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 | Wizz Air Holding 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 |
Sale and lease-back transactions We asked the company for further information on gains and losses on sale and leaseback transactions. The company provided this information noting that, in the year under review, total gross gains were immaterial and that no losses had been incurred. We encouraged the company to clarify its future disclosures in light of our enquiries in this area. On-board catering revenues We sought an explanation of how the company had concluded that it acts as agent, rather than principal, in respect of on-board catering services. We were satisfied with the explanation provided. Cash and cash equivalents We asked the company to explain the basis on which financial assets with an original maturity of between three and 12 months had been classified as ‘cash equivalents’. Following correspondence and discussions with the company, it agreed to separate from cash and cash equivalents deposits with an original maturity of greater than three months, even if they were accessible within three months at insignificant cost, where those deposits were being held for purposes other than meeting short-term cash commitments. In accordance with IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’, the company accounted for this change as a prior period adjustment in its annual report and accounts for the year ended 31 March 2021. 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. Other enquiries In view of the proximity of our enquiries to the company’s 2021 reporting date, we asked the company to consider some observations in respect of disclosures included in its 2020 annual report and accounts and to provide, after publication of its 2021 annual report and accounts, explanations of how those matters had been addressed. The observations covered:
The company made satisfactory improvements to disclosures in its 2021 annual report and accounts. |
| Entity | Co-operative Group Limited (3) |
| Balance Sheet Date | 4 January 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Revenue recognition for prepaid funeral plans We asked the company for information about the judgement disclosed in relation to revenue recognition for prepaid funeral plans, which was the subject of a qualified audit opinion. We questioned its basis for concluding that the proceeds from whole of life insurance policies, in which payments from customers were invested, represented variable consideration from a contract with a customer. We also asked the company to explain the basis for recognising fair value gains and losses on revaluing these insurance policies as changes to deferred revenue; that is, on the balance sheet rather than in the income statement. Following correspondence and discussions with the company, it agreed to change its treatment. Under the revised policy it recognises fair value movements on life insurance policies in the income statement, as required by IFRS 9 ‘Financial Instruments’. The company now treats the amounts initially received from customers as revenue, in accordance with IFRS 15 ‘Revenue from Contracts with Customers’. As these amounts are received in advance of the performance of the funeral, it defers the revenue and increases this liability by recognising an effective interest charge in the income statement until the plan is redeemed. In accordance with IAS 8 ‘Accounting, policies, Changes in Accounting Estimates and Errors’, the company has accounted for this change as a prior period adjustment in the next annual report and accounts, with a restatement of comparative figures. 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. Consolidation of the Reclaim Fund We asked the company for further information about the judgement it disclosed in relation to the consolidation of the Reclaim Fund. The company had been in the process of reconsidering the extent to which it had power over the Reclaim Fund, and its exposure or rights to any variable returns from its investment in the Fund. Following discussions with the company, it concluded that it had neither power over, nor exposure or rights to, variable returns from the Reclaim Fund and agreed to deconsolidate it. The company agreed to restate the comparative amounts in its next annual report to reflect this revised accounting policy and to refer to the FRC’s involvement in this decision as described above. Alternative performance measures The company’s annual report described underlying profit before tax, an APM, as giving a ‘truer’ measure of performance than reported profit. We explained that APMs should not be given more authority than their IFRS equivalents. The company has agreed to reflect this in its future annual reports. |
| Entity | Great Portland Estates plc (3) |
| Balance Sheet Date | 31 March 2020 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Income statement presentation We asked how the duplication of line items in the income statement and the offsetting of amounts of income and expense was consistent with the requirements of IAS 1, ‘Presentation of Financial Statements’. The company acknowledged that the presentation of additional lines on the face of the income statement may have made it unclear which amounts were presented in accordance with IFRS and agreed that this may have been confusing for users. The company agreed to amend its presentation of the income statement in its future reporting to remove the duplication of line items and present line items on a gross basis without offsetting. As this change affects a primary statement, the company agreed to disclose in its next report and accounts that the matter came to its attention as a result of the Financial Reporting Council’s enquiry. |
| Entity | Hilton Food Group plc (3) |
| Balance Sheet Date | 29 December 2019 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
Cash flow statement We questioned why the proceeds from the issue of an inter-company loan were classified as financing, rather than investing, activities in the parent company cash flow statement. The company acknowledged that it would have been more appropriate to classify this as an investing activity and agreed to restate the comparatives in its next 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 result of our enquiry. We also asked why the proceeds from the maturity of a bank treasury deposit were classified as financing, rather than investing, activities in the consolidated cash flow statement. The company explained that this classification reflected the fact that these bank deposits were directly linked to certain financing activities, and agreed to explain this in its future reporting. Joint ventures We asked the company for further information about why its joint venture facilities in Australia were not accounted for as subsidiaries due to the Group having taken full operational control following a restructuring. The company provided a satisfactory explanation, which it agreed to disclose in future. We suggested clarifying that both joint venture partners had equal representation on the joint venture board which controlled the key business and strategic decisions. We also asked the company to explain the judgements it made in determining that it was acting as an agent on behalf of the joint venture rather than as principal, in certain transactions with customers, with revenue being recognised on a net basis. The company provided a satisfactory explanation and agreed to more fully describe this in its next annual report and accounts. Leases We asked for more information about the changes to the assessment of purchase options in leases which resulted in significant additional liabilities being recognised on the initial application of IFRS 16, ‘Leases’ at 31 December 2018. The company concluded that, having reviewed this further, these lease arrangements should have been recognised as finance leases, rather than operating leases, in accordance with the requirements of IAS 17, ‘Leases’, in its 2018 accounts. The company agreed to disclose in its next report and accounts details of this error, including the adjustment required to the assets and finance lease liabilities reported in the balance sheet in its 2018 accounts. The company explained that, following the adoption of IFRS 16, the adjustments required to its 2019 accounts to adjust for this error were not material. We also asked the company to clarify the extent of future cash flows that the company is potentially exposed to arising from leases. The company provided a satisfactory explanation. Share-based payment We asked for more information about the adjustment in respect of employee share schemes included in the statement of changes in equity, as this appeared inconsistent with the charge for share options included in the employee benefit expense. The company explained that the adjustment included cash paid to satisfy share scheme awards classified as equity-settled share-based payments. The company acknowledged that these awards should have been accounted for as cash-settled share-based payments once a practice of offering a cash alternative had been established in 2018. The company explained that it had concluded that the adjustments required to correct this error were not material and that there is no longer a constructive obligation to settle awards in cash following the ending of this practice in 2020. The company agreed to explain this in its next report and accounts. |
| Entity | IWG plc (3) |
| Balance Sheet Date | 31 December 2019 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Limited |
| Quarter Published | June 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice |
This company was selected as part of our thematic review related to the application of IFRS 16 ‘Leases’ and, as such, only the disclosures relating to leases were reviewed. Cash flow statement We queried the company’s presentation of interest payments on lease liabilities as financing cash flows. This was inconsistent with its existing policy of classifying interest payments on financial liabilities as operating cash flows. The company agreed to follow a consistent policy for all interest payments and to restate the comparative amounts in the cash flow statement to classify interest on leases as operating cash flows. We also queried the presentation of lease incentives (contributions received from partners to enhance premises leased by the company) in the cash flow statement. It was also not apparent how the lease incentives were reflected in the movements in the right-of-use assets and lease liabilities notes to the financial statements. The company explained that the amounts received in respect of the lease incentives were netted against lease repayments recognised in the cash flow statement. The company acknowledged that IAS 7 'Statement of Cash Flows' requires gross presentation of cash flows in such cases and undertook to restate their cash flow statement accordingly. The company also agreed to disclose separately partner contributions in the related notes to the financial statements. 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. Alternative Performance Measures (APMs) The management commentary in the strategic report stated that information provided on an IAS 17, ‘Leases’, basis better represented the economics of the company’s leases and referred to ‘Operating profit’ in relation to the information presented on an IAS 17 basis. IAS 17 had been superseded by IFRS 16 for the period in question and information provided in accordance with IAS 17 was, therefore, an APM. We asked that, in future, the company not give disclosures that appeared to give more authority to APMs than to their IFRS equivalents, to which the company agreed. Lease term We queried the determination of the term of the company’s leases and the specific factors considered in the assessment of extension and termination options in those leases. The company provided a satisfactory response. We explained that users of the accounts would also find the information provided to us helpful and the company agreed to provide it in future accounts. Accounting policies We queried the nature of the ‘other adjustments’ made by the company on transition from IAS 17 to IFRS 16 and the ongoing accounting policy for lease incentives. We also queried whether the lessor accounting model should be applied to the company’s contracts with customers. The company provided adequate explanations and agreed to enhance their relevant accounting policies in the future. |
| Entity | St James House plc (3) |
| Balance Sheet Date | 31 January 2019 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | June 2021 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | CVS Group plc (3) |
| Balance Sheet Date | 30 June 2019 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | December 2020 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Galliford Try Holdings plc (3) |
| Balance Sheet Date | 30 June 2018 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | December 2020 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Alpha Financial Markets Consulting plc (3) |
| Balance Sheet Date | 31 March 2019 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2020 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Angling Direct PLC (3) |
| Balance Sheet Date | 31 January 2019 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2020 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Anglo American Woodsmith Limited (formerly Sirius Minerals Plc) (3) |
| Balance Sheet Date | 31 December 2018 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2020 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Bilby Plc (3) |
| Balance Sheet Date | 31 March 2019 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2020 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Funding Circle Holdings plc (3) |
| Balance Sheet Date | 31 December 2018 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2020 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Manolete Partners PLC (3) |
| Balance Sheet Date | 31 March 2019 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2020 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |
| Entity | Renishaw plc (3) |
| Balance Sheet Date | 30 June 2019 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | September 2020 |
| Auditor (5) | N/A |
| Case Summary / Press Notice | N/A |