In 2014, at the request of the Department for Business, Energy and Industrial Strategy (BEIS – formerly BIS) the FRC developed and published non-mandatory guidance on the application of the strategic report requirements introduced into The Companies Act 2006 by The Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013 (SI 2013/1970) (the Regulations).
The FRC’s Guidance on the Strategic Report (the Guidance) was revised in 2018 to incorporate the non-financial reporting Regulations which were effective for financial years beginning on or after 1 January 2017; and the reporting requirements relating to the director’s section 172 duty to promote the success of the company, which were effective for financial years beginning on or after 1 January 2019.
The Guidance has now been updated to incorporate the following matters:
- climate-related financial risks and opportunities, in line with the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations;
- the need for traded limited liability partnerships (LLPs) and banking LLPs to publish a strategic report;
- clarifying the scope and definitions of the requirements with regard to public interest entities (PIEs); and
- the government’s ‘Streamlined Energy and Carbon Reporting (SECR)’ requirements.
The Guidance on the Strategic Report is set in the context of the annual report as a whole to recognise that the strategic report does not exist in isolation from other aspects of corporate reporting.
The Guidance includes communication principles that emphasise the qualities of good corporate reporting. It encourages companies to focus on the application of materiality to disclosures and to be innovative in the structuring of information to improve the clarity and conciseness of information.
The strategic report should provide a company’s shareholders with a holistic and meaningful picture of a company’s business model, strategy, risks, development, performance, position and future prospects including relevant non-financial information.
To read the full report click on the link above.