The Financial Reporting Council (‘FRC’) have released two new support papers including:
1. FRC shares better practice examples from thematic reviews
The Financial Reporting Council (‘FRC’) has published three thematic reports to help companies improve the quality of their corporate reporting in acknowledged areas of difficulty.
The reports cover:
- Judgements and estimates
- Pension Disclosures
- Alternative Performance Measures
They detail findings from the FRC’s 2016/17 thematic reviews to which companies can refer when preparing their next report and accounts. Sixty companies were informed, before their year-end, that the FRC would review one of the three themes in their next reports and accounts. Many companies responded by improving the quality of their reporting in the selected area. The thematic reviews analyse the enhanced information provided to readers of the reports, and recognise the most significant improvements, including extracts from the better disclosures which most closely matched the FRC’s expectations. The FRC expects other companies to use the better examples observed to assess the quality of their own reporting and raise the bar on their disclosures.
Follow link to obtain copies of the reports:
2. Investors note improved information on risk, but more needed on viability reporting
Investors want a better understanding of how boards identify and manage risk to protect the sustainability of companies, according to a report from the FRC’s Financial Reporting Lab (‘the Lab’), which sought to understand how companies can better inform investors on the risks they face and their viability.
In its report the Lab found that, since the financial crisis, companies have made enhancements to their risk reporting and investors have seen better engagement with them on how they are managing their risks. However, further improvements could be made and the report provides guidance and practical examples on how companies can find a balance between reporting that is specific, whilst not revealing commercially sensitive information.
On the viability statement, companies have found the process of developing their statement to be helpful in better analysing their risk appetite, particularly by incorporating stress and sensitivity analyses into their risk management processes. However, companies need to be bolder in their viability report disclosures to ensure that they provide investors with better information on the company’s longevity and relevance in the market. The report encourages companies to develop their viability statements in two stages – firstly to assess prospects, and secondly to make their statement of viability.
Follow the link below to obtain a copy of the report: