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 | HICL Infrastructure PLC |
|---|---|
| Balance Sheet Date | 31 March 2020 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Homeserve plc |
| Balance Sheet Date | 31 March 2020 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | HSBC Holdings plc |
| Balance Sheet Date | 31 December 2019 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Impairment We asked the company to provide us with further information regarding the allocation of impairment losses to the ‘Middle East and North Africa – CMB’ cash-generating unit (‘CGU’). In its December 2019 Annual Report and Accounts, the company had provided an analysis of the carrying amount and value in use of those CGUs where goodwill had been impaired during the year. The carrying amount of the ‘Middle East and North Africa – CMB’ CGU was $2.6 billion compared to a value in use of $1.5 billion. However, we noted that, of the $1.1 billion difference, only $0.1 billion had been recognised as an impairment against goodwill. The company satisfactorily responded to our query, explaining that the non-financial assets of the group were insignificant, meaning that the residual deficit of $1 billion could not be allocated once goodwill had been impaired. In addition, the company concluded that the unallocated deficit did not meet the definition of a liability under another accounting standard. |
| Entity | Ibstock plc |
| Balance Sheet Date | 31 December 2019 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | IMI plc |
| Balance Sheet Date | 31 December 2019 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Revenue recognition The company’s revenue accounting policy did not explain the accounting treatment applied to customer discounts and promotions in one of its three divisions. In response to our enquiry, the company explained its policies and said that it considered the level of uncertainty involved in estimating these items to be minimal. It agreed to enhance its disclosures of these items in its next report and accounts. Derivatives We were unable to reconcile movements in balance sheet items relating to derivatives to the relevant gains and losses recognised in the statement of comprehensive income. The company provided further details on the nature of the derivatives used in its activities and explained how the movements reconciled. In response to our queries, it committed to disaggregate certain line items relating to gains and losses on derivatives in future statements of comprehensive income. We explained that there were additional disclosures relating to other comprehensive income and hedge accounting that we would expect the company to provide in the following year’s report and accounts. |
| Entity | Imperial Brands PLC |
| Balance Sheet Date | 30 September 2019 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | IntegraFin Holdings plc |
| Balance Sheet Date | 30 September 2019 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Full |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | John Lewis Partnership Plc |
| Balance Sheet Date | 25 January 2020 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Man Group Plc |
| Balance Sheet Date | 31 December 2019 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Marks and Spencer Group plc |
| Balance Sheet Date | 28 March 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Measurement of liabilities at amortised cost We asked the company to explain how it had reflected the effect of changes in estimated interest cash flows on the measurement of liabilities at amortised cost, following a downgrade in credit rating, with reference to the requirements of IFRS 9, ‘Financial Instruments’, paragraph B5.4.6. The company set out the basis of its treatment of the change in credit rating, noting that because the step-up arose because of a change in the company’s credit rating, this was considered to represent a movement in the market rate of interest. As such, the related liabilities were treated as floating rate instruments and the increased interest cost was accounted for prospectively and the liability was not remeasured. On the basis that IFRS 9 does not define ‘floating rate instruments’ or ‘market rate of interest’ and the IASB considers that it is a matter of judgement, we accepted the company’s treatment. The company committed to explain the judgement that it had applied in arriving at this treatment, along with the alternative treatment considered, in its future annual report and accounts. Analysis of inventory and related provisions We asked the company for information to assist us in understanding the nature of inventory held and related provisions. In particular, we asked for details of the carrying value of the Clothing and Home inventory and queried whether this category should be disaggregated and shown separately, since the risks relating to these components appeared to us to be different in nature. The company provided the information requested and explained that disaggregating the information for Clothing and Home inventories would be inconsistent with the way that inventories were reported across all of its business units, and that its current disclosure is in line with other similar retailers. The company committed to disclose the inventory balance and related provisions by business unit in its 2020/21 interim financial statements, given the increased focus on inventory levels during Covid-19 disruption. |
| Entity | Mondi plc |
| Balance Sheet Date | 31 December 2019 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Multiplex Construction Europe Limited |
| Balance Sheet Date | 31 December 2018 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | National Express Group PLC |
| Balance Sheet Date | 31 December 2019 |
| Exchange of Substantive Letters (1) | No |
| Scope of Review (2) | Limited |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Pearson Plc |
| Balance Sheet Date | 31 December 2019 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Goodwill We requested information about the basis on which the company had allocated goodwill to cash generating units for the purpose of impairment testing. The company responded satisfactorily and explained the judgements it had made. Priority Account Service programme – supplier financing We asked for information about the company’s Priority Account Service programme, which is available to suppliers. The company provided more information on the programme’s nature and use. It explained that the programme provided supplier financing but was not mentioned in the company’s report and accounts as it was not considered to be material. It does not engage in any other supplier finance arrangements but stated that if, in future, it did, it would make the appropriate disclosures in accordance with IFRS and FRC guidance, where material and relevant. |
| Entity | Pendragon PLC |
| Balance Sheet Date | 31 December 2019 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | March 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Impairment of assets We asked the company for more information about the impairment of its investments in its subsidiaries. The company provided additional information and performed a more detailed assessment of individual investments. From this assessment, the company concluded that the recoverable amount of each investment supported the carrying value in the parent company financial statements. We recommended that it would be helpful to disclose the impairment testing process or, where an indication of impairment exists but after the subsequent impairment test it is concluded that no impairment has occurred, to explain the basis for that conclusion. We questioned the company’s disclosures of impairment testing for goodwill allocated to significant cash generating units, specifically the key assumptions in cash flow forecasting and sensitivity to changes in those assumptions. We considered the information and explanations the company provided and observed that users would benefit from understanding the outlook on key aspects of the forecast and the basis for assuming resumed sales growth in the short-term forecast period. The company committed to provide clear disclosure of the sensitivity analysis in its future accounts. Inventories We asked a question about information within the accounts reconciling inventory movements to the related cash flows, which appeared to be incorrect or incomplete. The company acknowledged that the reconciliation contained an error relating to inventory transferred to ‘assets held for sale’ and agreed to correct this in its subsequent annual report and accounts. We sought clarification of the sensitivity of the net realisable value of inventories to changes in the key assumptions. We considered the company’s explanation of the factors taken into account and the company confirmed that it would enhance its sensitivity analysis in future accounts. Manufacturer and third party finance We asked for more information about arrangements for manufacturer and third party financing of inventory. The company provided the information requested and gave undertakings to disclose, in future accounts, the basis on which the facilities could be reduced or terminated, key contractual terms governing the repayment of vehicle stocking facilities and a maturity analysis for these liabilities. Additions to property, plant and equipment We sought clarification of the cash flows relating to additions to property, plant and equipment. We considered the reconciliations company provided between the cash flow information and balance sheet disclosures relating to additions including contract hire vehicles, and had no further questions on this matter. Other receivables We questioned the composition of the balance of ‘other receivables’. The company explained that this largely comprised accrued manufacturer rebates, other manufacturer advances and accrued income relating to arranging finance and insurance packages for customers, and agreed to disaggregate material components of the balance in its future accounts. |