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Narrative reporting areas of focus

In addition to the directors’ report, the directors of a company other than those qualifying for the small companies exemption in the Companies Act 2006, are required to prepare a strategic report for each financial year.

The Strategic report is currently under the spotlight and is a constant area of FRC challenge.  From ensuring that relationships and linkages between financial and non-financial reporting information are clearly explained to providing better information on how boards have fulfilled their duty under s172 when taking decisions to promote the long term success of the company. There are many things to consider.

Companies within scope need to comply with the enhanced reporting under the EU non-financial reporting directive which was effective for annual reporting periods beginning on or after 1 January 2017.  They will need to include, within their strategic report, a non-financial information statement and some additional disclosures including those about anti-corruption and bribery matters. The Directive also requires certain diversity disclosures to be presented.  See below link for resources in this area.

Risk reporting and viability statements is another area of FRC and investor scrutiny with calls for greater differentiation of the time periods used by different companies and sectors and a clear rationale for the period selected.

Companies are encouraged to revisit their assessment of the risks and ongoing uncertainties regarding the effects of the EU referendum and impact of other systematic risks, making appropriate disclosures to reflect their latest analysis and how this has developed over the year. 

In July 2018 The Companies (Miscellaneous reporting) Regulations 2018 were approved by Parliament. These regulations are part of the Government’s package of corporate governance reforms and are effective for financial years commencing on or after 1 January 2019. Large companies (within the meaning under the Companies Act 2006) will need to include:

  1. A separately identifiable statement in the Strategic Report describing how the directors have complied with their duty to promote the success of the company having regard to the matters section 172(1)(a) to (f) of the Companies Act 2006.
  2. A statement in the Directors’ Report summarising how the directors have had regard to the need to foster the company’s business relationships with suppliers, customers and others, and the effect of that regard, including on the principal decisions taken by the company during the financial year.

All UK registered companies with more than 250 employees will have to include:

  • A statement in the Directors’ Report summarising how their directors have engaged with employees, how they have had regard to employee interests, and the effect of that regard, including on the principal decisions taken by the company during the financial year. This expands on the information about employee engagement matters that companies already have to include in their directors’ report.

The FRC has recently published updated Guidance on the Strategic Report which will help companies improve in these areas.

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

Governance in brief — GC100 issues practical advice to directors on performance of their s172 duty

06 Dec 2018

GC100, the group of General Counsels of the FTSE 100, has issued updated guidance to help directors in performance of their duty under section 172 of the Companies Act 2006.

Governance in brief — FRC issues advice on annual reports for the 2018/19 reporting season

06 Dec 2018

The Financial Reporting Council (FRC) has issued its Annual Review of Corporate Reporting and annual letter to finance directors and audit committee chairs covering its perspective on key developments for 2018/19 annual reports.

GC 100 provides guidance to directors on s172

29 Nov 2018

The GC 100 has issued guidance which aims to provide practical help to directors on their performance of the section 172 duty.

FRC publishes year-end advice to preparers in advance of the 2018/19 reporting season

25 Oct 2018

The Financial Reporting Council (FRC) has published a letter to Audit Committee Chairs and Finance Directors, in advance of the 2018/19 reporting season, highlighting changes to reporting requirements and key matters which should be considered in the preparation of forthcoming annual reports and accounts.

FRC publishes findings on the quality of corporate reporting in 2017/2018

24 Oct 2018

The Financial Reporting Council (FRC) has published its Annual Review of Corporate Governance and Reporting 2017/2018, 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 also includes information on the level of compliance with the provisions of the UK Corporate Governance Code (“the Code”) as well as the quality of explanations and reporting provided by companies in their governance statements and committee reports.

FRC Lab report on on business model reporting and risk and viability reporting

18 Oct 2018

A new report from the Financial Reporting Lab of the Financial Reporting Council (FRC) considers how reporting practice has changed since the Lab published its original reports on business model reporting and risk and viability reporting.

Annual report insights 2018 — Surveying FTSE reporting

28 Sep 2018

In this publication we aim to provide insight into practices in annual reporting, focusing on areas where requirements have changed, where regulators are focusing or where innovative practices are emerging.

FRC publishes revised Guidance on the Strategic Report

02 Aug 2018

The Financial Reporting Council (FRC) has published revised Guidance on the Strategic Report encouraging companies to consider wider stakeholders and broader matters that impact performance over the longer term.

UK Government publishes response to its consultation on a streamlined approach to energy and carbon reporting

24 Jul 2018

The Department for Business, Energy and Industrial Strategy (BEIS) has published a response to its consultation which proposed a “streamlined and more effective energy and carbon reporting framework” for the UK.

Research into the local implementation of the EU Directive on disclosure of non-financial and diversity information

25 Apr 2018

Accountancy Europe, CSR Europe, and GRI have published an updated report on their research looking at the local implementation of the EU Directive on non-financial and diversity information reporting.

Robert Bruce interviews — Paul George, Executive Director, Corporate Governance and Reporting at the Financial Reporting Council

12 Apr 2018

In a wide-ranging video interview Paul George talks to Robert Bruce about the responses to the recent Corporate Governance Code consultation and areas of challenge in governance generally, what the FRC would like to see more of from strategic reports and information on directors’ responsibilities, what it would like to happen with IFRS post-Brexit, and how the Stewardship Code needs to evolve.

The Bruce Column — Where the Financial Reporting Council goes from here

12 Apr 2018

To say that the Financial Reporting Council has been under fire recently would be an understatement. Corporate scandals, as ever, do occur. But behind the scenes efforts to strengthen the UK’s corporate governance Code continue. Robert Bruce, our regular columnist, has interviewed Paul George, the FRC’s Executive Director, Corporate Governance and Reporting, to find out what the future may hold.

FRC publishes Strategy for 2018/21

27 Mar 2018

The Financial Reporting Council (FRC) has published its three year strategy for 2018/21 and its budget and levy proposals for the 2018/19 financial year.

FRC reminds Boards of companies in the construction and business support services sectors of their reporting obligations

30 Jan 2018

The Financial Reporting Council (FRC) has published reminders to Boards of companies in the construction and business support services sectors of their reporting obligations. Although the FRC guidance is directed at one sector, in the light of the collapse of Carillion, the FRC states it is also relevant to other companies.

FRC publishes Strategy for 2018/21

19 Dec 2017

The Financial Reporting Council (FRC) has published its three year strategy for 2018/21 and its draft budget and levy proposals for the 2018/19 financial year.

FRC to delay finalisation of Strategic Report guidance

04 Dec 2017

The Financial Reporting Council (FRC) has today announced that it is to delay the publication of its amended Guidance on the Strategic Report (“the Guidance”) until after the government has announced its legislative changes in respect of reporting on section 172.

FRC’s Financial Reporting Lab issues report on risk and viability reporting

28 Nov 2017

The Financial Reporting Council’s (FRC’s) Financial Reporting Lab (“the Lab”) has published a report on risk and viability reporting. The report seeks to understand the views of companies and investors participating in the project on the key attributes of principal risk and viability reporting, their value and use. The report also provides illustrative examples of the types reporting that investors favour in this area.

Accounting Roundup - Closing Out 2017

27 Nov 2017

Closing out 2017 discusses the significant corporate reporting issues relevant to 31 December 2017 annual reports, covering areas of regulatory focus identified in the FRC’s Annual Review of Corporate Reporting 2016/2017, ESMA’s common enforcement priorities for issuers in the European Union together with developments in reporting standards and areas of investor interest.

Governance in brief — FRC issues advice on annual reports for 2017/18 reporting season

26 Oct 2017

During October the Financial Reporting Council (FRC) issued its 2016/17 Annual Review of Corporate Reporting and its annual letter to FTSE 350 finance directors and audit committee chairs. This edition of Governance in brief explores the findings in the Corporate Reporting Review (CRR) annual report, the recommendations in the FRC’s year-end advice letter to preparers and the aspects of financial statements and broader corporate reporting that the FRC is looking to companies to focus on in the coming year.

We comment on the FRC's consultation - Draft amendments to Guidance on the Strategic Report - Non-financial reporting

23 Oct 2017

We have published our comment letter on the Financial Reporting Council's (FRC's) consultation on amendments to its Guidance on the Strategic Report.

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