The Financial Reporting Council (FRC) recently announced that it will supplement its routine monitoring with a series of thematic reviews
The Financial Reporting Council (FRC) recently announced that it will supplement its routine monitoring with a series of thematic reviews aimed at helping companies improve the quality of reporting in four areas that the FRC has identified as being difficult.
Upcoming thematic reviews
The reviews will cover targeted aspects of smaller listed and AIM quoted companies, the effect of the new IFRS revenue and financial instruments on 2018 interim accounts, the effect of the new IFRS for lease accounting and the effects of Brexit on companies’ disclosure of principal risks and uncertainties.
The reviews will be published in its letter to listed companies for the 2018/2019 annual reporting season. The aim of its thematic reviews is to identify and share examples of good practice reporting and highlight areas where improvements can be made.
2016/17 review of corporate reporting
Last month, the FRC issued its 2016/17 annual review of corporate reporting. The report states that the standard of corporate reporting remains generally good with room to improve on certain areas. For instance, companies should pay particular attention to the following areas when reporting:
- fair and balanced - presenting a fair and balanced assessment of performance and prospects, reporting on both successes and challenges in transparent ways
- linkage - communicating clear links between the financial statements and the discussions of strategy, KPIs, the use of alternative performance measures and cash flow statements
- tailored information - providing information that is company-specific and material to the sustainability of the business
- key judgements and estimates - properly explaining key judgements and estimates used in accounting policy decisions
In relation to financial statements, the FRC notes that the most challenging areas for companies were disclosures regarding judgements and estimates, accounting policy disclosures, pensions and business combinations.
What’s to come from the FRC?
The report also notes that the FRC’s Financial Reporting Lab will publish a paper on risk and viability reporting later this year to provide guidance on ways companies can improve their communication in these key areas.
If you would like to discuss the FRC's announcement and its impact on investor communications, contact Kay Kayachith.