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 | Intermediate Capital Group plc (3) |
|---|---|
| Balance Sheet Date | 31 March 2021 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | March 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
The following matters arose as a result our limited scope review of how the undertakings the company gave during our review of its 2020 annual report and accounts were addressed in its 2021 report and accounts. Prior year restatements We queried a number of significant prior-year restatements of the group and parent company cash flow statements, which were not explained in the notes to the financial statements. The company provided us with adequate explanations for the restatements and agreed to include the missing disclosures in the forthcoming interim financial statements. As the disclosures related to prior-year restatements of the primary statements, we asked the company to disclose the fact that the matters had come to its attention as a result of our enquiry. Other matters in relation to the cash flow statements We asked for reconciliations of a number of items in the parent company and group cash flow statements to the corresponding movements in the statements of financial position. This highlighted that the dividends declared by subsidiary undertakings were aggregated within ‘Net investment returns’ line, rather than reported in the ‘Interest and dividend income’ line. The company agreed to report such amounts separately in the future and to restate the comparative amounts accordingly. In closing the case we noted that we expect material non-cash movements in the parent company investments in subsidiaries to be disclosed in the future. We also explained that we expect the captions used for financial line items to reflect their contents and items of dissimilar nature to be disaggregated. |
| Entity | Intermediate Capital Group plc (3) |
| Balance Sheet Date | 31 March 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Non-consolidation of carried interest partnerships Parent company accounts We asked for details about the line ‘Cash flow on behalf of subsidiary undertakings’ and the reasons for classifying these cash flows within investing activities in the parent company’s cash flow statement. We also asked for an explanation about the increase in investments in subsidiaries and how these were reported in the cash flow statement. The company explained that the line in question included cash outflows in respect of investment in subsidiaries. The line reported netted off aggregated cash flows of dissimilar nature and included some financing cash flows. The company agreed to disaggregate cash flows of a dissimilar nature, to ensure gross presentation, to reclassify items of a financing nature and to restate comparative period information as appropriate. In responding to our queries, the company also performed a review of intercompany receivables and identified that some amounts related to long-term investments. The company undertook to reclassify these balances from current to non-current assets and to restate comparative period information accordingly. Consolidated accounts We requested an explanation of the difference between the amounts in respect of the purchase of own shares reported in the statement of changes in equity (SOCE) and the consolidated cash flow statement. The company explained that the SOCE included an incorrect amount in respect of the shares retained by the employee benefit trust. The company agreed to restate the SOCE accordingly. As these restatements affected the primary statements, we asked the company to disclose the fact that the matters had come to its attention as a result of our enquiry. |
| Entity | Keller Group plc (3) |
| Balance Sheet Date | 31 December 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | March 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
This company was selected as part of our thematic review related to the application of IAS 37, ‘Provisions, Contingent Liabilities and Contingent Assets’; only the disclosures relating to those matters were reviewed. We sought further explanation of the company’s arrangements for insurance and self-insurance, in connection with its disclosure of ‘insurance and legal provisions’. The company provided a detailed response and acknowledged that it had presented these provisions net of insurance reimbursements which were virtually certain to be received. It also acknowledged that the reimbursement assets should have been presented separately, and agreed to restate the relevant balance sheet lines. As the change affected a primary statement, we asked the company to disclose the fact that the matter had come to its attention as result of our enquiry. The company also agreed to ensure that the recognition criteria for these provisions are more clearly described in its future disclosures. |
| Entity | National Express Group PLC (3) |
| Balance Sheet Date | 31 December 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Presentation of cash flows and payables balances in relation to factoring We asked the company for further information about its arrangements for the advance factoring of revenues and, in particular, for an explanation of why cash inflows had been presented within ‘operating activities’ in the Statement of Cash Flows. The arrangements did not result in the derecognition of a trade receivable and appeared to represent short-term borrowings which are required to be classified as ‘financing activities’ under paragraph 17(c) of IAS 7, ‘Statement of Cash Flows’. We also asked the company whether the advance factoring liability was included within the ‘net debt’ alternative performance measure (APM). The company agreed to classify the payables balance within borrowings in its 2021 accounts, with corresponding adjustments to the presentation of the associated cash flows and the net debt APM, and to restate these amounts in the comparative period. Under the revised policy, cash inflows from the bank and the subsequent outflows on repayment will be treated as financing activities, with receipts of cash from customers presented within operating activities. The company agreed to disclose the fact that the matter had come to its attention as result of our enquiry. Presentation of Covid support grants We asked for clarification of whether Covid support grant or subsidy arrangements provided compensation for any of the Covid-related costs presented within separately disclosed items. The company satisfactorily explained that they did not. Revenue recognition policy – booking fees We asked the company to explain why booking fees were recognised at the point of sale and treated as a separate performance obligation to the corresponding ticket revenue. It was unclear what service was provided to the customer at the point of booking, and how this may be considered distinct from other promises in the contract in line with the criteria set out in IFRS 15, ‘Revenue from Contracts with Customers’, paragraphs 22(a) and 27. The company re-examined their view on this matter and concluded that the booking fee did not represent a distinct service and consequently would be recognised in the period in which the related travel occurred. The company confirmed that the amounts concerned were not material in the current reporting period and that the adjustment would be recognised prospectively. |
| Entity | Savills plc (3) |
| Balance Sheet Date | 31 December 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2022 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Payments on business acquisitions contingent upon continuing employment We asked the company for more information on its accounting policies for, and disclosure of, contingent payments that are linked to continuing employment, which under paragraph 52(b) of IFRS 3, ‘Business Combinations’, are required to be accounted for separately from the acquisition accounting. The company satisfactorily explained its accounting policies and undertook to enhance its future disclosures in respect of payments linked to continuing employment. The company also identified that certain payments linked to continuing employment had been incorrectly classified as investing cash flows in the consolidated statement of cash flows for the year ended 31 December 2020. The company undertook to restate the comparative amounts in the 2021 accounts accordingly. As the change affected a primary statement, we asked the company to disclose the fact that the matter had come to its attention as a result of our enquiry. Provisions for professional indemnity claims We asked the company to clarify its accounting treatment for provisions for professional indemnity claims in excess of the self-insured element. The company undertook to present reimbursement assets separately in the balance sheet from the related liability in future accounts, as required under paragraph 53 of IAS 37, ‘Provisions, Contingent Liabilities and Contingent Assets’. The company noted that the effect on the amounts reported at 31 December 2020 is not quantitatively material and that consequently these amounts will not be restated in the 2021 accounts. The company also clarified that the provision was not considered to be an estimate that has a significant risk of resulting in a material adjustment to the carrying amount within the next financial year under paragraph 125 of IAS 1, ‘Presentation of Financial Statements’, and that it will reconsider its future disclosures accordingly. |
| Entity | AB Dynamics plc (3) |
| Balance Sheet Date | 31 August 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | December 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Inventory write-down We requested further information about the write-down of inventories in the year including the specific circumstances giving rise to this adjustment. To the extent the write-down related to inventory brought forward from the prior year, we asked for the rationale for treating the adjustment as a change in accounting estimate rather than a prior period error in accordance with IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’. We were satisfied by the company’s response. Acquisition of DRI In relation to the acquisition of Dynamic Research Incorporated (“DRI”) in 2019, we sought an explanation for the adjustment to the provisional fair value of goodwill following finalisation of the deferred tax position. We were satisfied with the company’s explanation and its undertaking to disclose, in the 2021 accounts, why no deferred tax liability arose on the assets acquired. Impairment testing of goodwill We asked the company to explain how the pre-tax discount of 6%, used to determine the value in use of the principal cash generating units, was calculated, including how it was derived from the company’s post-tax weighted average cost of capital, which was also 6%. The company provided the information requested, indicating in its response that there had been no adjustment to the post-tax weighted average cost of capital to reflect a pre-tax rate. In this instance, we considered that this issue was unlikely to have a significant impact on the company’s accounts. In closing the matter, we requested that the company apply paragraph A20 of IAS 36 ‘Impairment of Assets’ in the future, which states that when the basis used to estimate the discount rate is post-tax, that basis is adjusted to reflect a pre-tax rate. Policy for leases We asked the company to describe its accounting policy for leases which it provided together with an undertaking to disclose the policy in its next accounts. Short term deposits We queried whether the maturity threshold of short-term deposits included in cash and cash equivalents related to three months or less remaining from the date of acquisition or the reporting date and, where relevant, requested details of those deposits with a maturity greater than three months from the date of acquisition. The company clarified that short term deposits included an amount of £5m with a maturity date of more than three months from the date of acquisition. As, on reflection, the company did not consider the £5m deposit to meet the definition of cash equivalents in paragraph 7 of IAS 7 ‘Statement of Cash Flows’, it undertook to reclassify retrospectively those deposits from cash and cash equivalents to short term investments in its 2021 accounts. Other finance expense We asked for an explanation of other finance expense of £0.6m included in the consolidated statement of comprehensive income. The company provided the information requested and undertook to make clear the nature of this expense in the comparative information to the 2021 accounts. |
| Entity | Domino’s Pizza Group plc (3) |
| Balance Sheet Date | 27 December 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | December 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Classification of cash flows in relation to sub-lease receipts We asked the company to reconsider the classification of cash receipts in relation to sub-leases, which had been classified as inflows from financing activities in the group cash flow statement. They did not appear to meet the definition of financing activities in paragraph 6 of IAS 7, ‘Statement of Cash Flows’, which are those that ‘result in changes in the size and composition of the contributed equity and borrowings of the entity’. The company agreed to classify sub-lease receipts as investing activities in the group cash flow statement in its accounts for the period ended 26 December 2021, and to restate comparative period information as appropriate. The company agreed to disclose the fact that the matter had come to its attention as a result of our enquiry. |
| Entity | Kier Group plc (3) |
| Balance Sheet Date | 30 June 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | December 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Cash flow statement We questioned why loan repayments from joint ventures were classified as financing, rather than investing, activities in the consolidated cash flow statement. The company acknowledged that this was incorrect and agreed to correct this in its next report and accounts and to restate the comparatives. 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. Deferred taxation We asked for more information on the nature of the evidence supporting the recognition of the deferred tax asset included in the accounts and the basis on which the company determined that the disclosures complied with the requirements of IAS 12 ‘Income Taxes’. The company provided the information requested. It agreed to enhance the disclosures in its future reporting,including disclosure of the period over which the deferred tax asset is expected to be utilised, the forecasts used, and the methodology applied. We suggested that it would be helpful to disclose details of the sensitivity analysis performed. We also enquired about the company’s disclosures of estimation uncertainty relating to deferred taxation under IAS 1 'Presentation of Financial Statements'. The company explained that its disclosures of estimation uncertainty in relation to deferred taxation were not required by IAS 1. It agreed to clearly distinguish additional voluntary disclosures from those made to satisfy the requirements of IAS 1, paragraph 125 in its future reporting. Free cash flow and movements in net debt We asked for more information about the measures of free cash flow and movements in net debt included as alternative performance measures (APMs). We asked the company to explain how it concluded that the reconciliations, labelling and commentary on these measures were in line with the requirements of the ESMA Guidelines on APMs. We also asked whether the strategic report should have included more details about the Group’s cash flow performance. The company provided the information requested and agreed to provide clearer, more granular, reconciliations and labelling, and enhanced commentary on these APMs in its future reporting. The company also acknowledged that the commentary provided on cash flow performance in the strategic report could have been clearer. It agreed to provide a more comprehensive commentary in future reports. |
| Entity | PZ Cussons plc (3) |
| Balance Sheet Date | 31 May 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | December 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Discontinued operations We asked the company to explain why the gain on sale from certain businesses appeared to have been presented as part of continuing operations. The company acknowledged that the gain on sale should have been presented as part of discontinued operations. It agreed to restate the comparatives in its next annual report and accounts to correct this. We also questioned the cash flow statement presentation of the consideration from the disposal of a business which had been presented within cash flows from operating activities. The company acknowledged that the disposal proceeds should have been presented as part of investing activities. It agreed to restate the comparatives in its next annual report and accounts to present the cash flows from the disposal within investing activities. Since these restatements affected the primary financial statements, 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. Impairment We asked the company for further information on the assumptions used in the impairment assessment of goodwill and intangible assets. The company provided satisfactory responses to our questions. The company acknowledged that a change in the methodology used to derive the discount rate in the year should have been disclosed in accordance with paragraph 39 of IAS 8, and that clearer narrative disclosures of the reason for the impairment would have been appropriate. Alternative performance measures We questioned why EBITDA did not appear to have been adjusted for amortisation. The company explained that there was an error in the FY19 calculation of EBITDA and in the FY20 presentation of the reconciliation of EBITDA. The company agreed to correct these in the next annual report and accounts. Exceptional items We asked the company why certain exceptional items were not representative of the underlying trading of the company, given they appeared to occur each year. The company provided the requested explanations, and also noted that in future it does not plan to identify items as exceptional in the income statement. Interim Financial Information to 30 November 2020 We asked the company for an explanation of why foreign exchange reserves associated with Nutricima were not reclassified to profit or loss on disposal in the six months ended 30 November 2020. The company explained that it did not consider the disposal of the trade and assets to meet the definition of a full or partial disposal as described by IAS 21, and that the amounts would be reclassified to profit or loss when this definition was met during the 6 months ended 31 May 2021. |
| Entity | Anexo Group Plc (3) |
| Balance Sheet Date | 31 December 2019 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | September 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
This company was part of our thematic review of cash flow and liquidity disclosures and, as such, only the disclosures relating to the cash flow statement and liquidity were reviewed. Invoice discounting facility in the cash flow statement We asked the company why an invoice discounting facility was included within cash and cash equivalents in the cash flow statement as the balance did not appear to fluctuate between negative and positive. The company acknowledged that the invoice discounting facility did not meet the criteria for classification as cash and cash equivalents, and agreed to restate the comparatives in its next report and accounts to present the cash flows from the facility within financing activities. New lease arrangements The statement of cash flows presented a cash inflow within financing activities, in relation to new leases. We asked the company to explain this presentation because cash flows would not usually arise on the inception of a lease. The company acknowledged that the cash flow statement had been incorrectly grossed up for a non-cash transaction. The company agreed to restate the comparatives in its next report and accounts to remove the gross up associated with leases. The company also agreed to present cash flows associated with hire purchase leases and other leases within a single line in the statement of cash flows. As the changes to both the composition of cash and cash equivalents, and the presentation of cash flows from leases 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 | City of London Investment Group PLC (3) |
| Balance Sheet Date | 30 June 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Lawfulness of dividends and share repurchases We observed that over a number of years, the company’s dividends and share repurchases exceeded retained earnings and other reserves available for distribution as shown in the annual accounts. No interim accounts were filed at Companies House to support the distributions, as required by section 836(2)(a) of the Companies Act 2006 (the Act). We asked how the directors were satisfied that the distributions were lawful. The company acknowledged that its historical distributions did not comply with the requirements of the Act, and explained the steps that it intended to take to rectify the situation. We closed the matter on the basis that the company had taken legal advice and satisfactorily explained how it intended to rectify the unlawful distributions. Cash flow statement - classification of acquisition-related expenses We questioned why acquisition-related expenses of £1,248k were classified as investing activities, rather than as operating activities in the cash flow statement. The company acknowledged that it was not appropriate to classify the amounts as investing cash flows because paragraph 16 of IAS 7, ‘Statement of Cash Flows’, explains that only expenditures relating to amounts recognised as assets in the statement of financial position can be classified as investing activities. It agreed to restate the comparative cash flow statement in its next accounts to classify the amounts as operating cash flows. Consolidation of the International REIT fund Disclosures in the report and accounts indicated that the company’s investment in the International REIT fund was consolidated on a net asset basis. It was unclear how the method of consolidation complied with IFRS 10, ‘Consolidated Financial Statements’. The company confirmed that the International REIT fund was consolidated on a line-by-line basis, as required by paragraph B86 of IFRS 10, and agreed to clarify its disclosures in future accounts. Nature of interest in the EM REIT fund The company disclosed that it had stopped consolidating its EM REIT fund after a substantial investment in the fund by a client, which reduced the company’s holding to 21%. We asked the directors to explain why the company does not control or have significant influence over the fund. We were satisfied with the company’s analysis that it did not control the fund, and with its basis for concluding that the control assessment did not require significant judgement. The company also provided a satisfactory analysis to support its conclusion that it did not have significant influence and committed to disclosing the matter as a significant judgement in its next accounts. |
| Entity | Eden Research plc (3) |
| Balance Sheet Date | 31 December 2019 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | September 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Transactions with associate We asked for more information about the group’s sale of geraniol to its associate and the group’s acquisition of an intangible asset from the associate. We also queried the existence of, and accounting for, any unrealised gain or loss (in applying the equity method) arising from such transactions. The company explained that it had reconsidered the guidance in IFRS 15 'Revenue from Contracts with Customers' in relation to its arrangement with the associate for the sale of geraniol. As a result, the company acknowledged that the group accounts (in addition to recognising the group’s share of the result of the associate through the normal equity accounting) should have recognised revenue based upon the margin it was entitled to receive from the associate’s sale of geraniol instead of on a gross basis. Consequently, the company agreed to restate comparative amounts in the following year’s income statement accordingly. As the change affected a primary statement, we asked the company to disclose the fact that the matter had come to its attention as result of our enquiry. The company provided a satisfactory explanation in respect of the purchase of the intangible asset. The company also acknowledged that there was a gain on the sale of the intangible asset by the associate for which its share had not been eliminated when preparing the group accounts, but explained that the adjustment was considered immaterial. Impairment review of investment in associate We requested information about the impairment review performed for the company’s investment in its associate, Terpene Tech (UK). The company provided a satisfactory analysis of the assessment performed. The company agreed to enhance the disclosure in respect of the impairment review in future annual accounts, including an improved analysis of the key assumptions made. Investment in subsidiary We asked the company to clarify its judgement made in determining that the company controls Terpene Tech (Ireland). The company provided a satisfactory explanation and agreed to improve the disclosure in future annual accounts to more clearly explain the basis for its conclusion. |
| Entity | Mothercare plc (3) |
| Balance Sheet Date | 28 March 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Revenue recognition We asked the company to provide further information about the basis for recognising revenue from sales of goods to franchise partners on dispatch of those goods. The company’s response satisfactorily addressed our concern. The company will enhance the wording of its accounting policy in future accounts to explain its rationale. Earnings per share The loss from continuing operations did not appear to have been used as the control number when determining whether the potential ordinary shares were dilutive for the purposes of diluted earnings per share from continuing and discontinued operations and from discontinued operations. The company confirmed that it did not use the loss from continuing operations as the control number and that it would restate the 2020 amounts presented for EPS from continuing and discontinued operations and from discontinued operations. The company agreed to include an FRC reference in its 2021 accounts explaining that the enquiry from the Financial Reporting Council led to the correction. The diluted loss per share from continuing operations was determined in accordance with IAS 33 ‘Earnings per Share’. We also asked for further information about the determination of the weighted average number of shares used in the diluted EPS amounts. The company explained that the number had been calculated incorrectly and that it would present restated amounts for 2020 in its 2021 accounts. Related parties We queried whether the directors considered a certain shareholder to be a related party. This shareholder had an interest in excess of 20% of the company’s ordinary share capital on 28 March 2020 and had provided a loan to the company in 2019. The company confirmed that the shareholder was a related party and that it would give the disclosures required by IAS 24 ‘Related Party Disclosures’ in future accounts. |
| Entity | Oxford Instruments plc (3) |
| Balance Sheet Date | 31 March 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Revenue recognition accounting policy We asked the company to clarify certain aspects of its revenue recognition policy, including the method used to allocate transaction prices to performance obligations, and how it had concluded that contracts for the sale and installation of complex systems contained a single performance obligation. The company satisfactorily addressed our questions and agreed to enhance the accounting policy in its next accounts. Customer deposits and deferred income We requested additional information to assist us in understanding the nature of customer deposits of £45.3m included in trade and other payables. In particular, we wanted to understand whether the amounts represent obligations to transfer goods and services under IFRS 15, ‘Revenue from Contracts with Customers’, and if so, how the company met the relevant disclosure requirements. We also asked whether there was a distinction between the customer deposits and deferred income. The company satisfactorily explained that the customer deposits and deferred income are contract liabilities under IFRS 15, as they represent obligations to transfer goods and services. It also committed to enhance the disclosures included in its next accounts to clarify the matter and to disclose the information required by IFRS 15. Bank loans and overdrafts We questioned why bankloans and overdrafts in the parent company accounts were higher than those in the consolidated accounts. The company acknowledged that, in its consolidated accounts, it had inappropriately offset positive bank balances and overdrafts that did not meet the offsetting criteria in paragraph 42 of IAS 32, ‘Financial Instruments: Presentation’. 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 disclosures required by IFRS 7, ‘Financial Instruments: Disclosures’, where relevant. Cash flow statement - classification of disposal-related expenses We asked for the company’s rationale for classifying disposal-related expenses as investing activities in its cash flow statement. The company provided a satisfactory explanation and we closed the matter. Alternative performance measures (APMs) We identified a number of areas where improvements could be made to the presentation of the company’s APMs. The company accepted our observations and committed to provide reconciliations for all its APMs in future annual reports, and to ensure that APMs are not given more prominence than IFRS measures. |
| Entity | Telecom Plus plc (3) |
| Balance Sheet Date | 31 March 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Significant estimate: revenue recognition We asked the company to provide further information about the estimation uncertainty relating to revenue from non-smart meter customers, including the carrying amounts of associated balances and sensitivities or ranges of reasonably possible outcomes. The company agreed to enhance its disclosure about this significant estimate in future annual reports and accounts. Expected credit losses We asked for an explanation of the basis on which the allowance for credit losses had been calculated and for clarification as to whether the non-current financial assets had been assessed for impairment. Additionally, we asked for further information about the requirement of paragraph 35M of IFRS 7, ‘Financial Instruments; Disclosures’, to disclose, by credit risk rating grades, the gross carrying amount of financial assets. The company confirmed that non-current financial assets are assessed for impairment and agreed to augment its disclosures to include details of the inputs, assumptions and estimation techniques used to calculate expected credit losses in future annual reports and accounts. The company explained that the key determinants in calculating expected credit losses for trade receivables are ageing and whether an indebted customer remains with the Group. Disaggregated gross trade receivables and the corresponding expected credit losses will be presented on this basis in future annual reports and accounts. Impairment charge in the year Given the materiality of the credit loss impairment charge in the year, we questioned why this had not been disclosed separately on the face of the statement of comprehensive income as required by paragraph 82(ba) of IAS 1. The company agreed to separately show the credit loss impairment charge on the face of the statement of comprehensive income in future annual reports 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 result of our enquiry. |