CRR Case Summaries and Entity-specific Press Notices

The FRC publishes, on a quarterly basis, summaries of its findings from recently closed reviews that resulted in a substantive question to a company (‘Case Summaries’). In addition, it publishes the names of companies whose reviews were closed in the previous quarter without the need for a substantive question. No Case Summary is prepared for such reviews.

Case Summaries, which are available for cases closed in the quarter ending March 2021 onwards, are included in the table below. As, currently, the FRC is subject to existing legal restrictions on disclosing confidential information received from a company, the Case Summaries can only be disclosed with the company's consent. Where consent has been withheld by the company, that fact is disclosed in the table.

From March 2018 until March 2021, the FRC published the names of companies whose reviews were closed in the previous quarter but did not prepare Case Summaries. However, on an exceptional basis, specific cases may be publicised through entity-specific Press Notices, which can also be found in the table below.

The FRC’s reviews are based solely on the company’s annual report and accounts (or interim reports) and do not benefit from detailed knowledge of the company’s business or an understanding of the underlying transactions entered into. They are, however, conducted by staff of the FRC who have an understanding of the relevant legal and accounting framework. The FRC’s correspondence with the company provides no assurance that the annual report and accounts (or interim reports) are correct in all material respects; the FRC’s role is not to verify the information provided but to consider compliance with reporting requirements. The FRC’s correspondence is written on the basis that the FRC (which includes the FRC’s officers, employees and agents) accepts no liability for reliance on its letters or Case Summaries by the company or any third party, including but not limited to investors and shareholders.

Key

  1. Only a certain number of CRR’s reviews result in substantive questioning of the Board. Matters raised may cover questions of recognition, measurement and/or disclosure.
  2. CRR’s routine reviews of companies’ annual reports and accounts generally cover all parts over which the FRC has statutory powers (that is, strategic reports, directors’ reports and financial statements). Similarly, CRR’s routine reviews of companies’ interim reports will generally cover all information in that document. Limited scope reviews arise for a number of reasons, including those conducted when a company’s annual report and accounts or interim report are selected for thematic review or reviews that have been prompted by a complaint. In accordance with the Supervision 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 annual report and accounts or interim report in response to a review.
  4. Case closed after 1 January 2021 but performed under operating procedures that did not allow for the publication of Case Summaries.
  5. From the quarter ended June 2023, the FRC started identifying the auditor of the annual report and accounts, or the audit firm that issued a review report on the interim report, that was the subject of the CRR review. This information was also back-dated for closed cases publicised from the quarter ended September 2022. Cases marked N/A relate to those published prior to September 2022 or interim reviews that did not have a review opinion.’

Case Summaries

CRR Case Summaries and Entity-specific Press Notices (Excel version)

1141 case summaries
Entity ASOS Plc
Balance Sheet Date 31 August 2022
Exchange of Substantive Letters (1) Yes
Scope of Review (2) Full
Quarter Published December 2023
Auditor (5) PricewaterhouseCoopers LLP
Case Summary / Press Notice

Post balance sheet event: change to the Group operating model

The company had recognised significant inventory write-downs as non-adjusting post balance sheet events due to changes made to the Group operating model. We asked whether these write-downs, and the prices subsequently achieved on inventory sold through off-site clearance routes after the balance sheet date, were indicative of the value of the inventory at the year-end. The company provided an adequate explanation of why the inventory write-down was a non-adjusting post-balance sheet event.

Movements in the inventory provision

We asked for details of any inventory write-downs or reversals of write-downs in the year. The company responded satisfactorily to our enquiry and agreed to enhance its disclosures in its next annual report.

Going concern

We queried whether significant judgement had been applied in the determination that there were no material uncertainties over going concern. The company explained why it had concluded no significant judgement had been made. Nevertheless, we noted that there was a degree of judgement in this conclusion and the company agreed to carefully consider, in its next annual report, whether the assessment of going concern involved significant judgement.

We also asked for further details of the base case assumptions used in the going concern assessment. The company agreed to disclose quantified base case assumptions for both the going concern assessment and the viability statement in its next annual report.

Discount rate (dilapidations provision)

We asked the company to clarify how the discount rates for the dilapidations provision had been determined. We also asked for an explanation of a material movement relating to the effect of movements in the discount rate. The company provided the information requested and agreed to revise its accounting policy description and enhance the related disclosures in future annual reports.

Entity Bank of Georgia Group PLC
Balance Sheet Date 31 December 2022
Exchange of Substantive Letters (1) No
Scope of Review (2) Full
Quarter Published December 2023
Auditor (5) Ernst & Young LLP
Case Summary / Press Notice N/A
Entity Billington Holdings Plc
Balance Sheet Date 31 December 2022
Exchange of Substantive Letters (1) No
Scope of Review (2) Full
Quarter Published December 2023
Auditor (5) Grant Thornton UK LLP
Case Summary / Press Notice N/A
Entity Britvic plc (3)
Balance Sheet Date 30 September 2022
Exchange of Substantive Letters (1) Yes
Scope of Review (2) Full
Quarter Published December 2023
Auditor (5) Ernst & Young LLP
Case Summary / Press Notice

Share repurchase arrangements

We asked the company to clarify the terms of its share repurchase arrangements and received a satisfactory response. The company agreed to enhance its accounting policy disclosure for any future share buybacks.

Classification of intercompany loans receivable by the parent company

We sought an explanation for the classification of all intercompany loans receivable by the parent company as current assets. The company acknowledged that a large part of the overall balance was not expected to be realised within 12 months of the balance sheet date and, accordingly, should be presented as non-current assets. The company agreed to revise the presentation and restate comparative figures in its 2023 annual report and accounts.

Presentation of overdrafts and cash and cash equivalents

We also noted that a reference to cash pooling in the notes to the financial statements did not state the extent (if any) of off-setting financial assets and liabilities. Having reviewed its arrangements, the company concluded that positive and negative balances in the cash pooling facility did not meet the criteria for net presentation. The company is revising its treatment of these balances and will restate comparative figures in its 2023 annual report and accounts, to show the gross amounts for overdrafts and cash and cash equivalents.

Since these restatements affect a primary financial statement of the parent company and consolidated group, respectively, the company agreed to disclose in its 2023 annual report and accounts the fact that the matters had come to its attention as result of our enquiry.

Entity Bunzl plc
Balance Sheet Date 31 December 2022
Exchange of Substantive Letters (1) Yes
Scope of Review (2) Full
Quarter Published December 2023
Auditor (5) PricewaterhouseCoopers LLP
Case Summary / Press Notice

Consolidated cash flow statement and movement in net debt

We requested more information about an amount described as realised losses on foreign exchange contracts included as a financing cash outflow in the consolidated cash flow statement, and a non-cash movement with an identical description and amount included in the movement in net debt. The company satisfactorily explained that the cash outflow related to the settlement of foreign currency forward contracts related to financing liabilities, and that the non-cash movement related to the valuation loss in relation to the same contracts. The company agreed to improve the clarity of the disclosure by amending the description of the cash outflow on the face of the consolidated cash flow statement accordingly.

Amounts owed by group undertakings

We sought clarification of the basis on which amounts owed by group undertakings were classified as current assets in the parent company balance sheet. The company satisfactorily responded to our enquiries.

Entity Capricorn Energy PLC
Balance Sheet Date 31 December 2022
Exchange of Substantive Letters (1) No
Scope of Review (2) Full
Quarter Published December 2023
Auditor (5) PricewaterhouseCoopers LLP
Case Summary / Press Notice N/A
Entity Clifford Chance LLP
Balance Sheet Date 30 April 2022
Exchange of Substantive Letters (1) Yes
Scope of Review (2) Full
Quarter Published December 2023
Auditor (5) PricewaterhouseCoopers LLP
Case Summary / Press Notice

Revenue recognition

We requested information about the nature of contingent matters affecting consideration and the process for estimating variable consideration. The LLP provided the requested details and satisfactorily explained the factors considered in applying the revenue constraint.

We asked the LLP to describe the input method used for measuring progress towards satisfying the performance obligations for fixed and capped fee contracts. It provided the requested description and agreed to explain the method used in its next annual report and accounts.

For the two matters above, we questioned whether there were any judgements made, or sources of estimation uncertainty relating to, the measurement of the related contract assets or liabilities that would require disclosure in accordance with IAS 1, 'Presentation of Financial Statements'. The LLP provided a satisfactory response as to why it did not consider this to be the case.

We sought an explanation of the nature of the external disbursements excluded from revenue and the basis on which the LLP had concluded that it acts as agent, rather than principal, for such services. The LLP provided a satisfactory response and agreed to clarify that it acts as agent for such arrangements in its 2023 annual report and accounts.

Costs for claims

We requested information about the amounts recognised in relation to claims by clients, and regulatory investigations or proceedings, and asked the LLP to explain why the related costs were presented as an accrual rather than as a provision. We also asked the LLP to clarify the accounting policy applied to the cost of claims covered by its professional indemnity insurance.

The LLP provided the requested amounts and satisfactorily explained its accounting policy for amounts recoverable from its professional indemnity insurance. It acknowledged that the obligation for such claims should be recognised as a provision but explained that it did not consider this matter to be material for the year ended 30 April 2022.

Restatement of the LLP’s individual financial statements

We asked the LLP to provide further information about a prior year restatement of the LLP’s individual financial statements. The LLP confirmed that it related to the correction of a prior year error in respect of intra-group accounting entries. It acknowledged that it had continued to investigate the matter during the year ended 30 April 2023. The LLP explained that, as a result, of this exercise, it had concluded that another restatement of the LLP’s individual financial statements was required to correct the matter. The LLP agreed to disclose further information to explain the restatements in its annual report and accounts for the year ended 30 April 2023.

We also asked the LLP to clarify the basis on which it considered the LLP’s profit share arrangement with members to be discretionary, for which it provided a satisfactory response.

Entity Darktrace plc
Balance Sheet Date 30 June 2022
Exchange of Substantive Letters (1) Yes
Scope of Review (2) Full
Quarter Published December 2023
Auditor (5) Grant Thornton UK LLP
Case Summary / Press Notice

Sales arrangements that involve channel partners (‘reseller partners’ or ‘distributors’)

We asked for further information about sales made through channel partners as the contractual arrangements between the company, channel partners and end-customers were unclear. We closed our enquiry after the company provided relevant explanations and agreed to enhance the accounting policies and judgements presented in its 2023 annual report, which is now publicly available.

Opt-out provisions included in sales contracts

We asked the company to explain its accounting for sales contracts where customers have the right to opt-out within six months of the commencement date. We closed our enquiries after it described its accounting policy and explained that sales contracts where opt-out rights had not yet expired at the reporting date did not have a material impact on revenue recognised during the year.

Alternative Performance Measures

We asked for an explanation of the difference between total Remaining Performance Obligations (‘RPO’) of $1,003.9m and the equivalent IFRS 15 disclosure of $1,069.0m. The company explained that part of the difference was due to a $32m error in the compilation of the latter amount and agreed to correct the disclosure in its 2023 annual report, which is now publicly available. It also explained the remainder of the difference and agreed to enhance the relevant disclosures in its annual report to help users understand any differences between the measures.

We also asked for an explanation of the difference between the short-term portion of RPO of $438.0m and Annual Recurring Revenue (‘ARR’) of $514.4m. We closed our enquiry after the company gave satisfactory explanations and agreed to consider enhancing the relevant disclosures provided in its 2023 annual report.

Share repurchases

We asked how the directors were satisfied that share repurchases conducted during the year were lawful, given that, contrary to the requirements of the Companies Act, the company did not file interim accounts at Companies House to support the transactions. We closed our enquiry after the company acknowledged that it had not filed relevant interim accounts prior to the share repurchases and it explained that it was consulting its professional advisers to determine the appropriate actions to rectify the situation.

Independent review of financial processes and controls

We observed that the company separately announced that it had commissioned an independent third-party review of its key financial processes and controls (‘the Review’), and we asked it to inform us if new or revised information that is of relevance came to light. The company subsequently provided us with a copy of the findings of the Review, and we closed our enquiries after it satisfactorily explained its basis for concluding that the findings did not affect its 2022 and earlier accounts.

Entity Diamond DCO Two Limited (formerly Lloyds Pharmacy Limited) (3)
Balance Sheet Date 31 March 2022
Exchange of Substantive Letters (1) Yes
Scope of Review (2) Full
Quarter Published December 2023
Auditor (5) Deloitte LLP
Case Summary / Press Notice

Going concern

We requested more information about the company’s conclusion that no material uncertainty in relation to the company’s ability to continue as a going concern was present at the date of approval of the financial statements, in the light of an ongoing strategic review following a change of ownership of the company. We also sought clarification of the extent of financial support provided by other group entities.

The company explained that, as at the date of approval of the financial statements, the directors concluded that there was no material uncertainty over the ability of the company to continue to meet its liabilities as they fell due. The company further explained that, following a subsequent decision to dispose of the company’s remaining trade either to other entities within the group or to third parties, the company’s next financial statements will be prepared on a basis other than going concern.

In closing the matter, we reminded the company that when assessing whether a material uncertainty exists, consideration should be given to uncertainties over the ability of the company to continue to trade following a potential reorganisation or restructuring, and not only to uncertainties over the company’s liquidity. We also observed that the disclosure requirements of IAS 1, ‘Presentation of Financial Statements’, apply to any key judgements made in concluding that there are no material uncertainties.

Presentation of primary statements

We questioned the presentation of a material impairment of tangible fixed assets outside operating loss for the year. The company agreed to present future tangible fixed asset impairment charges within operating profit/loss and to restate the income statement for the year ended 31 March 2022 accordingly in its next financial statements. The company agreed to disclose the fact that the matter had come to its attention as a result of our enquiry.

We also asked for more information about the classification within current assets of amounts due from other group entities that had previously been presented as non-current assets. The company explained that these amounts were settled after the year end, and we closed our enquiry on this basis.

Income tax

We requested more information about the basis of calculation of the tax credit for the year, including the company’s group relief arrangements, and sought explanations for significant reconciling items in the effective tax rate reconciliation. The company satisfactorily responded to our enquiries.

We asked the company to provide more information on the nature of the evidence supporting the recognition of a net deferred tax asset, given the company’s recent history of losses. In the course of our enquiry, the company identified additional information that enabled more accurate projections of the level of future taxable profits to be made. Consequently, the company agreed to derecognise the net deferred tax asset in full and to restate the 31 March 2022 financial information accordingly in its next financial statements. The company agreed to disclose the fact that the matter had also come to its attention as a result of our enquiry.

Defined benefit pension scheme asset

We sought clarification of the basis of recognition of a defined benefit pension scheme asset under IFRIC 14, ‘IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interactions’, as well as the calculation of the related deferred tax liability. The company satisfactorily explained that the asset was recognised based on the company’s unconditional right to a refund, after taking account of the effect of the trustees’ decision in March 2022 to initiate winding-up the scheme. The company explained that the related deferred tax liability had been calculated at a rate of 25%, and that the effect of the difference between this rate and the rate of 35% applicable to refunds from a pension scheme was not considered material. We closed our enquiry on this basis.

Entity Eight Capital Partners plc (3)
Balance Sheet Date 31 December 2021
Exchange of Substantive Letters (1) Yes
Scope of Review (2) Full
Quarter Published December 2023
Auditor (5) PKF Littlejohn LLP
Case Summary / Press Notice Consent withheld
Entity Fevertree Drinks plc
Balance Sheet Date 31 December 2022
Exchange of Substantive Letters (1) No
Scope of Review (2) Full
Quarter Published December 2023
Auditor (5) BDO LLP
Case Summary / Press Notice N/A
Entity Forterra plc
Balance Sheet Date 31 December 2022
Exchange of Substantive Letters (1) No
Scope of Review (2) Limited
Quarter Published December 2023
Auditor (5) Ernst & Young LLP
Case Summary / Press Notice N/A
Entity Freshfields Bruckhaus Deringer LLP
Balance Sheet Date 30 April 2022
Exchange of Substantive Letters (1) Yes
Scope of Review (2) Full
Quarter Published December 2023
Auditor (5) Deloitte LLP
Case Summary / Press Notice

Partners’ annuities

We observed that the LLP did not include the potential impact of IFRS 17, ‘Insurance Contracts’, on the accounting for partners’ annuities in its disclosure of the anticipated effects of forthcoming, new, and revised standards. We asked the LLP to explain the factors it considered in assessing the potential impact of the introduction of IFRS 17 on the accounting for partners’ annuities. The LLP acknowledged the need for further analysis of the impact of the standard on the measurement and disclosure of certain elements of partners’ annuities and agreed to include narrative disclosure of the likely impact in its 2023 annual report and accounts.

We questioned why no finance charge had been presented for the unwinding of the discount on partners’ annuities as required by IAS 37, ‘Provisions, Contingent Liabilities and Contingent Assets’. The LLP explained that the unwinding of the discount on current members’ annuities was recognised as remuneration, in line with the LLP SORP. The unwinding of the discount on former members’ annuities was not separately presented as a finance expense but included within the movement of provisions for retired members’ annuities. The LLP acknowledged this was not in accordance with IAS 37 or the LLP SORP. However, we accepted the presentation because the amount was not considered material.

Revenue recognition

We asked the LLP to clarify the circumstances in which variable consideration arises, the nature of contingent matters affecting consideration and the process for estimating variable consideration, including application of the revenue constraint. The LLP satisfactorily explained that it enters very few contingent fee engagements and agreed to remove the contingent fee accounting policy from future reports and accounts.

We asked the LLP to explain the rationale for excluding disbursements from revenue, clarifying the basis on which the firm acted as an agent in these transactions. The LLP provided a satisfactory explanation of why it is acting as an agent in these transactions.

Sources of significant estimation uncertainty

We questioned the adequacy of the information disclosed about the impact of significant estimates on partners’ annuities and unbilled revenue. The LLP agreed to improve disclosure around the estimates affecting partners’ annuities valuation, including sensitivity analysis, in future annual reports and accounts. The LLP also clarified that revenue recognition does not represent a key source of estimation uncertainty and agreed to remove this disclosure moving forwards.

Provisions and contingent liabilities

We queried an apparent omission of disclosures about provisions and contingent liabilities arising from ongoing litigation and claims brought against the partnership. The LLP satisfactorily explained that the provisions arising in respect of claims received, or expected to be received, are included within ‘other provisions’. The LLP agreed to disclose this, and to continue to consider the disclosure requirements of IAS 37, when preparing future annual reports and accounts.

Other receivables and other payables

We asked the LLP to provide an analysis of ‘other receivables’ and ‘other payables’ balances, describing the nature of any material items of a dissimilar nature. The LLP provided the analysis and agreed to provide enhanced disclosure describing the nature of these balances in future annual reports and accounts.

Entity Handelsbanken plc
Balance Sheet Date 31 December 2022
Exchange of Substantive Letters (1) No
Scope of Review (2) Full
Quarter Published December 2023
Auditor (5) PricewaterhouseCoopers LLP
Case Summary / Press Notice N/A
Entity Harbour Energy plc
Balance Sheet Date 31 December 2022
Exchange of Substantive Letters (1) No
Scope of Review (2) Full
Quarter Published December 2023
Auditor (5) Ernst & Young LLP
Case Summary / Press Notice N/A