Babcock International Group

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.

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.
 

Babcock International Group Monitor

Babcock International Group Annual Report 2018
CR Monitor Issue: 
2018/1013
Company covered: 
Babcock International Group
Period End: 
31 March, 2018
Report issued on 16 October 2018 covered the following practice issues:
Pronouncements
Extended disclosure in respect of the expected impacts of IFRS 9 "Financial instruments" and IFRS 15 "Revenue from contracts with customers".
Change
Changes made in segment reporting structure to enhance transparency.
Change
Discussion of key audit matters included in auditors report.
Change
Separate sections outlining director and auditor responsibilities included in audit report.

Fair value measurement information under IFRS

IFRS 13 “Fair value measurement” sets out a single consistent framework for measuring fair value within IFRS financial statements and outlines a standardised set of disclosures in respect of fair value measurements. IFRS 13 has been mandatory now for some years, with application being required for annual reporting periods beginning on or after 1 January 2013. This report sets out the results of how requirements of the standard have been put into practice, both in terms of measurement and disclosure, in the consolidated financial statements of 139 large public limited companies with year ends between 31 March 2016 and 1 April 2017. It is not an exhaustive study of all aspects of IFRS 13 application and its conclusions are limited to our findings in respect of the areas analysed within the financial statements reviewed.

Babcock International Group Monitor

Babcock International Group Annual Report 2017
CR Monitor Issue: 
2017/1006
Company covered: 
Babcock International Group
Period End: 
31 March, 2017
Report issued on 10 October 2017 covered the following practice issues:
Change
Cash outflow on acquisition of non-controlling interest reflected within financing section of the cash flow statement
Change
Goodwill on business acquisition attributed to market position and the value of the workforce.
Pronouncements
Extended disclosure on the future impacts of IFRS 15 and IFRS 16.
Change
Impairment review leads to goodwill write-down.

Disclosure of the impacts of IFRS 16 "Leases"

IFRS 16 “Leases” will fundamentally change accounting by lessees as it requires assets previously off balance sheet under operating lease arrangements to be brought on balance sheet as is currently the case for finance leased assets. As a result on application companies will recognise both additional assets and additional liabilities. Consequently there will also be knock on effects in the income statement as operating lease charges are replaced by a depreciation charge and a finance expense. This report analyses the financial statements of a range of companies to firstly establish whether there has been any early adoption and secondly to establish what companies are disclosing in respect of IFRS 16 and its future impacts.

Brexit Disclosures in Listed Company Annual reports

The referendum vote to leave the European Union (EU) has undoubtedly led to uncertainty for business and will potentially have far reaching impacts for companies from many different industries. This report, pulled together in March 2017, focuses on the information that companies have disclosed within their annual reports during the latter half of 2016. It sets out disclosures around risk as well as the disclosure of Brexit impacts which have already been felt and the resulting ramifications.

Babcock International Group PLC Monitor

Babcock International Group PLC Annual Report 2016
CR Monitor Issue: 
2016/1113
Company covered: 
Babcock International Group PLC
Period End: 
31 March, 2016
Report issued on 29 November 2016 covered the following practice issues:
Change
Restatement of financial statements due to finalisation of provisional business combination accounting.
Pronouncements
Presentation of a full list of subsidiaries rather than just principal subsidiaries following a change in the Companies Act.
Change
Viability statement looking forward for three years included within strategic report.

Babcock International Group PLC Monitor

Babcock International Group PLC Annual Report Year
CR Monitor Issue: 
2014/0908
Company covered: 
Babcock International Group PLC
Period End: 
31 March 2014
Report issued on 16 September 2014 covered the following practice issues:
Pronouncements
Strategic report replaces business review in management commentary.
Pronouncements
New pension rules lead to decrease in operating profit and extended sensitivity disclosures.
Change
Acquisition financed through rights issue disclosed as event after the reporting period.
Change
Extended audit report discloses areas of audit focus and materiality levels.