Company Names Published in March 2022

On 18 March 2021, 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 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)
The Go-Ahead Group plc 29 June 2019 Yes 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
4imprint Group plc (3)
02 January 2021
Yes
Full
Yes

Parent company cash flow statement
We asked the company to explain the extent of the cash and non-cash movements in the amounts due to and from subsidiaries in the parent company’s balance sheet. The company provided a satisfactory explanation of these movements in the year.

We also questioned the classification of dividends received as financing cash inflows in the parent company cash flow statement. The company agreed to classify these amounts as investing cash inflows in accordance with paragraph 33 of IAS 7, ‘Statement of Cash Flows’, in its 2021 financial statements and to restate the comparative amounts accordingly. As the restatement 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.

Tax on defined benefit pension contributions
We asked the company to clarify the basis of its allocation of tax on defined benefit pension contributions between the income statement and other comprehensive income. While we were not persuaded that the basis of allocation used best reflects the requirements of paragraph 63 of IAS 12, ‘Income Taxes’, the company clarified that the net effect on the income statement and other comprehensive income would not have been materially different had an alternative allocation policy been applied. The company undertook to reconsider certain aspects of the allocation and the related accounting policy note in future periods.

We also asked the company for more information on the composition of deferred tax balances related to the pension scheme. The company satisfactorily responded to this enquiry.

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888 Holdings plc (3)
31 December 2020
Yes
Full
Yes

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

Amounts due to and from subsidiaries
We asked for clarification of the value of dividends received in cash during the year based on an inconsistency in the notes compared to the parent company cash flow statement. The company acknowledged that the parent company cash flow statement included an incorrect amount for the dividend cash inflow and agreed to restate the comparatives in its next annual report and accounts. 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.

We asked the company to explain the rationale for classifying amounts due from subsidiaries as current assets and the loan payable to subsidiaries as a non-current liability. The company explained the judgements it had made and undertook to disclose details of the terms and conditions of the loan in future annual reports and accounts.

The company classified cashflows with subsidiaries as operating activities and provided a net figure for the movement on amounts due to and from subsidiaries. We enquired about the nature of the underlying transactions and asked the company to explain the basis for showing a net movement on the balances with subsidiaries. The company provided a satisfactory explanation of the nature of the transactions to support the inclusion of the cashflows within operating activities. The company undertook to present separate line items for the movements in amounts due to and from subsidiaries in future annual reports and accounts.

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Antofagasta plc
31 December 2020
Yes
Full
Yes

Accounting for tolling arrangements and treatment charges
We requested more information on the company’s accounting policy for concentrate sold under tolling arrangements to smelters and roasters.

The company satisfactorily explained that the smelters and roasters are the company’s customer, not its agent, and that the adjustment to revenue for ‘tolling’ or ‘treatment’ charges disclosed in the annual report is a pricing adjustment, rather than an expense of the company. The company undertook to revise the wording of its revenue accounting policy to explain in more detail the nature of the pricing of concentrate sales.

Recognition of deferred tax assets
We asked the company to explain the extent to which it had considered the requirements of IAS 12, ‘Income Taxes’, to recognise deferred tax assets in relation to unused tax losses to the extent that there are sufficient taxable temporary differences relating to the same taxation authority and the same taxable entity.

The company satisfactorily explained that the unrecognised tax losses relate to a single entity that has no material deferred tax liabilities, and that the losses are not eligible for offset against the taxable profits of other group entities.

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Baillie Gifford Shin Nippon PLC
31 January 2021
No
Full
N/A
Benchmark Holdings plc
30 September 2020
Yes
Full
Yes

Biological assets
We questioned the basis for treating live artemia as inventory, rather than biological assets.

We requested a reconciliation between movements disclosed in the ‘biological assets’ note and movements in biological assets evident elsewhere in the financial statements. In addition, we queried the basis for aggregating different types of movement in biological assets in the reconciliation of changes in biological assets.

We also asked for an explanation of why biological assets that will produce saleable progeny within twelve months were classified as current assets.
The company provided the explanations and reconciliations requested and agreed, where relevant, to enhance its disclosures in its future accounts.

Receivables from the related parties
We queried the nature of, and terms and conditions attaching to, substantial outstanding balances with related parties included in the company balance sheet. We also questioned the basis for classifying these balances as current. The company provided the information requested and agreed to clarify the nature of the related party relationships in its next annual report, along with more detail on terms and conditions. It also satisfactorily explained the reasons for the classification of the balances as current in its 2020 financial statements but indicated that circumstances had subsequently changed and that the balances would be classified as non-current in its next annual report.

Cash flow statement
We asked the company to explain apparent discrepancies between amounts included in the cash flow statement in relation to the disposal of trade and assets and property, plant and equipment and information in the notes to the financial statements. The company provided us with the relevant information and agreed to ensure better linkage between the disclosures in the future.

Deferred tax assets
The group had significant deferred tax liabilities in respect of accelerated capital allowances. However, there was no deferred tax asset recognised for unutilised tax losses to offset the liabilities. We requested further information in relation to the company’s assessment of the effects of the reversal of taxable temporary differences on the probability of utilisation of the remaining tax losses and temporary differences, which the company provided.

Other receivables
We asked for an analysis of the ‘other receivables’ balance. The company provided us with relevant detail and agreed to provide a greater disaggregation of items of dissimilar nature in the future. We questioned the basis for recognising a separate asset and liability for purchases that remained undelivered at the year-end. The company provided a satisfactory explanation and agreed to disclose information about the nature of the contractual rights in the future, along with the judgements made when recognising a liability and separate asset.

Dissolution of the joint venture (JV) in Chile
We asked how the assets transferred to the group upon the dissolution of the JV in Chile were measured at initial recognition and whether any gain or loss resulted from the transaction. The company provided us with a satisfactory response.

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BMO Global Smaller Companies PLC
30 April 2021
No
Full
N/A
Bodycote plc
31 December 2020
No
Limited
N/A
BT Group plc
31 March 2021
No
Full
N/A
Coca-Cola Europacific Partners Plc
02 July 2021
No
Full
N/A
Creightons Plc
31 March 2021
No
Full
N/A
Derwent London plc (3)
31 December 2020
Yes
Full
Yes

Cash flow statement
We asked the company to explain its rationale for classifying the cash flows arising from the disposal of trading properties in investing activities in the cash flow statement.

The company acknowledged that the cash flows did not arise from investing activities as defined in paragraph 6 of IAS 7, ‘Statement of Cash Flows’, and that they should be classified as operating cash flows.

The company agreed to re-present the comparative amounts in its 2021 annual report and accounts. As the re-presentation affects a primary statement, the company also agreed to disclose in its 2021 report and accounts that the matter came to its attention as a result of the Financial Reporting Council’s enquiry.

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Drax Group plc
31 December 2020
Yes
Full
Yes

Deferred tax
We asked the company for details of the evidence supporting the recognition of a deferred tax asset balance relating to start up losses. The company provided the information requested and undertook to include more specific disclosures to explain the evidence supporting such deferred tax assets in its 2021 annual accounts.

Goodwill impairment
The company provided us with information to support its use of business plan projections for periods longer than five years in its value in use calculations. IAS 36 ‘Impairment of Assets’ requires such projections to cover a maximum of five years unless a longer period is justified and the justification to be disclosed. The company undertook to include an explanation of why a longer period than five years is justified in its 2021 annual accounts.

Derivatives
We requested explanations and further information for certain aspects of the company’s disclosures about its derivatives including the cash and accounting impact of its rebasing transactions, the accounting judgements applied to its biomass purchase and sale contracts, the amount of its outstanding commitments for biomass purchase contracts and the extent of estimation uncertainty arising from its derivative valuations. The company provided the explanations and information we had requested and undertook to enhance its disclosure of these matters in future annual reports and accounts.

Management of capital
We asked for information about the key terms and conditions of the company’s loan covenants and the basis for the limited information it had disclosed about these arrangements in the annual report and accounts. The company provided the information requested, explained the rationale for its disclosure and undertook to enhance its capital management disclosures in future.

Alternative performance measures
The company clarified what its KPI for system support represented, how it had been measured and how it aligned with the company’s disclosure of revenue. The company also explained how the amount disclosed for total cash and committed facilities reconciled to information elsewhere in the annual report and accounts. The company undertook to enhance its disclosures in future to explain more clearly what these amounts represent and how they align to other disclosures.

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Elementis plc
31 December 2020
Yes
Limited
Yes

We sought further information about the company’s self-insurance provision. The company provided satisfactory explanations and agreed to ensure it is clear to a reader that the liability recognised is the gross liability, and any insurance recoveries would be recognised as a separate reimbursement asset. We also observed that we expect a clear description of the underlying claims to help users understand the nature of the company’s exposure.

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Entain plc
31 December 2020
Yes
Full
Yes

Disclosure of critical accounting estimates and judgements
We found the company’s disclosures about critical accounting estimates and judgements did not clearly distinguish between judgements and estimates. Furthermore, we considered there was scope to improve the clarity of disclosures about (i) the specific material judgements made by management and (ii) the specific assets and liabilities subject to estimation uncertainty at risk of material adjustment in the next year. The company agreed to improve its disclosures in these areas in its next accounts.

Provisions
We requested further information about the litigation and regulation provision, specifically the nature of the provision relating to Greek tax, and the nature and relevant uncertainties of other provisions included in the total for this balance. The company provided this information and, in its next accounts, agreed to enhance its disclosures over the nature of these provisions, the extent of estimation uncertainty and the likely timing of settlement.

Taxation
We asked the company for a breakdown of the tax on separately disclosed items to help explain the reason for the low effective tax rate on the total of these items, which the company provided.

Other receivables
We asked the company to clarify the composition of the ‘other receivables’ balance. The company provided the information requested.

Deposits
We queried the nature of deposits disclosed in the net debt note and where these were presented in the consolidated balance sheet as this was not clear from the accounts. The company clarified that the deposits predominantly related to the company’s spread-betting business, which was disclosed as a discontinued operation in the year.

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Flutter Entertainment plc
31 December 2020
Yes
Full
Yes

Alternative performance measures (APMs)
We noted that the commentary in the management report predominantly focused on metrics presented on a pro forma basis following a significant acquisition made part way through the year. We questioned whether the limited discussion of the IFRS measures in the management report was sufficiently balanced and comprehensive to meet the requirements of The Financial Conduct Authority’s Disclosure Guidance and Transparency Rules. The company undertook to expand the commentary on the statutory performance of the business in its 2021 annual report.

We sought an explanation as to how the company had addressed the requirements of the ESMA Guidelines on APMs to give sufficient prominence to measures directly stemming from the financial statements when compared to the equivalent APMs.

The company acknowledged that, in certain areas of the annual report, equal prominence may not have been given to IFRS-based measures. The company undertook to include in its future reporting references to IFRS-based measures in the Highlights and the Key Performance Indicators sections, as well as in the Chair’s Statement and the Chief Executive Officer’s Review.

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Fuller, Smith & Turner P.L.C.
27 March 2021
No
Full
N/A
Grafton Group plc
30 June 2021
Yes
Full
Yes

Alternative performance measures (‘APMs’)
The company presented APMs that included balances from a business that had been disposed of but had not yet completed. We asked that they clarify the rationale for including these items within their APMs. The company explained that the adjustments were made to give investors and stakeholders a better understanding of the financial position of the group at the interim reporting date.

We also asked the company to explain whether a further balance, a right of use asset, was considered to be an APM. The company confirmed that it was, and that it had been disclosed in order to be consistent with the alternative presentation of net cash and net debt, which included amounts relating to the deemed disposed business.

The company agreed to provide greater clarity and explanations of the measures in its 2022 interim report.

The divestment of the business giving rise to the APM adjustments completed in December 2021 meaning that the metrics questioned will not feature in the company’s 2021 annual report and accounts.

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Headlam Group plc
30 June 2021
Yes
Full
Yes

Interim cash flow statement
We asked the company to clarify the operating cash flow adjustments arising from the sale of a subsidiary and, in particular, the treatment of the loss on disposal of the subsidiary.

The company explained that the loss on disposal was added back to operating cash flows through its inclusion in the changes in trade and other payables line of the cash flow statement. The company agreed to present the loss on the sale of the subsidiary as a separate line item in the cash flow statement, along with improved accompanying disclosure, in its next annual report and accounts.

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Helios Towers plc
31 December 2020
Yes
Full
Yes

Judgement that contracts with customers do not contain leases
We questioned the conclusion that the contracts the company has with its customers to provide space on telecommunications towers do not contain leases, which it disclosed as a critical judgement. We enquired specifically about the terms of substitution rights in these contracts and the conclusion that these rights were substantive. The company provided satisfactory explanations and agreed to enhance the critical judgement disclosure and revise its reference to ‘lease’ agreements in its 2021 annual report and accounts.

Revenue recognition
We asked the company to clarify disclosures describing certain revenue as being recognised ahead of agreement with the customer. The company satisfactorily explained some of the key terms of its contracts with customers and how these have been considered in the recognition of revenue. It undertook to enhance its revenue disclosures to more clearly articulate the point at which revenue is recognised where additional space on towers is used.

Working capital
We asked the company to explain the difference in working capital movements between the consolidated statement of cash flows and the consolidated statement of financial position and how changes in working capital were explained within the strategic report. The company provided a satisfactory analysis and undertook to enhance the disclosures of balance sheet movements in its 2021 strategic report.

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Herald Investment Trust Plc
30 June 2021
No
Full
N/A
HgCapital Trust plc
30 June 2021
No
Full
N/A
Hyve Group plc (3)
30 September 2020
Yes
Full
Yes

Assets and liabilities recognised in respect of acquisitions – leases
We asked the company to explain why a right-of-use (‘ROU’) asset arising from a business combination in the period was significantly less than the related lease liability recognised. The company explained that the ROU asset had been reduced to reflect the fact that the company did not intend to use all the office space leased.

The company acknowledged that the ROU asset had been adjusted to reflect company-specific circumstances rather than any differences between the lease terms and market terms, as required by paragraph 28B of IFRS 3 ‘Business Combinations’. It agreed that the ROU asset should instead have been measured at the same amount as the lease liability.

The company agreed to restate the comparative amounts in the following year’s annual report and accounts, with consequential amendments to goodwill, deferred tax, impairment and depreciation. As the restatement affects the primary statements, the company agreed to disclose in its next report and accounts that the matter came to its attention as a result of the Financial Reporting Council’s enquiry.

Assets and liabilities recognised in respect of acquisitions – deferred tax assets
We sought clarification of how the deferred tax relating to the acquisitions was calculated. The company provided this information, noting that a deferred tax asset relating to deferred income and lease balances had been incorrectly described as relating to provisions and accruals. The company undertook to ensure that movements in deferred tax are more appropriately described in future annual reports and accounts.

The company agreed to disclose the tax effects of future acquisitions, should this be relevant and material. We suggested considering whether the tax effect of acquisitions also needs to be discussed in future strategic reports in order to satisfy the requirement of section 414C of the Companies Act 2006, to provide a balanced and comprehensive analysis of its position at the year end.

Assets and liabilities recognised in respect of acquisitions – deferred income
We asked the company for details of the nature of the obligation relating to the acquired deferred income and the basis for which the fair value was determined. We were satisfied with the explanation provided and encouraged the company to disclose details of how the fair value of acquired deferred income is determined, should this be material, in future annual reports and accounts.

Recoverability of intercompany receivables and investment in subsidiaries
We requested information about the basis on which the company had determined that the intercompany receivables and investment in subsidiaries included in the company statement of financial position were recoverable. The company provided a satisfactory response.

We explained that more granular disclosure about the impairment methodology applied would have helped users to understand the basis for the impairment charge recognised. We also noted that we would generally expect ‘investment in subsidiary’ balances to be impaired before intercompany debtors, given that equity holders typically bear losses before creditors.

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ICG Enterprise Trust Plc
31 January 2021
No
Full
N/A
Impax Environmental Markets plc
31 December 2020
No
Full
N/A
Impellam Group plc
01 January 2021
Yes
Full
Yes

Non-recourse financing agreements
We asked the company to provide further information about the nature of its non-recourse financing agreements and their terms conditions, and to explain how the resulting transactions had been accounted for and presented in the annual accounts. The company provided the information requested, explained the accounting and presentation, and agreed to clarify its disclosure of such arrangements in the 2021 annual report and accounts if applicable.

Impairment testing
In response to our query, the company confirmed that impairment tests had been performed at both the interim and year-end reporting dates. It confirmed that the tests had taken account of the indication of impairment provided by the company’s market capitalisation, clarified the basis on which the company’s Information Technology cash generating unit (CGU) had been impaired and explained the recoverable amount disclosed for the CGU. The company agreed to ensure that its future disclosures clarify the timing and impact of impairment tests where similar circumstances arise.

Lease terms
We requested an explanation of how the company’s approach to determining the lease term reflected the requirement of IFRS 16, ‘Leases’, to include periods covered by extension and termination options only when it is ‘reasonably certain’ that the option will, or will not, be exercised. The company clarified that, although its disclosures referred to the ‘expected’ lease term, it had applied the IFRS 16 requirement. It agreed to revise its disclosures in the 2021 annual report and accounts to refer to the ‘reasonably certain’ criterion.

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Intermediate Capital Group plc (3)
31 March 2020
Yes
Full
Yes
Non-consolidation of carried interest partnerships
We asked the company for information about the non-consolidation of carried interest partnerships. The company provided us with satisfactory explanations. In closing the matter, we encouraged the company to enhance their disclosure of the critical judgement by describing the key factors in support of its conclusion.

Parent company accounts
We asked for details about the line ‘Cash flow on behalf of subsidiary undertakings’ and the reasons for classifying these cash flows within investing activities in the parent company’s cash flow statement. We also asked for an explanation about the increase in investments in subsidiaries and how these were reported in the cash flow statement.

The company explained that the line in question included cash outflows in respect of investment in subsidiaries. The line reported netted off aggregated cash flows of dissimilar nature and included some financing cash flows. The company agreed to disaggregate cash flows of a dissimilar nature, to ensure gross presentation, to reclassify items of a financing nature and to restate comparative period information as appropriate.

In responding to our queries, the company also performed a review of intercompany receivables and identified that some amounts related to long-term investments. The company undertook to reclassify these balances from current to non-current assets and to restate comparative period information accordingly.

Consolidated accounts
We requested an explanation of the difference between the amounts in respect of the purchase of own shares reported in the statement of changes in equity (SOCE) and the consolidated cash flow statement. The company explained that the SOCE included an incorrect amount in respect of the shares retained by the employee benefit trust. The company agreed to restate the SOCE accordingly.

As these restatements affected the primary statements, we asked the company to disclose the fact that the matters had come to its attention as a result of our enquiry.
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Intermediate Capital Group plc (3)
31 March 2021
Yes
Limited
Yes

The following matters arose as a result our limited scope review of how the undertakings the company gave during our review of its 2020 annual report and accounts were addressed in its 2021 report and accounts.

Prior year restatements
We queried a number of significant prior-year restatements of the group and parent company cash flow statements, which were not explained in the notes to the financial statements. The company provided us with adequate explanations for the restatements and agreed to include the missing disclosures in the forthcoming interim financial statements. As the disclosures related to prior-year restatements of the primary statements, we asked the company to disclose the fact that the matters had come to its attention as a result of our enquiry.

Other matters in relation to the cash flow statements
We asked for reconciliations of a number of items in the parent company and group cash flow statements to the corresponding movements in the statements of financial position. This highlighted that the dividends declared by subsidiary undertakings were aggregated within ‘Net investment returns’ line, rather than reported in the ‘Interest and dividend income’ line. The company agreed to report such amounts separately in the future and to restate the comparative amounts accordingly.

In closing the case we noted that we expect material non-cash movements in the parent company investments in subsidiaries to be disclosed in the future. We also explained that we expect the captions used for financial line items to reflect their contents and items of dissimilar nature to be disaggregated.

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International Consolidated Airlines Group S.A.
31 December 2020
Yes
Limited
Yes

This company was selected as part of our thematic review of alternative performance measures (‘APMs’) and, as such, only these disclosures were reviewed.

Exceptional items – tax
The company’s accounting policy for exceptional items explained that exceptional items are those that require separate disclosure due to their size, nature or incidence. The policy included a list of examples of exceptional items, none of which related to tax. We asked the company to explain the extent to which it considered tax-related items when applying the accounting policy. We closed the matter after the company explained that its accounting policy for exceptional items applies to both tax and non-tax items. In closing the matter, we observed that, as the existing accounting policy is generic, it may be helpful if the company clarified that the policy applies to both tax and non-tax items.

We also asked for the company’s basis for concluding that certain tax credits and charges disclosed in its IFRS accounts should not be classified as exceptional items. We were satisfied with the company’s response, which explained that gains or losses due to changes in tax rates were not classified as exceptional items because such changes occur on a regular basis. It also explained that a tax charge from the derecognition of deferred tax assets was not classified as an exceptional item in view of guidance in our 2020 Covid-19 thematic review, which discourages the arbitrary splitting of items between Covid-19 and non-Covid-19 elements, as such allocations are likely to be highly subjective and, therefore, unreliable.

Tax repayment
We asked the company to provide us with additional information to enable us to understand the nature of a tax repayment recognised during the year and the basis on which it had been included in the company’s alternative performance measures. The company explained that the tax repayment was recognised when it elected to partially carry back tax losses incurred during 2020 to the previous 12-month period, as allowed by the Corporation Tax Act 2010. We closed our query in view of the above guidance contained in our Covid-19 thematic review.

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IP Group plc
31 December 2020
Yes
Full
Yes

Investment entity exemption
We asked for an explanation of the basis on which the company determined it did not qualify for the investment entity exemption in IFRS 10 ‘Consolidated Financial Statements’.

The company’s response satisfactorily addressed the question we had raised and included a commitment to provide specific disclosure about the assessment of the investment entity exemption in future annual reports to improve the clarity over the basis of preparation of the financial statements.

Fair value measurement
We asked for further information about the fair value measurements of unquoted equity investments categorised within ‘other valuation methods’ and the sensitivity of these measurements to changes in unobservable inputs.

The company provided the information requested and agreed to expand and clarify the description of its valuation techniques and to more explicitly link those techniques to numerical analysis in future annual reports. It also agreed to further disaggregate the ‘other valuation methods’ category in the numerical analysis included in the notes to the financial statements.

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JPMorgan European Discovery Trust plc
31 March 2021
No
Full
N/A
Keller Group plc (3)
31 December 2020
Yes
Limited
Yes

This company was selected as part of our thematic review related to the application of IAS 37, ‘Provisions, Contingent Liabilities and Contingent Assets’; only the disclosures relating to those matters were reviewed.

We sought further explanation of the company’s arrangements for insurance and self-insurance, in connection with its disclosure of ‘insurance and legal provisions’. The company provided a detailed response and acknowledged that it had presented these provisions net of insurance reimbursements which were virtually certain to be received. It also acknowledged that the reimbursement assets should have been presented separately, and agreed to restate the relevant balance sheet lines. As the change affected a primary statement, we asked the company to disclose the fact that the matter had come to its attention as result of our enquiry. The company also agreed to ensure that the recognition criteria for these provisions are more clearly described in its future disclosures.

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Lloyds Banking Group plc
31 December 2020
No
Full
N/A
London Stock Exchange Group plc
30 June 2021
Yes
Full
Yes

Alternative performance measures
We questioned the prominence given to alternative performance measures in the company’s interim report following material business combinations and divestments in the period. We asked the company to explain how it will ensure that the strategic report to be published in the 2021 annual report would be fair, balanced and comprehensive. The company explained the steps it will take to ensure this, which include providing detailed reconciliations from the statutory results to adjusted measures, making sure adjusted measures are appropriately labelled and ensuring that there is sufficient commentary on both the statutory and adjusted financial information.

Valuation of shares
As part of consideration for a business combination, the company issued unlisted, limited voting ordinary shares in addition to ordinary shares. We asked the company how it had valued the different shares issued. The company provided a satisfactory explanation and undertook to disclose the value of the shares issued, how the unlisted, limited-voting ordinary shares have been valued, and whether that determination required the exercise of significant judgement.

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Loungers plc
18 April 2021
No
Full
N/A
M&G Plc
31 December 2020
Yes
Full
Yes

Fair value measurement of level 3 assets
We asked the company for quantitative details of the significant unobservable inputs used to measure the fair value of assets held at level 3 in the fair value hierarchy.

The company provided the information requested and agreed to enhance its disclosures in this respect in future annual reports and accounts.

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Metro Bank Plc
31 December 2020
No
Full
N/A
Micro Focus International plc
31 October 2020
Yes
Limited
Yes

This company was selected as part of our thematic review of alternative performance measures (‘APMs’) and, as such, only these disclosures were reviewed.

Tax relating to APMs
We asked the company to explain its policy for classifying individual tax charges or credits as exceptional items. We also asked for its basis for concluding that certain tax credits and charges disclosed in its IFRS accounts should not be classified as exceptional items.

We closed the matter after the company explained that its existing accounting policy for exceptional items applies to both tax and non-tax items. It explained that tax credits or charges arising from changes in statutory tax rates are not classified as exceptional items because such changes routinely occur in the ordinary course of its business. It also explained its rationale for adjusting a tax-related APM, presented in the previous year, for a deferred tax charge that had not been classified as an exceptional item.

We were satisfied with the response and closed our enquiry. In closing the matter, we recommended that the company provides specific explanations for any tax amounts classified as exceptional items in its future accounts.

Multi-year integration and restructuring programmes
We questioned why exceptional costs from certain multi-year integration and restructuring programmes were described as ‘one-off’, as the company has incurred such costs over several years, and the strategic report highlighted that in 2020 the company began implementing a three-year transformation programme. We closed our enquiry after the company agreed that its future disclosures would not imply that all its exceptional items are due to ‘one-off’ events.

We also asked the company to include certain additional information in its future APM disclosures in relation to any multi-year restructuring and other strategic programmes that are treated as exceptional or adjusting items. The company agreed to provide the information.

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MJ Gleeson plc
30 June 2021
No
Full
N/A
Motorpoint Group plc
31 March 2021
No
Full
N/A
National Express Group PLC (3)
31 December 2020
Yes
Full
Yes

Presentation of cash flows and payables balances in relation to factoring
We asked the company for further information about its arrangements for the advance factoring of revenues and, in particular, for an explanation of why cash inflows had been presented within ‘operating activities’ in the Statement of Cash Flows. The arrangements did not result in the derecognition of a trade receivable and appeared to represent short-term borrowings which are required to be classified as ‘financing activities’ under paragraph 17(c) of IAS 7, ‘Statement of Cash Flows’. We also asked the company whether the advance factoring liability was included within the ‘net debt’ alternative performance measure (APM).

The company agreed to classify the payables balance within borrowings in its 2021 accounts, with corresponding adjustments to the presentation of the associated cash flows and the net debt APM, and to restate these amounts in the comparative period. Under the revised policy, cash inflows from the bank and the subsequent outflows on repayment will be treated as financing activities, with receipts of cash from customers presented within operating activities. The company agreed to disclose the fact that the matter had come to its attention as result of our enquiry.

Presentation of Covid support grants
We asked for clarification of whether Covid support grant or subsidy arrangements provided compensation for any of the Covid-related costs presented within separately disclosed items. The company satisfactorily explained that they did not.

Revenue recognition policy – booking fees
We asked the company to explain why booking fees were recognised at the point of sale and treated as a separate performance obligation to the corresponding ticket revenue. It was unclear what service was provided to the customer at the point of booking, and how this may be considered distinct from other promises in the contract in line with the criteria set out in IFRS 15, ‘Revenue from Contracts with Customers’, paragraphs 22(a) and 27.

The company re-examined their view on this matter and concluded that the booking fee did not represent a distinct service and consequently would be recognised in the period in which the related travel occurred. The company confirmed that the amounts concerned were not material in the current reporting period and that the adjustment would be recognised prospectively.

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Pharos Energy plc
30 June 2021
No
Full
N/A
Premier Foods Plc
31 March 2021
No
Full
N/A
Provident Financial plc
31 December 2020
Yes
Full
Yes

We sought further information about adjustments made by the company to its models to calculate expected credit losses. The company provided satisfactory explanations and agreed to enhance its disclosures by quantifying overlays applied to the expected credit loss models, distinguishing between in model and post model overlays. The company also agreed to include an explanation of the underlying modelling methodologies with a clear explanation of why the overlays are needed and, to the extent they exist, disclose material sensitivities to overlay amounts.

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Rubix Group Holdings Limited
31 December 2020
Yes
Limited
Yes

This company was selected as part of our thematic review of streamlined energy and carbon reporting (‘SECR’) disclosures and, as such, only these disclosures were reviewed.

Streamlined energy and carbon reporting
We asked the company to explain why it had not satisfied one aspect of the SECR disclosure requirements, in relation to the disclosure of energy consumption. These requirements applied for the first time to the company’s 2020 annual report and accounts. The company explained why it did not include this information in the 2020 accounts and agreed to make the required disclosures in the 2021 and future annual reports and accounts.

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Saga plc
31 January 2021
Yes
Full
Yes

Cash flow hedges
We asked the company to provide further information regarding the gains recognised through other comprehensive income in relation to a hedging instrument for the acquisition of two new ships, and also the accounting adopted on the acquisition of those ships. The company provided the information requested.

Modification of lease terms
We also asked for further explanation of the reduction in the cost of right of use assets, and the related reduction in depreciation, with respect to river cruise ships, described as the “effect of modification of lease terms”. The company confirmed that this related to the disposal of the right of use assets due to the termination of the associated leases, and that the loss arising on this lease termination was not material.

Impairment review and useful economic life of cruise ships
We asked the company to explain how the global transition to net zero, including any possible future changes in regulation or customer behaviour arising from this, had been taken into account in both determining the useful economic lives and residual values of cruise ships, and producing the cash flow forecasts used as the basis for the impairment review of the Spirit of Adventure.

The company provided the information requested and undertook both to continue to monitor environmental developments and revise these estimates as and when required, and also to look to add further disclosure in its next annual report and accounts to explain how climate considerations have been factored into the impairment assessment of each ship.

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Savills plc (3)
31 December 2020
Yes
Full
Yes

Payments on business acquisitions contingent upon continuing employment
We asked the company for more information on its accounting policies for, and disclosure of, contingent payments that are linked to continuing employment, which under paragraph 52(b) of IFRS 3, ‘Business Combinations’, are required to be accounted for separately from the acquisition accounting.

The company satisfactorily explained its accounting policies and undertook to enhance its future disclosures in respect of payments linked to continuing employment.

The company also identified that certain payments linked to continuing employment had been incorrectly classified as investing cash flows in the consolidated statement of cash flows for the year ended 31 December 2020. The company undertook to restate the comparative amounts in the 2021 accounts accordingly. 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.

Provisions for professional indemnity claims
We asked the company to clarify its accounting treatment for provisions for professional indemnity claims in excess of the self-insured element.

The company undertook to present reimbursement assets separately in the balance sheet from the related liability in future accounts, as required under paragraph 53 of IAS 37, ‘Provisions, Contingent Liabilities and Contingent Assets’. The company noted that the effect on the amounts reported at 31 December 2020 is not quantitatively material and that consequently these amounts will not be restated in the 2021 accounts.

The company also clarified that the provision was not considered to be an estimate that has a significant risk of resulting in a material adjustment to the carrying amount within the next financial year under paragraph 125 of IAS 1, ‘Presentation of Financial Statements’, and that it will reconsider its future disclosures accordingly.

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Schroders plc
31 December 2020
Yes
Full
Yes

Disclosure of unit-linked liabilities and related assets
We asked the company to explain its basis for concluding that no further disclosures were required in respect of the assets backing unit-linked liabilities. The company explained that it does not consider it necessary to provide any further disclosures regarding the risks arising from these assets as these risks are borne by the life insurance policyholders and the group has no direct exposure. It agreed to expand its fair value hierarchy disclosures to include a breakdown of these assets by type.

Fair value measurement
We also asked for further details of the fair value measurements of financial assets and liabilities held at level 3 in the fair value hierarchy and the sensitivity of these measurements to changes in estimation inputs. The company explained that these balances are not homogeneous in nature, and consequently the valuations make use of different methodologies and assumptions. There are no individually significant assumptions or reasonably possible alternatives that would lead to a material change in fair value. The company agreed to disclose this information in future financial statements.

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Serco Group plc
31 December 2020
Yes
Full
Yes

Share repurchase programme
We asked the company to explain the basis on which no liability had been recognised for the irrevocable instruction to repurchase shares announced in December 2020. The company explained that the contract was cancellable until the share buy-back period commenced, in January 2021 and, as such, no obligation existed at 31 December 2020.

Modifications of contracts with customers
We questioned the company’s accounting policy for the modifications of contracts with customers. The company acknowledged that the disclosed policy was not in accordance with the requirements of IFRS 15 and agreed to update it. The company also confirmed no contract modifications to which the incorrect policy might have been applied had occurred either during the year ended 31 December 2020 or in the six-month period to 30 June 2021.

Other provisions
We asked the company for further information about ‘other provisions’. The company provided the information requested and agreed to enhance the disclosures relating to the largest component of this balance, including the uncertainties associated with its timing and amount.

Other payables
We requested an analysis of items included within ‘other payables’ and, subsequently, sought clarification of the nature and uncertainties associated with claims related liabilities, which were a significant component of the ‘other payables’ balance. The company provided the information requested and agreed that, as there is some uncertainty over the timing of payment of the claims, classification of the claims related liabilities as a provision may be appropriate.

The company explained it planned to record the reclassification from other payables to provisions as a current year reclassification in FY21, rather than as a prior period adjustment, as it did not consider the effect of the change to be material. We observed that some users might reasonably expect that a change in presentation of this size would be reflected by way of prior period restatement but did not consider it proportionate to pursue this judgement further; however, we did ask management to explain their judgement regarding the materiality of this adjustment in the disclosure accompanying the change in classification.

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Severn Trent Plc
30 March 2021
No
Full
N/A
Sportech PLC
31 December 2020
Yes
Full
Yes

Cash flow statement - classification of interest paid
We asked for the company’s rationale for classifying interest paid on lease liabilities as arising from financing activities in its cash flow statement, while classifying bank interest within operating activities. The company acknowledged that all interest payments should be classified consistently in the cash flow statement. In future, it will classify bank interest as an outflow from financing activities. It will not reclassify the comparative amounts as it does not consider bank interest to be material.

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Synthomer plc
31 December 2020
Yes
Limited
Yes

Provisions
We asked the company to explain whether it had an obligation to decommission its coal-fired utility plant in the Czech Republic and to confirm the amount included in provisions for the associated expected outflows.

The company clarified that the restructuring charge and provision included the estimated cost to meet the legal obligation to decommission the utility plant. The company explained that the amount was not material to the group, but acknowledged, with hindsight, that the disclosure would have been improved if it had stated that the restructuring charge and provision included the decommissioning costs of the utility plant.

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Tesco Group PLC
27 February 2021
No
Full
N/A
The British Land Company PLC
31 March 2021
No
Full
N/A
The Henderson Smaller Companies Investment Trust
31 May 2021
No
Full
N/A
The Unite Group PLC
30 June 2021
Yes
Full
Yes

Revenue earned from joint venture
We asked the company to explain the basis for recognising only half of the performance fee revenue earned from its joint venture and to provide the related accounting entries. The company explained that it made an accounting policy choice to eliminate its share of the joint venture fee against revenue and provided satisfactory explanations. It undertook to enhance the related narrative disclosures in its 2021 annual report and accounts.

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Trainline PLC
28 February 2021
No
Full
N/A
TT Electronics plc
31 December 2020
Yes
Full
Yes

Classification of share-based payments
In the light of certain share-based payment awards which were disclosed as settled in cash during the year, we asked the company to explain the basis for classifying its share-based payment schemes as equity-settled according to the criteria in paragraph 41 of IFRS 2 ‘Share-based Payment’.

The company explained that the cash settlements were largely in respect of its legal duties regarding employees’ tax obligations related to the share-based payment schemes. It also explained that certain schemes gave the company the option to settle either in cash or in equity and that the balance of the cash settlements during the year comprised awards that had been settled directly in cash at the company’s option. We were satisfied with the company’s explanations, and asked the company to consider the implications of these cash settlements for the classification of future share-based payment awards.

The company undertook to update its narrative disclosures to explain the basis on which it classifies its share-based payment transactions as equity-settled and to rename certain headings in its future annual reports and accounts.

Deferred tax on provisions
We asked the company to explain how it had calculated a deferred tax asset line item labelled ‘provisions’ of £7.6m in relation to the total balance sheet provisions of £7.5m.

The company explained that the deferred tax amount was largely related to intercompany accruals, not IAS 37 ‘Provisions, contingent liabilities and contingent assets‘, and undertook to rename the deferred tax line item appropriately in its 2021 annual report and accounts.

Deferred tax on cash flow hedging instruments
We asked the company to explain why we were unable to identify a deferred tax liability in relation to the net asset recognised in respect of its cash flow hedging instruments.

The company confirmed that a deferred tax liability should have been recognised and undertook to correct this prospectively in its future annual reports and accounts, since the effect on the 2020 financial statements was not material.

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Whitbread PLC
25 February 2021
No
Full
N/A
Workspace Group PLC
31 March 2021
No
Full
N/A
WPP plc
31 December 2020
Yes
Full
Yes

Revenue recognition
We asked the company why volume rebates received from suppliers for transactions entered into on behalf of clients are recognised as revenue in cases where the rebates are retained by the Group. The company explained that this treatment is adopted only when it is acting as agent; where it acts as principal, the rebates reduce the associated cost line.

Investments in associates
We requested an explanation of the way in which the group’s share of other comprehensive income from associates had been recorded in the consolidated financial statements.

The company clarified that the group’s share of other comprehensive income from associates had been recognised in the consolidated statement of comprehensive income within ‘Exchange adjustments on foreign currency net investments’. The company undertook to separately disclose its share of other comprehensive income from associate undertakings in both the statement of comprehensive income and the note to the accounts that reconciles the opening and closing carrying values of interests in associates in its 2021 financial statements.

Consolidated statement of changes in equity
We questioned the nature of, and the accounting policy applied to, the transactions giving rise to the credit entry recorded directly in reserves described as ‘recognition/remeasurement of financial instruments’.

The company noted that the transactions related to the recognition and derecognition of non-controlling interest put option agreement liabilities that arose in acquisitions and provided a satisfactory explanation of the accounting applied to the transaction.

The company agreed to clarify the accounting policy in this area and to amend the description in the consolidated statement of changes in equity to ‘Recognition/derecognition of liabilities in respect of put options’.

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Zotefoams plc
30 June 2021
No
Full
N/A