The Financial Reporting Council (FRC) is stepping up efforts to promote clear and concise reporting with the announcement of a targeted programme of work to encourage companies to cut down on clutter, starting with guidance on the requirements of the new strategic report say Harris & Co accountants Northampton
The publication of the Guidance on the Strategic Report follows a consultation last year, with the FRC reporting that feedback showed ‘the majority of respondents appreciating the clear, accessible, principles-based, light-touch approach’.
The FRC says the guidance is designed to give an overview of the various components of an annual report, including where information should best be placed, and to help companies to focus on ensuring disclosures are material.
Melanie McLaren, FRC executive director of codes and standards, said:
‘The new legal requirements for the strategic report have already made a positive impact, with a number of companies focussing on clarity of communication rather than a compliance-driven checklist approach to reporting. We hope to encourage that trend.’
The guidance also includes clarification from the Department of Business, Innovation and Skills (BIS) on a number of legal points raised during the consultation. These include how a strategic report could be issued as a standalone document; safe harbour’ provisions for information presented elsewhere in the annual report and cross referenced; dual listing; and online publication.
‘We have also kept an eye on developments such as the EU Directive on Non-Financial Reporting and the work of the International Integrated Reporting Council. Reports that follow the Guidance should result in reporting that is consistent with the International IR Framework.’
The move reflects increasing concern about the size of annual reports with some companies publishing 14,000 word documents on an annual basis.
The FRC is planning other initiatives going forward, including publishing a review of progress towards clear and concise reporting in the 2014 reporting cycle, including, examples of practical application along with Financial Reporting Lab case studies setting out investor feedback on how well companies have addressed clarity and conciseness. The regulator’s corporate reporting review team will also highlight examples of reports where it has identified ‘clutter’ which is contrary to the objectives of clear and concise reporting.
Stephen Haddrill, FRC chief executive, said:
‘In 2012 the FRC introduced the requirement that corporate reports of listed companies should be “fair, balanced and understandable.’
‘However, investors still express concern that the key messages about the business are buried in too much verbiage of little value or are obscured by boilerplate. The programme we launch today is designed to tackle this persistent problem and promote clear and concise reporting.’
‘We will be seeking the views of stakeholders through roundtable discussions.’