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Narrative reporting areas of focus

The FRC continues to find areas for improvement with regards to the strategic report and the non-financial information statement as indicated in its Annual Review of Corporate Reporting.  Challenges will continue to be raised where these are not a fair, balanced and comprehensive representation of the performance and position of the business and where the non-financial information statement provides cross references to information elsewhere in the annual report which does not contain the required information.

Regulatory focus has highlighted how central the Section 172 statement is to UK reporting. This has been amplified by the COVID-19 pandemic, with investors asking for information that is company-specific and describes how the directors have engaged with stakeholders to understand the relevant issues, and how they have had regard to those issues in their decisions and strategy. In particular, investors are interested in how the directors have balanced the short-term financial threats with the longer-term business resilience.

The FRC indicates, in its year end letter to Audit Committee Chairs and Finance Directors, that many companies are failing to explain how their directors discharged their section 172 duty and in particular the responsibility to have regard to the consequences of decisions in the long term. Additionally whilst companies are reporting on the methods of engagement with stakeholders they are not reflecting how the feedback affected decision making. Some companies are treating the statement as one of compliance. 

The FRC encourages companies to disclosure:

  • The effectiveness and outcomes of their engagement.
  • The oversight that boards have over delegated engagement.
  • How feedback has been used within the decision-making process.
  • Difficult decisions, rather than just focusing on positive engagement.
  • How stakeholders are considered strategically and how such consideration is contributing to companies’ long-term success.
  • Implications of the decisions on both long-term success and on stakeholders themselves.

The FRC has published a set of tips intended to help companies consider what content to include in a Section 172 statement, how to present it and how to facilitate the process of preparing the statement.

2020 sees companies having to comply with the Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 - the Streamlined Energy and Carbon Reporting Regulations - for the first time.  These Regulations broaden greenhouse gas reporting and energy efficiency disclosure requirements in the directors’ report for quoted companies and extend this reporting requirement to large unquoted companies and LLPs with at least 250 employees or annual turnover greater than £36m and a balance sheet total (gross assets) greater than £18m.  They are effective for financial periods beginning on or after 1 April 2019.  The Department for Business, Energy and Industrial Strategy (BEIS) has published guidance to assist companies to comply.

Below is a comprehensive collection of resources — organised chronologically — on narrative reporting areas of focus.  Click for direct access to specific narrative reporting resources:

Related Resources

FRC publishes review findings on SECR

09 Sep 2021

The Financial Reporting Council (FRC) has published the findings of its review of how a sample of companies and Limited Liability Partnerships (LLPs) had complied with the Streamlined Energy and Carbon Reporting Requirements (SECR) which came into effect from 1 April 2019. The review assesses compliance with SECR, identifies emerging good practice and sets out the FRC’s expectations for reporting in future periods.

FRC Lab publishes its latest project report on reporting on risks, uncertainties, opportunities and scenarios

06 Sep 2021

The Financial Reporting Council’s (FRC’s) Financial Reporting Lab (the Lab) has published its latest project report on reporting on risks, uncertainties, opportunities and scenarios. The report outlines what investors want to understand from corporate reporting on risks, uncertainties, opportunities and the use of scenarios.

FRC issues its draft Taxonomies 2022 suite for comment

31 Aug 2021

The Financial Reporting Council (FRC) has issued, for comment, its draft Taxonomies 2022 suite which has been updated for all the taxonomies including the UKSEF, Charities and Irish extension.

FCA consults on proposals to boost disclosure of diversity on listed company boards and executive committees

30 Jul 2021

The Financial Conduct Authority (FCA) has published a consultation on proposals to improve transparency for investors on the diversity of listed company boards and their executive management teams.

FRC Lab publishes report on reporting on stakeholders, decisions and Section 172 statements

21 Jul 2021

The Financial Reporting Lab of the Financial Reporting Council (FRC) has published its latest report on reporting on stakeholders, decisions and Section 172 statements.

Financial Reporting Lab publishes its first newsletter for 2021

16 Mar 2021

The Financial Reporting Lab ("the Lab") has published its first newsletter for 2021 providing highlights of its activities in the first quarter of the year.

EFRAG Lab project task force launches survey on non-financial risks and opportunities reporting practices

22 Jan 2021

The European Corporate Reporting Lab project task force on reporting of non-financial risks and opportunities and linkage to the business model has launched a survey on stakeholders’ views on non-financial risks and opportunities reporting practices.

ICAEW publishes guide highlighting key considerations for the 2020/21 reporting season

18 Dec 2020

The Institute of Chartered Accountants in England and Wales (ICAEW) Financial Reporting Faculty has published a guide highlighting key areas that preparers should focus on in the forthcoming reporting season.

FRC publishes consolidated covid-19 guidance for companies and auditors.

14 Dec 2020

The Financial Reporting Council (FRC) has published consolidated COVID-19 guidance for companies and auditors. The consolidated guidance supersedes all previous FRC guidance for companies and auditors.

FRC announces thematic reviews and priority sectors for 2021/2022

11 Dec 2020

The Financial Reporting Council (FRC) has announced its corporate reporting and audit quality review programme for 2021/22 alongside its priority sectors for review.

Financial Reporting Lab publishes its final newsletter for 2020

11 Dec 2020

The Financial Reporting Lab ("the Lab") has published its Q4 newsletter providing highlights of its activities in the fourth quarter of 2020.

Governance in focus — On the board agenda 2021

10 Dec 2020

As 2020 draws to a close, our annual review of board topics will stimulate your thinking and help prepare you for the year ahead.

Accounting Roundup - Closing Out 2020

10 Dec 2020

Closing Out 2020 discusses the significant corporate reporting issues relevant to 31 December 2020 annual reports, covering areas of regulatory focus identified in the FRC's annual review of corporate reporting 2019/20, issues arising from the COVID-19 pandemic and the current economic environment and developments in reporting standards and areas of investor interest.

President of the EFRAG Board consults on his views on non-financial reporting standard-setting

01 Dec 2020

In October 2020, EFRAG Board President Jean-Paul Gauzès invited all interested stakeholders to contribute views related to his ad personam mandate from the European Commission to develop proposals for possible changes to the governance and funding of EFRAG in the context of non-financial reporting standard-setting.

Governance in brief - FRC issues advice on annual reports for 2020/21 reporting season

23 Nov 2020

FRC issues advice on annual reports for 2019/20 reporting season

FRC publishes year-end advice to Audit Committee Chairs and Finance Directors in advance of the 2020/21 reporting season

14 Nov 2020

The Financial Reporting Council (FRC) has published a letter to Audit Committee Chairs and Finance Directors, in advance of the 2020/21 reporting season, setting out its expectations for preparers of reports and accounts for the coming year.

FRC publishes the results of its climate thematic review

10 Nov 2020

The Financial Reporting Council (FRC) has published the results of its thematic review of climate-related considerations by boards, companies, auditors and professional bodies and investors. The results of the review highlight that corporate reporting needs to improve to meet the expectations of investors and other users on the urgent issue of climate change.

Financial Reporting Lab publishes third newsletter of 2020

02 Nov 2020

The Financial Reporting Lab ("the Lab") has published its third newsletter of 2020.

Annual report insights 2020-Surveying FTSE reporting

29 Oct 2020

Our latest annual reporting survey, Annual report insights 2020, provides insights into practices in annual reporting, focusing on areas where requirements have changed, where regulators are focusing or where innovative practices are emerging.

FRC publishes findings on the quality of corporate reporting in 2019/2020

21 Oct 2020

The Financial Reporting Council (FRC) has published its Annual Review of Corporate Reporting 2019/2020, which provides the FRC's assessment of corporate reporting in the UK based on evidence from a variety of sources, including the work of the FRC's own Corporate Reporting Review (CRR) team. The report sets out the FRC’s expectations of areas of corporate reporting that require improvement and what it expects companies to focus on in the coming reporting season. The FRC expects companies to consider its findings during the financial reporting process.

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