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 | Diamond DCO Two Limited (formerly Lloyds Pharmacy Limited) (3) |
|---|---|
| Balance Sheet Date | 31 March 2022 |
| Exchange of Substantive Letters (1) | Yes |
| Scope of Review (2) | Full |
| Quarter Published | December 2023 |
| Auditor (5) | Deloitte LLP |
| Case Summary / Press Notice |
Going concern We requested more information about the company’s conclusion that no material uncertainty in relation to the company’s ability to continue as a going concern was present at the date of approval of the financial statements, in the light of an ongoing strategic review following a change of ownership of the company. We also sought clarification of the extent of financial support provided by other group entities. The company explained that, as at the date of approval of the financial statements, the directors concluded that there was no material uncertainty over the ability of the company to continue to meet its liabilities as they fell due. The company further explained that, following a subsequent decision to dispose of the company’s remaining trade either to other entities within the group or to third parties, the company’s next financial statements will be prepared on a basis other than going concern. In closing the matter, we reminded the company that when assessing whether a material uncertainty exists, consideration should be given to uncertainties over the ability of the company to continue to trade following a potential reorganisation or restructuring, and not only to uncertainties over the company’s liquidity. We also observed that the disclosure requirements of IAS 1, ‘Presentation of Financial Statements’, apply to any key judgements made in concluding that there are no material uncertainties. Presentation of primary statements We questioned the presentation of a material impairment of tangible fixed assets outside operating loss for the year. The company agreed to present future tangible fixed asset impairment charges within operating profit/loss and to restate the income statement for the year ended 31 March 2022 accordingly in its next financial statements. The company agreed to disclose the fact that the matter had come to its attention as a result of our enquiry. We also asked for more information about the classification within current assets of amounts due from other group entities that had previously been presented as non-current assets. The company explained that these amounts were settled after the year end, and we closed our enquiry on this basis. Income tax We requested more information about the basis of calculation of the tax credit for the year, including the company’s group relief arrangements, and sought explanations for significant reconciling items in the effective tax rate reconciliation. The company satisfactorily responded to our enquiries. We asked the company to provide more information on the nature of the evidence supporting the recognition of a net deferred tax asset, given the company’s recent history of losses. In the course of our enquiry, the company identified additional information that enabled more accurate projections of the level of future taxable profits to be made. Consequently, the company agreed to derecognise the net deferred tax asset in full and to restate the 31 March 2022 financial information accordingly in its next financial statements. The company agreed to disclose the fact that the matter had also come to its attention as a result of our enquiry. Defined benefit pension scheme asset We sought clarification of the basis of recognition of a defined benefit pension scheme asset under IFRIC 14, ‘IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interactions’, as well as the calculation of the related deferred tax liability. The company satisfactorily explained that the asset was recognised based on the company’s unconditional right to a refund, after taking account of the effect of the trustees’ decision in March 2022 to initiate winding-up the scheme. The company explained that the related deferred tax liability had been calculated at a rate of 25%, and that the effect of the difference between this rate and the rate of 35% applicable to refunds from a pension scheme was not considered material. We closed our enquiry on this basis. |