We requested information about the method used to determine the amount recognised as a provision for historical legal issues as of 27 December 2020 and asked why a range of potential outcomes relating to the provision was not disclosed. We also requested an explanation for the movement in current other payables and accruals which the company provided. We asked the company to explain its rationale for recognising non-refundable retainer fees up-front. The company clarified that these fees were recognised ‘over time’ rather than upfront at a ‘point in time’ and undertook to amend its policy wording going forward. We asked the directors how they had satisfied themselves that the distributions were lawful and how the capitalisation of share-based payments was factored into the assessment of the lawfulness of dividends paid.

• The London Stock Exchange does not disclose whether a trade is a buy or a sell so this data is estimated based on the trade price received and the LSE-quoted mid-price at the point the trade is placed.
• The company provided satisfactory explanations and undertook to enhance its disclosure of such deferred tax amounts in future.
• The company confirmed that investment properties are measured at fair value at each reporting date, as required by paragraph 16.7 of FRS 102, and that their valuation is considered to be a key source of estimation uncertainty.
• As such, only disclosures relating to leases or climate-related aspects of the company’s reporting were reviewed.
• The company explained that the dividend had been classified as revenue and no significant judgement had been required in reaching this conclusion.

It agreed to enhance the disclosures in its future reporting,including disclosure of the period over which the deferred tax asset is expected to be utilised, the forecasts used, and the methodology applied. We suggested that it would be helpful to disclose details of the sensitivity analysis performed. We asked the company to consider how it could improve the disclosures in its strategic report relating to the significance of subsidies to the current and future development, performance and position of the company’s business.

Client sentiment is provided by xcritical for general information only, is historical in nature and is not intended to provide any form of trading or investment advice – it must not form the basis of your trading or investment decisions. Shares in THG have dipped further in recent months after SoftBank called off plans to buy a $1.6bn stake in THG’s technology division in July, denying the retailer what would have been a valuable cash injection. THG issued a statement saying that “in light of global macroeconomic conditions, the option and collaboration agreement has been terminated by mutual agreement among the parties with immediate effect”. At £672m, THG’s entire market value is now less than half the amount that SoftBank had previously agreed to pay for a fifth of one division of the company.

Data preferences

Although revenue growth and a governance overhaul have failed to prevent the THG share price’s 74% slide this year, analysts continue to hold a positive view on the company amid bid interest. However, those promises seem to have been deemed insufficient by BlackRock, THG’s largest institutional investor at the time. On 2 November 2021, Blackrock halved its roughly 10% stake in the company, sending THG’s shares down 9% that day to a new low of 197.40p. The e-commerce company, formerly known as The Hut Group, listed in London to much fanfare on 16 September 2020, raising £920m in the city’s biggest IPO since Royal Mail in 2013. On the day of the floatation, strong investor demand inflated the shares to a high of 658p, 32% above the initial 500p listing price that valued the company at £5.4bn. Other ratios that measure the risk and return of a portfolio include the Treynor ratio and Sharpe ratio.

We questioned whether provision for dilapidation costs is recognised for properties covered by the Landlord and Tenant Act 1985 (‘LTA’). The company explained that for these properties, where it neither anticipates or intends exiting the lease, the circumstances in which the lease would end mean that an outflow of resources is not considered probable. We encouraged the company to disclose this rationale in its future annual report and accounts. We sought an explanation of the material reconciling items included in the reconciliation of the tax charge included in the accounts. The company provided a satisfactory response and agreed to include additional explanatory disclosure in its 2022 accounts, both in respect of 2021 and, if relevant, 2022.

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. We asked the company to provide more information on the nature of the evidence supporting the recognition of a net deferred tax asset, given that the company suffered a loss in both the current and preceding financial years. We asked the company for a breakdown of certain reconciling items included in the tax rate reconciliation. The company provided this information and agreed to enhance its income tax disclosures in its future annual report and accounts by including descriptions or labels that clearly describe the nature of any material tax reconciling items. The company also agreed to consider disaggregating these items going forward and to reanalyse the comparative amounts to provide more granular disclosure in its next annual report and accounts.

IAS 36 ‘Impairment of Assets’ requires such projections to cover a maximum of five years unless a longer period is justified and the justification to be disclosed. The company undertook to include an explanation of why a longer period than five years is justified in its 2021 annual accounts. We requested information about the basis on which the company had allocated assets to the bingo cash generating units for the purpose of impairment testing. The company explained that due to the scale of the matter and the absence of a legal precedent, the directors had concluded that it was not possible to determine a range of possible outcomes or make a reliable estimate of the potential fine. In closing this matter, and as a result of our observations, the company agreed to enhance its disclosure of estimation uncertainty in relation to provisions and contingent liabilities. We asked for information about the type of costs that were included in the amounts described as capitalised from administrative expenses and how they met the criteria for capitalisation in accordance with IAS 16, ‘Property, plant and equipment’.

Visit the Downdetector Methodology page to learn more about how Downdetector collects status information and detects problems. According to chief financial officer, Euan Marshall, the company’s platforms have both been running at “close to record levels”. Based in London, James is a freelance investment writer for the Fool UK. He also contributes tobusiness and economics publications, having previously worked as a staff writer and editor. James has a PhD in development studies and has contributed to academic work on global supply chains. On Friday, the xcritical share price jumped by 9% after the firm reported a strong fourth quarter.

Key

The company explained that these balances are not homogeneous in nature, and consequently the valuations make use of different methodologies and assumptions. There are no individually significant assumptions or reasonably possible alternatives that would lead to a material change in fair value. We closed the matter after the company explained that its existing accounting policy for exceptional items applies to both tax and non-tax items. It explained that tax credits or charges arising from changes in statutory tax rates are not classified as exceptional items because such changes routinely occur in the ordinary course of its business. It also explained its rationale for adjusting a tax-related APM, presented in the previous year, for a deferred tax charge that had not been classified as an exceptional item. We asked the company to provide us with additional information to enable us to understand the nature of a tax repayment recognised during the year and the basis on which it had been included in the company’s alternative performance measures.

Costs generated centrally are allocated to segments on an equitable basis, mainly based on revenue, headcount or active client levels, or where central costs are directly attributed to specific segments. The directors are required by the Disclosure Guidance and Transparency Rules to include xcritical website a management report containing a fair review of the business and a description of the principal risks and uncertainties facing the Group. This business continues to change as we look to utilise our technology to enter new markets and new geographies and expand our non-leveraged offering.

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The company explained that they had reassessed the accounting treatment adopted for certain transactions accounted for as sale and leasebacks, and had concluded these should have been treated as financing transactions. The company told us that the proceeds from these transactions had been incorrectly netted off purchases of PPE in the cash flow statement, and that these cash flows should have been classified as financing activities. The company’s condensed consolidated statement of cash flows, in its interim results for the six months ended 30 September 2021, includes a cash outflow described as ‘Purchase of intangible assets’ of £1,195,898. We requested further information on the foreign exchange accounting policy applied by the parent company in its individual financial statements.

We asked the directors to explain why the company does not control or have significant influence over the fund. The company acknowledged that its historical distributions did not comply with the requirements of the Act, and explained the steps that it intended to take to rectify the situation. We closed the matter on the https://xcritical.expert/ basis that the company had taken legal advice and satisfactorily explained how it intended to rectify the unlawful distributions. We asked the company for quantitative details of the significant unobservable inputs used to measure the fair value of mortgage-backed assets held at level 3 in the fair value hierarchy.

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. We questioned the company’s accounting policy of recognising revenue upfront on customer onboarding. However, the company further explained that neither the revenue stream in aggregate, nor the difference between this treatment and that required by IFRS 15 ‘Revenue from Contracts with Customers’, was material. The company undertook to remove this accounting policy from its 2021 annual report and accounts.

The company agreed to include disclosure, where relevant to future accounts, about the judgement exercised in determining whether a geographical area of operations is both separate and major. We sought an explanation for the fluctuation in the tax rate on non-underlying items between 2019 and 2020 as the reason for the inconsistent rate was unclear, particularly given that the non-underlying items were predominantly the same in each year. We were satisfied with the company’s explanation and its undertaking to enhance its disclosures about the tax on non-underlying items in future accounts, when necessary, to provide users with a better understanding of the balance. As the changes to both the composition of cash and cash equivalents, and the presentation of cash flows from leases 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.

• The company now treats the amounts initially received from customers as revenue, in accordance with IFRS 15 ‘Revenue from Contracts with Customers’.
• In particular, we expect our stockbroking and our other B2B businesses will become a greater proportion of the Group, relative to our B2C CFD business.
• We asked the company to explain the judgement involved, and to provide some further information about the leases in question.
• It also agreed to further disaggregate the ‘other valuation methods’ category in the numerical analysis included in the notes to the financial statements.
• We asked the company to explain the difference in working capital movements between the consolidated statement of cash flows and the consolidated statement of financial position and how changes in working capital were explained within the strategic report.

Cryptocurrency assets continue to be held at fair value through profit and loss therefore the adoption of this accounting policy impacts classification only. Other assets amount to £13,443,000 and are presented as a separate line in the consolidated statement of financial position. The Statement of Financial Position has not been restated to reclassify the comparative, on grounds of materiality. We asked the company to explain the changes in working capital presented in the cash flow statement.

Intangible assets

The CMAPC is chaired by the Chief Financial Officer, an FCA-approved person, who is responsible for overseeing the controls and procedures in place to protect client money. The risk that third-party organisations inadequately perform, or fail to provide or perform, the outsourced activities or contractual obligations to the standards required by the Group. Systems and data centres designed for high availability and data integrity enabling continuous service to clients in the event of individual component failure or larger system failures. The risk of unauthorised access to, or external disclosure of, client or Company information, including those caused by cyber attacks.

We questioned various aspects of the company’s disclosure of APMs in accordance with the European Securities and Markets Authority (‘ESMA’) ‘Guidelines on Alternative Performance Measures’, including labelling, consistency, reconciliations, and prominence. We requested further information about the accounting implications for potential litigation against the company in respect of the LF Equity Income Fund which had been reported in the media. We requested an explanation for certain balances presented within trade and other payables.

• Operating expenses increased by 23% to£151.3 million, predominantly due to higher variable remuneration as a result of the significantly improved performance in FY20.
• They acknowledged that their disclosed accounting policy was not correct and agreed to revise it in future accounts to clarify that any liability and reimbursement asset are shown separately on the balance sheet.
• We observed that the company had claimed in various regulatory documents that it provided a platform for client companies (“clients”) to generate cashflows via a non-credit approach and without incurring debt.
• The company confirmed that the only individually significant amount of goodwill allocated was to the ‘Managed Services’ practice group, which, at the balance sheet date, was within the Commercial Services division.

Further, as also advised in last year’s Annual Report, it was decided, due to the increased importance of the APAC & Canada region to the Group, to appoint Matthew Lewis, Head of Asia Pacific & Canada, as an Executive Director of the Company. I am very pleased to report that the appropriate regulatory approvals resulted in both appointments to the Board being approved on 15 October 2019 and effective 1 November 2019. As commented on in last year’s Annual Report, Grant Foley, Chief Operating and Financial Officer, stepped down from the Board to pursue other interests in June 2019. Euan Marshall, Grant’s deputy in Finance, was asked by the Board to fulfil the role of Chief Financial Officer on an interim basis whilst due consideration was given to a permanent successor. Several of the other operating responsibilities of a non-finance nature within Grant’s remit were re-allocated amongst the other Executive Directors.

We have taken reasonable steps to ensure that any information provided by The Motley Fool Ltd, is accurate at the time of publishing. The content provided has not taken into account the particular circumstances of any specific individual or group of individuals and does not constitute personal advice or a personal recommendation. No content should be relied upon as constituting personal advice or a personal recommendation, when making your decisions. If you require any personal advice or recommendations, please speak to an independent qualified financial adviser. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro.

We questioned why cash flows from a loan to subsidiary were classified as arising from financing, rather than investing, activities in the parent company’s cash flow statement. The company acknowledged that the amount should have been classified as an investing cash flow and undertook to correct this in its 2021 report and accounts, and to restate the comparatives. We asked the company to explain its rationale for not presenting material impairment losses in relation to financial assets on the face of the consolidated income statement as required by paragraph 82 of IAS 1. The company agreed to disclose this information in future financial statements to the extent material, and agreed to restate the 2020 comparatives to the 2021 income statement accordingly. As the restatement 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. The Board has put in place a governance structure which is appropriate for the operations of an online retail financial services group and is aligned to the delivery of the Group’s strategic objectives including its diversification into non-leveraged businesses.

Cash and cash equivalents

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. The company agreed to provide reconciliations of APMs in future annual reports where the basis of computing an APM cannot be immediately derived from amounts in the financial statements. Disclosures about the nature, amount and sensitivities or ranges of potential outcomes of estimation uncertainties relating to revenue did not appear to have been provided.

We asked the company to explain whether this assumption was consistent with the requirements of IFRS 16 ‘Leases’, whereby the exercise of a break option should be assumed only if it is considered to be reasonably certain. The company provided a satisfactory explanation and agreed to clarify, in its 2022 accounts, that the leases with a break clause would be evaluated on a case-by-case basis. The company agreed to enhance the disclosure of potential future cash outflows arising from break clauses. The company also undertook to improve its disclosure of the treatment of lease extensions in determining the forecast period when calculating value-in-use for the right-of-use assets cash generating units.