CRR Case Summaries and Entity-specific Press Notices
The FRC publishes, on a quarterly basis, summaries of its findings from recently closed reviews that resulted in a substantive question to a company (‘Case Summaries’). In addition, it publishes the names of companies whose reviews were closed in the previous quarter without the need for a substantive question. No Case Summary is prepared for such reviews.
Case Summaries, which are available for cases closed in the quarter ending March 2021 onwards, are included in the table below. As, currently, the FRC is subject to existing legal restrictions on disclosing confidential information received from a company, the Case Summaries can only be disclosed with the company's consent. Where consent has been withheld by the company, that fact is disclosed in the table.
From March 2018 until March 2021, the FRC published the names of companies whose reviews were closed in the previous quarter but did not prepare Case Summaries. However, on an exceptional basis, specific cases may be publicised through entity-specific Press Notices, which can also be found in the table below.
The FRC’s reviews are based solely on the company’s annual report and accounts (or interim reports) and do not benefit from detailed knowledge of the company’s business or an understanding of the underlying transactions entered into. They are, however, conducted by staff of the FRC who have an understanding of the relevant legal and accounting framework. The FRC’s correspondence with the company provides no assurance that the annual report and accounts (or interim reports) are correct in all material respects; the FRC’s role is not to verify the information provided but to consider compliance with reporting requirements. The FRC’s correspondence is written on the basis that the FRC (which includes the FRC’s officers, employees and agents) accepts no liability for reliance on its letters or Case Summaries by the company or any third party, including but not limited to investors and shareholders.
Key
- Only a certain number of CRR’s reviews result in substantive questioning of the Board. Matters raised may cover questions of recognition, measurement and/or disclosure.
- CRR’s routine reviews of companies’ annual reports and accounts generally cover all parts over which the FRC has statutory powers (that is, strategic reports, directors’ reports and financial statements). Similarly, CRR’s routine reviews of companies’ interim reports will generally cover all information in that document. Limited scope reviews arise for a number of reasons, including those conducted when a company’s annual report and accounts or interim report are selected for thematic review or reviews that have been prompted by a complaint. In accordance with the FRC's Operating Procedures, for Corporate Reporting Review, CRR does not identify those companies whose reviews were prompted by a complaint.
- The FRC may ask a company to refer to its exchanges with CRR when the company makes a change to a significant aspect of its annual report and accounts or interim report in response to a review.
- Case closed after 1 January 2021 but performed under operating procedures that did not allow for the publication of Case Summaries.
- From the quarter ended June 2023, the FRC started identifying the auditor of the annual report and accounts, or the audit firm that issued a review report on the interim report, that was the subject of the CRR review. This information was also back-dated for closed cases publicised from the quarter ended September 2022. Cases marked N/A relate to those published prior to September 2022 or interim reviews that did not have a review opinion.’
Case Summaries
CRR Case Summaries and Entity-specific Press Notices (Excel version)
| Entity | Lords Group Trading plc (3) |
|---|---|
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2024 |
| Auditor (5) | RSM UK Audit LLP |
| Case Summary / Press Notice |
Purchase of non-controlling interest We asked the company to explain its rationale for classifying the purchase of the non-controlling interest in Hevey Building Supplies Limited as a cash flow from investing activities in the consolidated statement of cash flows. The company agreed that it should have been classified as a cash flow from financing activities, given that the change in ownership interest had not resulted in a loss of control. The company agreed to restate the comparative figures included in its next annual report and accounts. As the restatement affected a primary statement, we asked the company to disclose that the matter had come to its attention as a result of our enquiry. Supplier rebates We noted that the Audit Committee Report explained that it could be complex to calculate the value of rebates that are not received before the audit sign-off date and there was a degree of estimation uncertainty in arriving at the value to be accrued. We also noted that the principal risks and uncertainties detailed in the Strategic Report, included ‘supplier management and rebates’. We asked the company to explain the basis on which the recognition and measurement of supplier rebates was not considered to be a significant estimate. We were satisfied with the explanation provided and encouraged the company to consider whether additional disclosures were required to help users to understand the extent of the estimation uncertainty outlined in the Audit Committee Report. We also queried the amount of accrued supplier rebates included within other receivables at the year-end. The company provided it and we noted it was a material component of total current trade and other receivables which should be presented separately from other receivables. The company agreed to such disclosure in future annual reports and accounts. |
| Entity | Rolls Royce Holdings Plc (3) |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2024 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice |
Cash flows on settlement of excess derivatives We asked the company to explain the basis for classifying the cash flows associated with the settlement of excess derivatives within financing activities in the Statement of Cash Flows, rather than operating activities, as the cash flows did not appear to fall within the IAS 7 ‘Statement of Cash Flows’ definition of financing activities. The company acknowledged that classification within operating activities would be consistent with the definition of the company’s net debt alternative performance measure, which excluded these derivatives. Consequently, the company has decided to amend its accounting policy and will present the settlement of excess derivatives cash flows within operating activities in the 2023 annual report and accounts and restate the 2022 comparative amounts. Payments in advance of performance The company disclosed significant current and non-current contract liabilities, representing instances where the customer has paid in advance of the company performing its associated obligations. We asked the company to describe the nature and anticipated timing of the contract liabilities disclosed, and how the company has considered the requirements of IFRS 15 ‘Revenue from Contracts with Customers’ regarding the existence of a significant financing component when measuring the associated contract revenue. The company explained the primary purpose for the customer’s payment in advance for these services is for reasons other than to provide financing to the customer. The company has agreed to enhance disclosures in future annual reports to explain management’s judgement in this area. Customer concession credits We asked the company to explain the nature of the contracts which include customer concession credits, how the credits have been reflected in the transaction price, and whether there was any significant judgement or estimation uncertainty associated with them. The company satisfactorily explained the various circumstances that led to these concessions and agreed to enhance disclosures in this area in future annual reports. Risk and revenue sharing agreements (RRSAs) – cash entry fees We asked for some clarification around the accounting treatment applied to RRSAs and the associated cash entry fees, such as why the fees are recognised as a reduction to cost of sales, and whether they differ from the ‘contributions and fees’ presented within the research and development note. The company satisfactorily explained their accounting policy further, and also confirmed that the amounts recognised in the income statement in relation to the RRSAs are not material. Provisions for onerous contracts and impairment testing We asked the company to further explain the impact on its onerous contracts provision of the amendment to IAS 37 ‘Onerous Contracts – Cost of Fulfilling a Contract’ and why no impairment loss had been recognised in respect of these assets before recognising a separate onerous contract provision. The company explained that the risk of impairment of the assets is relatively low, and that the assets have a significantly longer life than the contracts which have been recognised as onerous. Deferred tax assets Significant UK deferred tax assets were recognised in relation to carried forward tax losses which were expected to be recovered by the taxable profits generated by new civil aerospace large engine programmes over timeframes in excess of 30 years. Given that these programmes are typically loss-making in their investment phases, we asked the company to provide more detail about the timeframe over which the deferred tax assets were expected to be recovered. The company explained their judgements associated with the recognition and measurement of the assets and clarified that the forecasts of taxable profits only include existing engine programmes, with an assumption of a certain level of research and technology investment. The company confirmed that it would provide additional clarity over the timeframe of recovery of the deferred tax assets in the 2023 annual report. |
| 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 | 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 | Smyths Toys UK (3) |
| Balance Sheet Date | 30 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | December 2023 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice |
Arrangement with Smyths Toys HQ UC We requested details of the company’s contractual arrangement with its parent company, Smyths Toys HQ UC, and for an explanation of the associated risks and cash flows between the companies. We also queried why the company had no inventory on its balance sheet and the basis on which it was acting as a principal, rather than as an agent, in store transactions with its customers. The company responded satisfactorily. It also agreed to enhance the relevant accounting policy, disclose critical judgements applied and reflect more fully the nature of arrangements between the companies in the future. Dilapidation provision We queried the reasons for a significant increase in dilapidation provision and the treatment of the corresponding addition to leasehold improvements in the cash flow statement. The company provided adequate explanation in respect of the increase in the amount of provision. However, it acknowledged that the corresponding non-cash additions to assets should have been excluded from the investing cash outflow in the cash flow statement. The company undertook to restate the cash flow statement for this, and to make a corresponding adjustment to operating cash flows. 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. Disclosure of directors’ emoluments We enquired how the disclosure of directors’ emoluments complied with UK company law and were satisfied by the company’s responses. Strategic report We queried how the company satisfied the requirements of the Companies Act 2006 for the strategic report to provide a balanced and comprehensive analysis of the development and performance of the company’s business during the financial year and position at the end of that year. The company undertook to enhance the relevant disclosures in the future. |
| Entity | Baltic Classifieds Group PLC (3) |
| Balance Sheet Date | 30 April 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice |
Income tax We asked the company to explain why the reversal of a temporary difference was included as a reconciling item in the reconciliation of pre-tax profit to the tax expense for the year. The company explained that it related to the reversal of a deferred tax liability which had been initially recognised in relation to upfront commission fees incurred on long term borrowings. The company reviewed the historical accounting of the deferred tax liability and acknowledged that it should have been released in 2021, rather than in 2022. The company agreed to restate opening reserves as of 1 May 2021, the comparative consolidated statement of profit and loss and other comprehensive income and the comparative tax rate reconciliation in its next annual report and accounts. As the change affected the primary statements, we asked the company to disclose the fact that the matter had come to its attention as a result of our enquiry. We questioned the basis on which the directors considered the standard UK tax rate to be the most meaningful rate to use in the tax rate reconciliation as the group’s business operates from the Baltic region. The company confirmed that it had reassessed the use of the standard UK rate and agreed to use a blended rate in future annual reports and accounts. |
| Entity | discoverIE Group plc (3) |
| Balance Sheet Date | 31 March 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice |
Netting positive bank balances and overdrafts The company presented its positive bank balances and overdrafts on a net basis. We asked for further information about the basis on which it met the two criteria in IAS 32 ‘Financial Instruments: Presentation’ required for offsetting financial assets and liabilities. The company acknowledged that positive bank balances and overdrafts relating to a particular group cash pooling arrangement should have been presented on a gross basis. Although there was a legal right of offset, the company could not demonstrate the intention to settle the period-end balances on a net basis, as required by IAS 32. The company agreed to restate the comparative balance sheet in its next accounts by presenting the positive bank balances and overdrafts separately and committed to provide the relevant disclosures required by IFRS 7, ‘Financial Instruments: Disclosures’. As the restatement related to a primary statement, we asked the company to disclose that the matter had come to its attention as a result of our enquiry. |
| Entity | Gateley (Holdings) Plc (3) |
| Balance Sheet Date | 30 April 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | MHA MacIntyre Hudson |
| Case Summary / Press Notice |
Acquisition payments linked to post-acquisition employment We requested more information about the nature of amounts paid and payable in a business combination to vendors that remained in employment post-acquisition. The company explained that the vendors’ rights to these payments are contingent upon the vendors remaining in employment for a specified period and consequently agreed to account for these amounts as a post-acquisition remuneration expense under IFRS 3, ‘Business Combinations’, rather than as acquisition consideration. The company also agreed to revisit the accounting for previous acquisitions that included similar terms, and to restate the financial information for the year ended 30 April 2022 accordingly in its next annual report. The company agreed to disclose the fact that the matter had come to its attention as a result of our enquiry. Distributable profits We questioned whether the company’s assessment of the level of its distributable profits had taken into account the non-distributable cumulative credit to equity in relation to share-based payment charges included in the carrying amount of its investment in subsidiaries. The company confirmed that it had not, and that consequently the dividend paid in October 2022 was in excess of the company’s distributable profits in its audited financial statements for the year ended 30 April 2022. The company confirmed that, although it had sufficient distributable reserves at the date the dividend was paid, it had not filed interim accounts to support the distribution as required under section 836(2)(a) of the Companies Act 2006. The company agreed to take steps to ratify this payment. |
| Entity | GlobalData Plc (3) |
| Balance Sheet Date | 31 December 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice |
Refinancing transactions We requested more information about the nature of two refinancing transactions completed in the year. The company satisfactorily explained the circumstances of these, clarifying that the August 2022 refinancing of the previous term loan and revolving credit facilities (‘RCF’) was judged to be a repayment of the group’s existing debt and the drawdown of new debt facilities under IFRS 9, ‘Financial Instruments’. The company acknowledged that the disclosure in its annual report, which stated that the transaction was accounted for as a substantial modification of the existing debt, was incorrect. The company agreed to include amended wording, and highlight the wording error, in its next annual report and accounts. We also questioned the accounting treatment applied to the costs of the refinancing transactions. The company satisfactorily responded to our enquiries. We sought clarification of the basis for presenting the financing cash flows related to the refinancing of the previous term loan and RCF on a gross basis in the consolidated cash flow statement. The company identified that the transaction had resulted in the receipt of a single net cash inflow and agreed to restate the consolidated cash flow statement and related notes for the year ended 31 December 2022 accordingly in its next annual report and accounts. The company agreed to disclose the fact that the matter had come to its attention as a result of our enquiry. |
| Entity | James Fisher and Sons plc (3) |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | KPMG LLP |
| Case Summary / Press Notice |
Impairment testing We asked the company for information relating to the impairment testing of goodwill, including certain of the disclosures required by IAS 36 ‘Impairment of Assets’. The company provided a satisfactory response, and enhanced its disclosures by including the required information for each cash generating unit with significant goodwill, quantifying key assumptions used in the tests, and explaining significant movements in those assumptions. We also asked the company to explain whether an impairment test had been carried out on the parent company’s investments in subsidiaries, and to clarify the accounting policy applied in relation to impairment testing of loans to subsidiaries. The company confirmed that an impairment test had been carried out on the investment in subsidiaries and that no impairment was required. The company confirmed that loans from subsidiaries had been tested for impairment using the Expected Credit Loss approach under IFRS 9 ‘Financial Instruments’. It explained that a more detailed approach had been undertaken in 2022, which led to recognition of an expected credit loss provision of £1.1m at 31 December 2022. The company also enhanced the disclosures explaining the policy and methodology. Deferred tax assets We asked the company to explain the nature of evidence supporting the recognition of deferred tax assets. The company answered the question to our satisfaction. Contract modifications and variable consideration from contracts with customers We asked the company to explain the accounting policy applied to contract modifications and variable consideration from contracts with customers. In responding to this question, the company identified a ‘pain provision’ of £4.8m on one contract that was recognised in other payables instead of as a reduction in contract assets, and has restated the comparatives in the 2022 annual report to correct this. The company also enhanced the disclosures explaining the accounting policy for such contracts. Contract costs We sought an explanation from the company about the nature of commission fees of £6m recognised as a contract asset in 2021. As a result of our questions, the company has now identified that these costs related to future services, and were cancellable, and as such should not have been recognised as a contract asset and liability. The company has restated the 2021 balance sheet in its 2022 annual report to derecognise the contract asset and corresponding liability presented within accruals. Insurance claims We asked the company for further information about certain insurance claim assets recognised within other debtors. The company satisfactorily addressed our queries. Presentation of financial statements We asked the company to explain its rationale for not presenting apparently material impairment losses in relation to financial assets on the face of the consolidated income statement as required by paragraph 82(ba) of IAS 1, ‘Presentation of Financial Statements’. The company agreed to present this charge on the face of the income statement in future financial statements to the extent material, and agreed to restate the 2021 comparatives to the 2022 income statement 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. We also asked the company to clarify the purpose of the ‘separately disclosed items’ column in the 2021 income statement. We sought clarification from the company as to the basis for excluding certain impairment expenses from this classification. The company chose to simplify the income statement presentation by removing the ‘before separately presented items’ and ‘separately presented items’ columns from the 2022 income statement. The company included the information relating to these alternative performance measures in a separate note to the accounts, which addressed our concerns. Litigation provisions and contingent liabilities We asked the company for information relating to litigation provisions and contingent liabilities. The company addressed our questions satisfactorily, and agreed to disclose the use of the relevant disclosure exemption in IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’. Movements in working capital We sought an explanation for the movements in certain other debtors and other payables. The company provided the information requested and has also provided improved explanations of significant balance sheet movements in the strategic report and notes to the 2022 accounts. Note 1 to the 2022 accounts explains that the company restated the consolidated cash flow statement to reclassify £6.1m of deposits for new build vessels, which were presented within other debtors in 2021, from cash flows from operating activities to cash flows from investing activities in 2021. Lessor disclosures We asked the company about the omission of certain disclosures required by IFRS 16 ‘Leases’ for lessors. The company has now addressed these disclosure requirements. |
| Entity | Proton Motor Power Systems PLC (3) |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | September 2023 |
| Auditor (5) | RMT Accountants & Business Advisors Ltd |
| Case Summary / Press Notice |
IAS 33, ‘Earnings per share’ (‘EPS’) We noted that the effect of the share subdivision made during the year had not been reflected retrospectively in the weighted average number of ordinary shares used for calculating EPS. We asked the company for an explanation, and also for clarification of the basis on which the company had not included certain share options in calculating diluted EPS for the current financial year, and had restated the diluted loss per share for the prior year. The company acknowledged that its treatment of the share subdivision did not comply with IAS 33, and that potential ordinary shares arising from its stock awards scheme should have been included in the calculation of diluted EPS. It agreed to make a prior period restatement to correct both matters in its 2022 annual report and accounts. As the changes affected a primary statement, we asked the company to disclose that the matters had come to its attention as a result of our enquiry. The company satisfactorily explained why its share options did not qualify as potential ordinary shares for the calculation of diluted EPS, and agreed to enhance its disclosures in future to explain this. The company explained its restatement of the loss per share and agreed to give the required disclosures when making such changes in future. While it was not clear how the restated diluted loss per share complied with IAS 33’s definition of dilution, we did not consider it proportionate to pursue the matter further, as the restatement has no effect on future annual accounts. Embedded derivative The company reported a significant gain on an embedded derivative relating to convertible loan interest options that had been waived during the year for no consideration. We asked for an explanation of the basis on which the total gain was presented in profit for the year, with no portion recognised directly in equity as a transaction with owners in their capacity as owners, given that the holders of the options held the majority of the company’s ordinary shares. The company reassessed the circumstances of the waiver, concluded that its effect should be recognised in equity, and agreed to a prior period restatement in its 2022 annual report and accounts. As the change affected a primary statement, we asked the company to disclose that the matter had come to its attention as a result of our enquiry. We also asked for further detail of the methodology, inputs and judgements used in the valuation of the options. From the information provided, it appeared that the valuation involved significant judgements that could have had a material effect on the outcome and should have been disclosed. In light of the nature of these judgements, we also considered that the measurement might have been more appropriately categorised as Level 3 in the fair value hierarchy under IFRS 13, ‘Fair Value Measurement’, rather than Level 2. However, as the options had been derecognised in full following their waiver, we concluded it was not proportionate for us to pursue this matter further. We explained our observations on the valuation, and noted that, if similar circumstances arose in future, we expected the company to provide more detailed and informative disclosures of the valuation technique and inputs used, together with any significant judgements and sources of estimation uncertainty involved. |
| Entity | Redde Northgate plc (3) |
| Balance Sheet Date | 30 April 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice |
Impairment of financial assets We asked the company why apparently material impairment losses in relation to financial assets were not disclosed on the face of the consolidated income statement, as required by IAS 1, ‘Presentation of Financial Statements’. The company agreed to disclose this information in future financial statements and to restate the prior year comparatives in the April 2023 accounts. 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. Statement of cash flows We asked the company to explain the rationale for classifying certain intercompany cash flows in the parent company cash flow statement as investing activities. The company acknowledged that the presentation did not follow the requirements of IAS 7, ‘Statement of Cash Flows’, but noted that it intended to adopt FRS 101, ‘Reduced Disclosure Framework’, and will not present a parent company statement of cash flows in its future reporting. We closed our enquiries on this basis. Classification of amounts due from subsidiary undertakings We questioned the classification of amounts due from subsidiary undertakings that appeared to be long-term in nature as current assets in the balance sheet of the parent company, as this appeared inconsistent with the requirements of IAS 1. The company acknowledged that almost all of the amounts due from subsidiary undertakings would have been more appropriately classified as due in more than one year. The company noted that it intended to adopt FRS 101 and include debtors due in more than one year within current assets in future financial statements. We closed our enquiries on this basis. |
| Entity | The Alumasc Group plc (3) |
| Balance Sheet Date | 30 June 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | Crowe U.K. LLP |
| Case Summary / Press Notice |
Discontinued operations and assets held for sale We asked the company why the assets and liabilities of the Levolux business, which was disclosed to be held for sale, did not appear on the balance sheet at the year end. The notes to the accounts stated that at the year end the discontinued operation had liabilities of £3,859,000, and that the assets held for resale were written down to a value equivalent to the liabilities to reflect the sales proceeds of £1 received after the year end. The company agreed to restate the June 2022 balance sheet and associated notes in the 2023 annual report and accounts to show the gross Levolux assets and liabilities as held for sale. As this change in presentation affected the primary statements, we asked the company to disclose that the matter had come to its attention as a result of our enquiry. We also asked the company to disclose the major classes of assets and liabilities classified as held for sale, as required by IFRS 5, which the company agreed to do. It was not clear to us why the post year end disposal of Levolux had given rise to a loss on disposal, or why this was not disclosed in the annual report. The company gave a satisfactory explanation of the loss arising on disposal, and noted that the omission of a note giving an estimate of the non-adjusting item was an oversight. It was noted, however, that an estimate of the non-adjusting loss was provided in the investor presentation for the 2022 results, and was fully disclosed in the subsequent half year results announcement. Finally, we asked why the charge for restructuring costs fell within continuing operations, when disclosures indicated that this related mainly to the discontinued Levolux business. The company explained that these costs related to liabilities of the continuing group. It undertook to amend the comparative disclosure on provisions in its 2023 report and accounts to clarify this. |
| Entity | Wilkinson Hardware Stores, Limited (3) |
| Balance Sheet Date | 29 January 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2023 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice |
Financial instruments We asked the company to clarify whether it had applied IFRS 9, ‘Financial instruments’, in accounting for all of its financial instruments as permitted by FRS 102, ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’, or only to unsettled hedging instruments. The company confirmed that it had applied IFRS 9 to all financial instruments, and agreed to clarify this in future annual reports. Hedge accounting We requested further information about the cash flow hedge accounting movements in the period. The company agreed to restate its financial statements for the year ended 29 January 2022 to reclassify the effect of cash flow hedging in relation to inventory sold in the year from administrative expenses to cost of sales, and to present the related amount added to the cost of inventory purchased in the year as a movement in equity rather than as a reclassification within OCI, as required under IFRS 9. The company agreed to disclose the fact that the matter had come to its attention as a result of our enquiry. Recognition of deferred tax assets We sought more information on the nature of the evidence supporting the recognition of a net deferred tax asset in the light of the loss before tax, and the material uncertainty in relation to going concern, reported in the period. The company satisfactorily responded to our enquiries. The company further clarified that it did not consider there to be a significant risk of a material adjustment within the next financial year, but nevertheless agreed to assess at each balance sheet date the level of disclosure provided in relation to this matter. The company provided details of the expected net reversal of deferred tax assets within the next financial period and agreed to disclose this amount in future annual reports, in accordance with FRS 102. Insurance policy provisions We asked the company to indicate the extent to which the company’s provision for the self-insured excess on insurance policies was presented net of the related reimbursement asset. The company provided the requested information and, to the extent material, agreed to account for claims and reimbursement rights on a gross basis in future periods, as required under FRS 102. |