropriate disclosures in accordance with IFRS and FRC guidance, where material and relevant.
 
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Pendragon PLC
31 December 2019
Yes
Full
Yes
Impairment of assets

We asked the company for more information about the impairment of its investments in its subsidiaries. The company provided additional information and performed a more detailed assessment of individual investments. From this assessment, the company concluded that the recoverable amount of each investment supported the carrying value in the parent company financial statements. We recommended that it would be helpful to disclose the impairment testing process or, where an indication of impairment exists but after the subsequent impairment test it is concluded that no impairment has occurred, to explain the basis for that conclusion.

We questioned the company’s disclosures of impairment testing for goodwill allocated to significant cash generating units, specifically the key assumptions in cash flow forecasting and sensitivity to changes in those assumptions. We considered the information and explanations the company provided and observed that users would benefit from understanding the outlook on key aspects of the forecast and the basis for assuming resumed sales growth in the short-term forecast period. The company committed to provide clear disclosure of the sensitivity analysis in its future accounts.

Inventories

We asked a question about information within the accounts reconciling inventory movements to the related cash flows, which appeared to be incorrect or incomplete. The company acknowledged that the reconciliation contained an error relating to inventory transferred to ‘assets held for sale’ and agreed to correct this in its subsequent annual report and accounts.

We sought clarification of the sensitivity of the net realisable value of inventories to changes in the key assumptions. We considered the company’s explanation of the factors taken into account and the company confirmed that it would enhance its sensitivity analysis in future accounts.

Manufacturer and third party finance

We asked for more information about arrangements for manufacturer and third party financing of inventory. The company provided the information requested and gave undertakings to disclose, in future accounts, the basis on which the facilities could be reduced or terminated, key contractual terms governing the repayment of vehicle stocking facilities and a maturity analysis for these liabilities.

Additions to property, plant and equipment
We sought clarification of the cash flows relating to additions to property, plant and equipment. We considered the reconciliations company provided between the cash flow information and balance sheet disclosures relating to additions including contract hire vehicles, and had no further questions on this matter.

Other receivables

We questioned the composition of the balance of ‘other receivables’. The company explained that this largely comprised accrued manufacturer rebates, other manufacturer advances and accrued income relating to arranging finance and insurance packages for customers, and agreed to disaggregate material components of the balance in its future accounts.
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Persimmon Plc
31 December 2019
Yes
Full
Yes
Revenue recognition

The accounts disclosed that revenue is recognised from development agreements but no further information was provided. We enquired about the amount of revenue recognised from these agreements and the basis for recognition. The company explained that the amount of revenue related to these agreements is not material in the context of the overall revenue and the performance obligations are fulfilled over time but relatively quickly. Based on these explanations, we closed our enquiry. The company undertook to keep the disclosures relating to the revenue arising from development agreements under review.

Sensitivity analysis

We asked the company to provide further information about the sensitivity of the valuation of inventory to changes in assumptions, which was identified in the accounts as a source of estimation uncertainty in accordance with IAS 1 ‘Presentation of Financial Statements’. The company explained that the key estimates disclosed with respect to the valuation of inventory were not sources of estimation uncertainty, as defined by paragraph 125 of IAS 1, because no reasonably possible change in assumptions could result in a material impact on the carrying value of inventory within the next year. On the basis of that explanation, we closed our enquiry into the estimation uncertainty disclosures but encouraged the company to differentiate clearly any such additional disclosures from those required by IAS 1 and to explain their relevance.
 
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Polypipe Group plc
31 December 2019
No
Limited
N/A
Premier Oil plc
31 December 2019
No
Limited
N/A
Primary Health Properties PLC
31 December 2019
Yes
Full
Yes
Accounting for an asset purchase

The company disclosed that, following early-adoption of an amendment to IFRS 3 ‘Business Combinations’ regarding the definition of a business, it had accounted for a major acquisition as an asset purchase rather than as a business combination. We asked why the directors considered it appropriate to early-adopt the amendment as it had not been endorsed by the European Union at the date on which the annual report and accounts were approved.

The company acknowledged that the amendment was not available for use in the annual report and accounts under examination but provided an analysis to demonstrate that the transaction would have been accounted for as an asset purchase based on the IFRS 3 requirements that were effective when the accounts were approved. On the basis of this analysis, we closed our enquiry into the matter.

Labelling of alternative performance measures

We questioned whether descriptions given to certain alternative performance measures (APMs) were potentially misleading because they were similar to descriptions given to IFRS measures. The company accepted our observation and agreed to amend the descriptions in the next annual report and accounts.

Disclosure of directors’ emoluments

We enquired whether the disclosure of directors’ emoluments complied with UK company law and were satisfied by the company’s explanation.
 
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Proteome Science plc
31 December 2019
No
Limited
N/A
Rentokil Initial plc
31 December 2019
No
Full
N/A
RIT Capital Partners plc
31 December 2019
No
Full
N/A
Rolls-Royce Holdings plc
31 December 2019
Yes
Full
Yes
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.
 
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Rotork plc
31 December 2019
No
Limited
N/A
Senior plc
31 December 2019
Yes
Full
Yes
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.
 
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Severn Trent Plc
31 March 2020
Yes
Limited
Yes
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’.
 
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Sirius Real Estate Limited
31 March 2020
No
Limited
N/A
Smith & Nephew plc
31 December 2019
No
Full
N/A
Spirent Communications plc
31 December 2019
Yes
Full
Yes
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.
 
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Templeton Emerging Markets Investment Trust PLC
31 March 2020
Yes
Full
Yes
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.
 
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The City of London Investment Trust plc
30 June 2020
No
Full
N/A
The Law Debenture Corporation p.l.c.
31 December 2019
Yes
Full
Yes
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.
 
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The Restaurant Group Plc
29 December 2019
No
Limited
N/A
Trainline plc
28 February 2020
Yes
Full
Yes
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.
 
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Travis Perkins plc
31 December 2019
No
Full
N/A
Unilever PLC
31 December 2019
No
Limited
N/A
William Hill PLC
31 December 2019
No
Limited
N/A
WM Morrison Supermarkets Plc
02 February 2020
No
Limited
N/A