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 | Bridgepoint Group plc (3) |
|---|---|
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | Mazars LLP |
| Case Summary / Press Notice |
Cash flow statement We noted that the company allocated IPO-related expenses between its income statement and statement of changes in equity, as required by IAS 32, ‘Financial Instruments: Presentation’. However, in the consolidated and parent company cash flow statements, the amounts were wholly allocated to net cash flows from financing activities. We asked the company to explain its basis for concluding that the amounts were appropriately classified in its cash flow statements. The company also entered into sale-and-repurchase agreements in relation to certain investments, and we noted that in accordance with guidance in IFRS 9, ‘Financial Instruments’, the transactions did not result in the derecognition of the investments. We asked for the company’s rationale for classifying the proceeds from the agreements as cash inflows from investing activities in its consolidated cash flow statement, given that the transactions appeared to represent collateralised borrowings. We closed our enquiries after the company agreed to restate the comparative figures included in its next annual report and accounts. As the restatements affected primary statements, we asked the company to disclose that the matters had come to its attention as a result of our enquiries. Additional investment in a subsidiary (parent company accounts) It was unclear how the company had measured its additional investment in a subsidiary, and we asked for an explanation. We closed our enquiry after it acknowledged that the investment had not been correctly measured and agreed to restate the comparative figures included in its next balance sheet and statement of changes in equity. Since the restatements also affected primary statements, we asked the company to disclose that the matter had come to its attention as a result of our enquiries. Accounting policy for non-controlling interests We asked for the company’s basis for classifying non-controlling interests as financial liabilities measured at fair value through profit and loss. The company provided a satisfactory explanation and agreed to include a relevant accounting policy in its next report and accounts. Management incentive scheme We asked for further information to enable us to understand the accounting applied to a management incentive scheme disclosed in the accounts and we were satisfied by the company’s explanations. |
| Entity | Deuce Topco Limited (3) |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice |
Covid-19-related rent concessions We asked the company to explain the accounting policy applied to Covid-19-related rent deferrals as it was unclear why invoices received in relation to deferred rents were recognised within trade payables, with a corresponding increase in prepayments, in addition to the lease creditor recognised in accordance with IFRS 16 ‘Leases’. The company acknowledged that the balance sheet was inappropriately grossed-up and agreed to restate the comparative amounts in its next report and accounts by decreasing both trade and other payables and trade and other receivables. Leasehold health clubs intangible asset We questioned whether a ‘leasehold health clubs intangible asset’, relating to operating leasehold interests from previous acquisitions, should have been reclassified to right-of-use assets upon the company’s transition to IFRS 16. The company acknowledged that the reclassification should have happened upon transition to IFRS 16 and agreed to restate the comparative amounts in its next report and accounts. Expected credit losses We queried the amount of the expected credit loss charge as it differed from the movement in the provision for impaired receivables. The company explained that the movements in the expected credit loss provision were presented on a net basis and agreed to present them on a gross basis in future. We drew the company’s attention to the fact that the impairment loss on trade receivables should be disclosed separately on the face of the consolidated income statement in accordance with IAS 1 ‘Presentation of Financial Statements’. The company agreed to such presentation in future annual report and accounts. As each of the three matters raised resulted in a change to a primary statement, we asked the company to disclose that they had come to its attention as a result of our enquiry. |
| Entity | Hilton Food Group plc (3) |
| Balance Sheet Date | 2 January 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | June 2023 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice |
Consolidated cash flow statement We asked the company to explain how the cash outflow within investing activities for the ‘acquisition of subsidiary, net of debt acquired’ had been calculated and the basis on which each transaction met the definition of an investing activity in IAS 7, ‘Statement of Cash Flows’. The company explained how the amount had been calculated. For one of the associated business combinations the company acknowledged that certain non-cash transactions had incorrectly been included within investing activities in the cash flow statement with offsetting misstatements within financing activities. The company agreed to restate the comparative consolidated cash flow statement in its next annual report and accounts to remove the non-cash transactions from both investing and financing activities. 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. The company also undertook to enhance several other elements of the disclosure of its business combination transactions in its next annual report and accounts. Deferred tax We asked the company for more information about the deferred tax balances recognised on the acquisition of subsidiaries. The company acknowledged that the deferred tax liabilities arising on the recognition of intangible assets had been incorrectly classified within the notes to the accounts. The company undertook to correct this classification in its next annual report and accounts. Impairment testing of goodwill We asked the company for clarification as to whether the goodwill arising on acquisitions in the period had been tested for impairment. The company explained the considerations it had made regarding the impairment testing and acknowledged that the disclosures within the annual report and accounts did not fully reflect these. We reminded the company of the requirement to test for impairment, before the end of the current annual period, any cash generating units to which goodwill from a current year acquisition has been allocated. |
| Entity | Next 15 Group plc (formerly Next Fifteen Communications Group plc)(3) |
| Balance Sheet Date | 31 January 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice |
Contingent consideration and share purchase obligation We sought an explanation for the income statement presentation of changes to contingent consideration and the share purchase obligation as finance income or expense. The company provided a satisfactory explanation. We also asked for details of the liquidity risk associated with contingent consideration and for certain disclosures required by IFRS 13 ‘Fair Value Measurement’ relating to the measurement of contingent consideration. The company provided the information requested and undertook to enhance its disclosures in these areas in its next annual report and accounts. We requested clarification of the company’s policy for reporting payments of contingent consideration in the cash flow statement. As a result of our enquiry, the company reviewed the classification of these payments and considered them to represent cash flows from financing activities. This was on the basis they reflected the settlement of a long-term liability that financed an acquisition. The company undertook to reclassify retrospectively payments of contingent consideration from investing activities to financing activities, in its 2023 accounts. In closing the matter, we encouraged the company to review whether the presentation of the payments of contingent consideration as financing activities represented a significant judgement requiring disclosure under paragraph 122 of IAS 1 ‘Presentation of Financial Statements’. Since the restatement affected a primary financial statement, we asked the company to disclose the fact that the matter had come to its attention as result of our enquiry in its next annual report and accounts. Other contingent liability We asked for further details about the other contingent liability balance of £5.2m. The company provided a satisfactory response which included an undertaking to rename the balance in future accounts to avoid confusion over the nature of the balance. Share-based payment charge We requested further information to help us understand how the charge for share-based payments reconciled to the movement reported in equity, which the company provided, together with an undertaking to enhance its disclosures to enable users to reconcile the amounts in future accounts. Employment related acquisition payments We asked for clarification of the company’s policy for reporting payments in the cash flow statement relating to remuneration for post-combination services. The company explained these payments had been included within cash flows from investing activities but, on reflection, should have been recognised within operating activities. The company undertook to restate the comparatives in its 2023 accounts to present the employment related acquisition payments within operating cash flows and to disclose the fact that the matter had come to its attention as a result of our enquiry. Deferred tax In response to our question, the company provided a breakdown of the deferred tax asset relating to intangibles and undertook to provide a more granular analysis of the balance with appropriate headings in its next accounts. |
| Entity | QinetiQ Group plc (3) |
| Balance Sheet Date | 31 March 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2023 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice |
We asked the company to explain its basis for accounting for Research & Development Expenditure Credits (RDECs) under IAS 12 ‘Income Taxes’, as opposed to IAS 20 ‘Government Grants’, which is the more common treatment. The company explained the factors it considered to support its application of IAS 12 to the credits. However, we highlighted other factors that might indicate that IAS 20 is the more appropriate standard. As a result of this, the company reconsidered its approach and agreed to change its accounting policy to apply IAS 20 instead of IAS 12. As this change in accounting policy 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 questioned the appropriateness of the presentation of a proportion of the RDECs on a net basis. These related to contracts with the Ministry of Defence (‘MoD’) and were to be passed through to the MoD following receipt and approval by the Single Source Regulations Office (‘SSRO’). However, as this matter will no longer be relevant following a decision by the SSRO that the MoD had no valid claim to the credits, we did not consider it proportionate to pursue the matter further. |
| Entity | Clarkson PLC (3) |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2023 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice |
Transactions in company shares relating to employee incentives in the statement of cash flows The consolidated cash flow statement presented a cash outflow within financing activities in relation to the company’s acquisition of its own shares. The notes to the financial statements indicated that this outflow, and the movements in bonus accruals (presented within operating activities in the statement of cash flows), were presented net of an amount relating to the settlement of employee incentives using the company’s shares. We asked the company to explain the rationale for the adjustments that resulted in the net presentation of each item. As a result of our enquiry, the company reconsidered its approach and agreed to restate the comparative cash flows in its next annual report and accounts to present the total amount paid for its shares within financing activities and to make a corresponding adjustment to movements in bonus accruals within operating activities. As the restatement 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. |
| Entity | Dignity plc (3) |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2023 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice |
Impairment testing and related disclosures We asked the company for further information about how impairment testing was performed, including how cash-generating units (CGUs) were identified and the funeral market share assumptions applied in testing. The company explained that, in addition to its goodwill impairment test, other non-current assets were assessed for impairment at a cost centre level, using CGUs which consist of a local network of funeral branches. The company agreed to enhance its description of these matters in future accounts to meet the requirements of IAS 36, ‘Impairment of Assets’, paragraph 130(d)(i). The company provided the market share assumptions used and agreed to disclose these values in future accounts, as well as an explanation of how these assumptions differ from past experience or external information, as required by IAS 36, paragraphs 134(d)(ii) and (f)(ii). Impairment of financial assets 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. |
| Entity | EVRAZ plc (3) |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2023 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice |
Dividends We asked the company for further information about its basis for recognising a liability for interim dividends paid after the year end. In such cases, an obligation does not normally exist prior to payment unless the directors have taken steps to establish a legally binding liability at an earlier date. The company confirmed that no such obligation existed and agreed to revise its accounting policy in the 2022 financial statements with a restatement of the 2021 comparatives in the Statement of Financial Position. 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 for clarification of the current position in respect of certain dividends paid in breach of the procedural requirements of the Companies Act 2006. The company’s 2021 financial statements disclosed the expected steps intended to rectify the position. However, the company did not propose a special resolution at the Annual General Meeting in June 2022, as described in the disclosures. The company provided a satisfactory response in respect of its current intentions. |
| Entity | Hotel Chocolat Group Plc (3) |
| Balance Sheet Date | 27 June 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2023 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | Consent withheld |
| Entity | Just Group plc (3) |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | March 2023 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice |
Loss attributable to ordinary equity holders used for earnings per share (‘EPS’) We asked the company to explain the basis on which it had concluded that the loss recognised on redemption of the company’s equity classified Tier 1 notes should not be deducted when calculating the loss attributable to ordinary equity holders used in the calculation of EPS, as they appeared to have similar characteristics to preference shares classified as equity. Following our correspondence, the company reconsidered its treatment of the Tier 1 notes and concluded that the requirements in IAS 33 regarding equity preference shares should have been applied to them. It agreed to restate the comparative amounts for EPS in the consolidated statement of comprehensive income in its 2022 annual report and accounts, and also proposed to disclose the judgement required in determining the treatment of the Tier 1 notes in the EPS calculation. 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. |
| Entity | Langley Holdings plc (3) |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | March 2023 |
| Auditor (5) | Saffery Champness LLP |
| Case Summary / Press Notice | Consent withheld |
| Entity | Petrofac Limited (3) |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2023 |
| Auditor (5) | Ernst & Young LLP |
| Case Summary / Press Notice |
Classification of cash flows in relation to restricted cash, amounts owed to and from group entities and related derivatives We requested an explanation of the basis for presenting working capital adjustments relating to other net current financial assets within operating activities in the consolidated statement of cash flows, as well as a breakdown of these adjustments. The company provided the information and indicated in its analysis that the adjustments comprised cash flows in relation to restricted cash and derivatives. It agreed to include an explanation for this treatment of restricted cash in its next annual report and accounts. We requested similar information in respect of the parent company’s statement of cash flows for the classification within operating activities of working capital adjustments relating to other financial assets and liabilities, and cash flow movements in amounts due to and from group entities and related derivatives. In its response the company reconsidered its approach and agreed to restate the comparative cash flows in its next annual report and accounts to present movements in restricted cash (the principal component of the other financial assets and liabilities line) within investing activities and the cash flows in relation to amounts due to and from group entities within financing and investing activities, respectively. It also agreed to restate the related derivative cash flows on the same basis. Classification of cash receipts from subleases During our correspondence, we also questioned the basis for classifying cash receipts from subleases to joint operation partners within financing activities in the consolidated statement of cash flows. As a result of our enquiry, the company concluded that sublease receipts should be presented within investing activities and agreed to restate the comparative consolidated statement of cash flows and make consequential changes to its comparative consolidated income statement to present the lease finance income and expense on a gross basis, in its next annual report and accounts. In addition, the company agreed to enhance its IFRS 16 ‘Leases’ disclosures in relation to the subleases to joint operation partners. As these restatements affected the primary statements, we asked the company to disclose the fact that the matters had come to its attention as result of our enquiry. |
| Entity | Rathbones Group Plc (3) |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2023 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice |
Statement of cash flows We asked the company for further information about how the repayment of debt following the acquisition of Saunderson House was treated in the consolidated statement of cash flows. The company clarified that the repayment was made to a third party and explained that following further discussions, it had concluded that it would be more appropriate to classify the third-party debt repayment as a financing outflow in the consolidated statement of cash flows. The company agreed to restate the comparative period of the consolidated statement of cash flows in its 2022 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 for further information about amounts reported in the consolidated statement of cash flows for the repurchase and issue of ordinary shares, and the purchase and sale of investment securities. The company provided a satisfactory answer to our questions and gave an undertaking to provide enhanced note disclosures in its 2022 Annual Report and Accounts. Share-based payments We asked the company for further information about the amounts presented in the primary financial statements for share-based payments. The company provided a satisfactory answer to our questions and gave an undertaking to provide enhanced disclosures in its 2022 Annual Report and Accounts by providing further disaggregation of amounts presented in the consolidated statement of changes in equity relating to share-based payments. |
| Entity | Tyman Plc (3) |
| Balance Sheet Date | 31 December 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2023 |
| Auditor (5) | PricewaterhouseCoopers LLP |
| Case Summary / Press Notice |
Offsetting of deferred tax balances We asked for further information about the company’s application of paragraph 74 of IAS 12 ‘Income Taxes’ to its deferred tax asset and liability balances, which were presented on a gross basis in the accounts. The company concluded that certain asset and liability balances arose in the same tax jurisdiction and met the criteria for offsetting under IAS 12. The company agreed to restate the 31 December 2021 comparatives in its 2022 accounts, offsetting these balances. Offsetting of bank overdraft The company presented its cash at bank and bank overdraft balances on a net basis in the accounts on the basis of its cash pooling arrangements giving a legal right of offset. We asked for further information about the application of paragraph 42(b) of IAS 32 ‘Financial Instruments: Presentation’, in conjunction with the IFRS Interpretation Committee’s March 2016 decision regarding cash-pooling arrangements. Following a review of their cash pooling arrangements, the company concluded that, although there is a legal right of offset, as they did not settle the entire period-end balance subsequent to the year-end and had further transactions before the next net settlement date, the second criterion of IAS 32 paragraph 42 was not met. The company agreed to restate the 31 December 2021 comparatives in its 2022 accounts, presenting the balances on a gross basis. As both of the above restatements related to a primary statement, we asked the company to disclose that the matters had come to its attention as a result of our enquiry. Research and development expenditure We asked for further information about the company’s development costs and the associated accounting policy. The company provided further context for its development activities and explained its policy in more detail. It agreed to make some clarifications to its policy in its 2022 accounts, and to disclose the total R&D costs expensed to the income statement in accordance with IAS 38 ‘Intangible Assets’. |
| Entity | ScS Group plc (3) |
| Balance Sheet Date | 31 July 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | December 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Product warranty sales We questioned the basis for recognising revenue from the sale of product warranties as principal. As a result of our enquiry, the company reconsidered the principal versus agent requirements in IFRS 15 ‘Revenue from Contracts with Customers’ and reviewed the accounting treatment adopted by its peers. The company concluded that it did not control product warranties before transferring them to the customer and that revenue related to the sale of these warranties should have been recognised as agent rather than as principal. Consequently, the company agreed to restate the comparative amounts in the following year’s income statement. 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 make certain improvements to its accounting policy for product warranty sales and enhance certain other revenue-related disclosures. Product guarantees We asked the company to explain the accounting treatment of its 12-month and 20-year product guarantees. The company satisfactorily responded to our query. |