Halma

Brexit Disclosures

As the Brexit uncertainty continues, we look at how Brexit has been disclosed in a sample of FTSE 350 annual report and accounts.

As things currently stand, ‘exit day’ is still scheduled to be on 29 March 2019, although the likelihood of this date slipping appears to be increasing. The Government has issued the statutory instrument (SI 2019/145), Accounts and Reports (Amendment) (EU Exit) Regulations 2018, which effectively cuts the UK’s ties with the EEA (European Economic Area). The changes proposed will be made to the Companies Act 2006 and secondary legislation, making EEA states third countries under UK law. The Government has also issued another SI The Statutory Auditors and Third Country Auditors(Amendment) (EU Exit) Regulations 2019 dealing with statutory auditors and third country auditors. 

The Government has issued a number of additional pieces of guidance on how companies should operate in the event of a no-deal Brexit occurring on 29 March, on topics ranging from competition, insolvency and intellectual property, to the recognition of professional qualifications.

The Financial Reporting Council (FRC) and the Department for Business, Energy and Industrial Strategy (BEIS) have published letters for auditors and accountants to share information in case there is no deal for leaving the EU by Friday 29 March 2019.

It remains to be seen when these changes will actually come into force, and if further discussions with the European Union will change proposals that have been made. Needless to say our technical team will follow developments closely and ensure legislation and commentaries on the Croner-i Tax and Accounting platform are updated as soon as possible.

Halma plc Monitor

Halma plc Annual Report 2018
CR Monitor Issue: 
2019/0124
Company covered: 
Halma plc
Period End: 
31 March, 2018
Report issued on 12 February 2019 covered the following practice issues:
Pronouncements
Disclosure in respect of the expected impact of new accounting standards including IFRS 9 "Financial instruments", IFRS 15 "Revenue from contracts with customers” and IFRS 16 “Leases”.
Change
Deferred tax changes recognised following changes to US tax legislation.
Pronouncements
Presentation of a reconciliation of movements in liabilities following adoption of an amendment to IAS 7 "Statement of cash flows".
Change
Extended disclosure in respect of contingent liabilities.

UK Corporate Governance Code

Corporate governance has faced immense scrutiny recently following the high-profile collapses of BHS in 2016 and Carillion in January 2018, with MPs, the media and the public blaming the actions of the directors and auditors and all asking the same question… where was the board?

MPs, shareholders and the public have also been asking how effective the Financial Reporting Council’s (FRC) Corporate Governance Code has been in deterring poor corporate governance at the UK’s largest companies, following a raft of corporate failures. In July 2018 the FRC released a new UK Corporate Governance Code, (the Code) for listed companies in the UK. It also issued an update on its Guidance on Board Effectiveness. The Code is applicable to all companies with a premium listing, whether incorporated in the UK or elsewhere.

The new Code applies to accounting periods beginning on or after 1 January 2019, so with that in mind, this Common Practices report looks at how companies have been reporting on the current Code. We look at some good examples of reporting and look at the “explanations” made regarding compliance with the Code. We also discuss what’s new in the 2018 Code to enable readers to prepare for the upcoming changes.

The annual reports of 25 UK listed companies with year-ends between 31 December 2017 and 30 September 2018 were selected at random for review, across a range of industries. The full list of sample companies detailing company name, period end, auditor and industry classification can be found at the end of this report.

Disclosure of judgements and estimates

At the end of 2017, the FRC published a thematic review which focused on the disclosure of critical judgements and sources of estimation uncertainty, a requirement of IAS 1 Presentation of Financial Statements. This review was carried out in part because, in its 2016-17 corporate reporting review, the FRC found that companies were not making sufficiently clear disclosures in this area.

Unfortunately, despite this, judgements and estimates still represent an area of difficulty for companies, remaining the area most commonly raised by the Corporate Reporting Review Panel in reviewing company accounts during 2017–18. Common issues include poor explanations, a failure to separate judgements and estimates clearly and discussion of judgements and estimates that were not considered by the company to be significant or material. In some cases the FRC noted that disclosures elsewhere in the accounts suggested that significant judgements were made but these were not included in or referred to in the IAS 1 disclosures.

As a result of this, the FRC can be expected to continue its scrutiny of these disclosures and to challenge companies that do not provide clear, specific disclosures that meet the requirements of IAS 1.

This report analyses the disclosures about judgements and estimates which have been included in the consolidated annual reports of 20 UK listed companies selected at random from the FTSE 350.

Segment Reporting

The requirement to disclose information on operating segments has been around for a number of years, firstly under IAS 14 Segment Reporting, and currently under IFRS 8 Operating Segments which has been applicable for entities with publicly traded debt or equity instruments (or those which are about to publicly trade) since 2009.
 
This report looks at the operating segment disclosures in the consolidated financial statements of 20 UK listed companies selected at random.
 

Risk and viability in the strategic report

In light of recent high-profile collapses such as Carillion, the reporting by companies of risks and long-term viability is once again in the spotlight. Investors and other stakeholders expect detailed, specific information in the annual report which clearly sets out the key risks facing the company and the potential impact of these risks on the company’s longer-term viability. This report analyses the consolidated financial statements of 20 UK listed companies to assess the quality of risk and viability reporting in the annual report.

Halma plc Monitor

Halma plc Annual Report 2017
CR Monitor Issue: 
2018/0113
Company covered: 
Halma plc
Period End: 
1 April, 2017
Report issued on 30 January 2018 covered the following practice issues:
Restatement
Finalisation of provisional business combinations fair values results in restatement of prior year amounts in respect of one acquisition but adjustments are made in the current year in respect of another.
Change
Detailed description of the factors behind current year acquisition goodwill.
Pronouncements
Disclosure of expected impacts of new standards including IFRS 15, IFRS 9 and IFRS 16.
Change
Non-GAAP disclosures enhanced to include segment organic growth figures at constant currency rates.

Halma plc Monitor

Halma plc Annual Report 2015
CR Monitor Issue: 
2015/0910
Company covered: 
Halma plc
Period End: 
28 March, 2015
Report issued on 28 September 2015 covered the following practice issues:
Restatement
Average capital used to calculate performance measures in place of year-end figures.
Change
Graphical presentation of audit materiality, as threshold lowered.

Halma plc Monitor

Halma plc Annual Report 2014
CR Monitor Issue: 
2014/1010
Company covered: 
Halma plc
Period End: 
29 March 2014
Report issued on 21 October 2014 covered the following practice issues:
Inconsistent
Assumptions used to determine value in use of cash generating units disclosed, highlighting prior year non-compliance.
Change
Curtailment gains on defined benefit pension plans contribute 2.8% of profit before tax.
Change
Charts used to indicate audit coverage in external auditor's report.
Pronouncements
Strategic report included in management commentary.
Change
Contingent purchase consideration reclassified from trade and other payable to provisions.