UK Firms' Financial Reporting More Transparent: FRC
Whilst corporate reporting by large listed companies is generally good, detailed explanations and clarity could still be better, according to the Financial Reporting Council's (FRC's) recently released Annual Review of Corporate Reporting.
The FRC's review of 203 annual and interim reports and accounts included pre-informing 60 companies that a certain aspect of their next report and accounts would be subject to review. The FRC said many took the opportunity of reviewing the relevant disclosures and publishing reports and accounts that included an improvement in the quality of information provided.
The report notes that expectations of corporate reporting are changing. There are increasing calls for more information about how a company has thought about its long-term success and how directors have discharged their duties (to promote the success of the company, set out in Section 172 of the Companies Act 2006), along with a better explanation of how a company creates value and the extent to which that value is dependent on relationships with stakeholders.
Requirements are also changing with the implementation of new standards for Financial Instruments, Revenue from Contracts with Customers and Leases (IFRS 9, 15 and 16), and the Non-Financial Reporting Directive, it said.
Paul George, FRC's Executive Director for Corporate Governance and Reporting, said: "Whilst reporting is generally good, there is no room for complacency. Most companies seek to meet members' needs through fair, balanced, and understandable reporting. Our report provides important information to those involved in the preparation of Annual Report and Accounts. It highlights aspects of good practice, common areas for improvement, and changing expectations of stakeholders. High-quality and transparent reporting are fundamental to building trust and to the long-term success of UK companies and the wider economy."
With Brexit on the horizon and there being uncertainty currently about how it will impact on companies, the FRC said companies will need to provide significantly more detail in their next annual reports on how Brexit will impact their business, accounting, and tax arrangements.
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