The Financial Reporting Council's Annual Review sets out the findings of its monitoring of UK companies’ annual corporate report and accounts, alongside its expectations for the upcoming reporting season. Here, we signpost the resources you need to stay up to date.
The FRC's report is an essential resource for preparers and auditors of financial statements, investors, and other stakeholders; for NEDs, it provides a crucial perspective on the current state of corporate reporting, and highlights areas where they can add value in their roles.
Overall, the FRC is pleased that the quality of reporting in the FTSE 350 has been maintained, and that there have been improvements in several reporting areas, with provisions and contingencies falling out of the ‘top ten’ issues for the first time in over five years.
This year the FRC also questioned significantly fewer companies in relation to their disclosure of judgements and estimates, another area that has featured in the top ten for many years.
However, The FRC was disappointed that there has been an increase in the number of restatements in relation to impairment of assets and cash flow statements, predominantly in companies outside the FTSE 350, where they are seeing some evidence of a widening gap in quality. They announce that these will remain areas of close focus for them.
Companies and their auditors may reduce the risk of challenge by closely reviewing the FRC’s findings to avoid similar breaches of reporting requirements in the future.
The FRC will continue to take a proportionate and targeted approach to its monitoring to ensure companies comply with the relevant reporting requirements. They do not expect companies to provide information in their annual reports and accounts that is not material or relevant to users.
In relation to sustainability reporting, the FRC was pleased that, given the complexities for reporters, there were comparatively few compliance issues in premium-listed companies’ reporting against the Taskforce for Climate-related Financial Disclosures (TCFD) framework.
Sarah Rapson, the FRC's Executive Director of Supervision, shares her views on the review:
“While it is pleasing that the quality of corporate reporting has been maintained, a widening quality gap between FTSE 350 companies and other companies is concerning. Companies outside the FTSE 350 are important to economic growth and good quality reporting improves trust in business and supports investment and growth. To address the concerns highlighted in this year’s annual review, companies should clearly familiarise themselves with the FRC’s top ten reporting issues and focus on providing material disclosures that are clear, concise, and company specific. Companies should also note that good quality reporting does not necessarily require a greater volume of disclosure.”
Learn More:
To read the full review, follow the link here.
Equally, the FRC’s ‘In Conversation’ podcast about the Annual Review discusses the report’s purpose and the key takeaways from a year of corporate reporting. Listen to the outlook from Kate O’Neill, Director of Stakeholder Engagement and Corporate Affairs, and Geoff LeGouais, Corporate Reporting Review Case Director, here.
And on Thursday 17th October, be sure to join FRC’s webinar to explore the core findings. Register your place here.
BDO's Guide to the FRC Updates:
Need a run down of the key changes to the Corporate Governance Code? Be sure to check out BDO's breakdown of the updates here, looking at the primary changes to:
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Board Leadership & Company Purpose
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Compostition, Succession and Evaluation
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Audit, Risk and Internal Control
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Remuneration
With a comprehensive guide to what the announcement means for you, and what boards should be thinking about, this a great resource for developing your understanding of the Code.
WTW's Compliance Advice:
The overview of the Corporate Governance Code offered by WTW - which you can view here - also looks at the key updates, and is particularly helpful in outlining effects including:
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When the Corporate Governance Code 2024 applies.
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How you can identify the risks requiring 'material controls'.
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How you can adhere to the requirements on 'matieral controls'.
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What the implications are for your organisation if you don't comply with the Code.