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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

The Bruce Column — Paul Druckman looks back over five years of achievement

18 Nov 2016

Five years can bring about an immense amount of change. Paul Druckman has just stepped down as chief executive of the International Integrated Reporting Council.

Robert Bruce interviews — Paul Druckman looks back over five years of achievement

18 Nov 2016

Five years can bring about an immense amount of change. Paul Druckman has just stepped down as chief executive of the International Integrated Reporting Council. And in a video interview with Robert Bruce he has reflected on what has been achieved in that time under his leadership.

Stay Tuned Online - IFRS and UK GAAP update October 2016

18 Nov 2016

The following topics are covered in the October 2016 webcast:1 - Closing Out 2016, 2 - A clear vision: Annual report insights 2016, 3 - The Financial Reporting Council’s (FRC's) thematic review of tax, 4 - IFRS developments and reminders and 5 - Round up of other corporate reporting news

Report published into the ethnic diversity of UK Boards

15 Nov 2016

A report has been published by Sir John Parker that considers the ethnic diversity of UK Boards (“the report”). The findings of the report have been published “for the purpose of consultation, and debate amongst business leaders, regulators and lawmakers”.

BEIS responds to feedback from its consultation on implementation of the EU non-financial reporting directive

10 Nov 2016

The Department for Business, Energy and Industrial Strategy (BEIS) has published its response to feedback received in response to its consultation on the implementation of the EU non-financial reporting directive in the UK.

Governance in brief — FRC’s CRR report calls for more tax and stakeholder reporting as well as better business model, risk and judgement disclosures

03 Nov 2016

The Financial Reporting Council (FRC) has issued its 2015/16 Corporate Reporting Reporting (CRR) annual report, which reflects the political agenda and the social mood by encouraging business to enhance tax disclosures and include disclosures on wider stakeholder considerations around how the directors have discharged their duties. This edition of Governance in brief explores the findings in the 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.

FRC publishes findings on the quality of corporate reporting in 2015/2016

21 Oct 2016

The Financial Reporting Council (FRC) has published its Annual Review of Corporate Reporting 2015/2016, 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.

FRC publishes year-end advice for smaller and larger listed companies

11 Oct 2016

The Financial Reporting Council (FRC) has today published a letter to Audit Committee Chairs and Finance Directors containing “the FRC’s perspective on aspects of annual reports that companies should aim to improve” in the coming 2016 reporting season and highlighting recent changes to UK reporting requirements.

CIPFA/LASAAC consults on new Code of Practice on Local Authority Accounting

18 Jul 2016

The Chartered Institute of Public Finance and Accountancy (CIPFA) and the Local Authority (Scotland) Accounts Advisory Committee (LASAAC) are seeking comments on an exposure draft of the 2017/18 Code of Practice on Local Authority Accounting in the UK (the Code) which would apply to accounting periods beginning on or after 1 April 2017 (“the exposure draft”).

Research report published into human capital narrative reporting amongst FTSE 100 companies

27 May 2016

Valuing your Talent partnership has published a research report that looks at the current standard of human capital narrative reporting amongst FTSE 100 companies. The partnership brings together the Chartered Institute of Management Accountants (CIMA), the Chartered Institute of Personnel and Development (CIPD) and the Chartered Management Institute (CMI).

ICAEW responds to BIS proposals regarding implementation of the EU Non-Financial Reporting Directive

16 May 2016

The Institute of Chartered Accountants in England and Wales (ICAEW) has issued its comment letter to the Department for Business Innovation and Skills’ (BIS) call for views on effective reporting alongside proposals to implement EU requirements relating to the Non-Financial Reporting Directive (NFR Directive).

Need to Know — FRC issues final guidance on going concern and reporting on solvency and liquidity risks for non-Code companies

09 May 2016

This edition outlines the contents of the FRC's final guidance on going concern and reporting on solvency and liquidity risks for those companies that do not apply the UK Corporate Governance Code.

We comment on the BIS consultation on the UK implementation of the EU Non-Financial Reporting Directive

21 Apr 2016

We have published our comment letter on the Department for Business, Innovation and Skills (BIS) consultation on the UK implementation of the EU Non-Financial Reporting (NFR) Directive.

Deloitte comment letter on the BIS consultation on the EU Non-Financial Reporting Directive

21 Apr 2016

We have published our comment letter on the Department for Business, Innovation and Skills (BIS) consultation on the UK implementation of the EU Non-Financial Reporting (NFR) Directive.

ACCA comments on BIS consultation on disclosure of non-financial and diversity information

19 Apr 2016

The Association of Chartered Certified Accountants (ACCA) has published its comment letter on the Department for Business Innovation and Skills’ (BIS’s) consultation on the UK implementation of the EU Non-Financial Reporting Directive 2014/95/EU on disclosure of non-financial and diversity information by certain large undertakings and groups.

FRC comments on BIS consultation on disclosure of non-financial and diversity information

05 Apr 2016

The Financial Reporting Council (FRC) has published its comment letter on the Department for Business Innovation and Skills’ (BIS’s) consultation on the UK implementation of the EU Non-Financial Reporting Directive 2014/95/EU on disclosure of non-financial and diversity information by certain large undertakings and groups.

FRC comments on government consultation on mandatory gender pay gap reporting regulations

22 Mar 2016

The Financial Reporting Council (FRC) has published its response to the Government Equalities Office (GEO) consultation on draft regulations that will introduce mandatory gender pay gap reporting for private and voluntary sector employers in England, Scotland and Wales with at least 250 employees.

FRC letter to investors ahead of the 2016 shareholder meeting season

18 Mar 2016

The Financial Reporting Council (FRC) has issued a letter to investors ahead of the 2016 shareholder reporting season highlighting recent changes in reporting and encouraging investors to “engage with companies to provide a steer on what information they believe is relevant and to challenge where reporting falls short of these expectations”.

Governance in brief — Gender pay gap information

17 Mar 2016

Tackling the gender pay gap is a key priority for the current government. The Prime Minister has made clear the government’s ambition to eliminate the gender pay gap in a generation, and the Government Equalities Office has now published draft regulations. Employers with 250 or more relevant employees are being asked to publish detailed gender pay information on their website for each financial year This Governance in brief explores the draft regulations issued. The government intends to lay the regulations before the parliament over the summer.

ICAEW publishes report providing recommendations to improve the quality of corporate reporting

14 Mar 2016

The Institute of Chartered Accountants in England and Wales (ICAEW) has published an 'Audit Insights' publication that “examines seven important areas of annual reporting and makes recommendations that will improve the quality of corporate information provided”. The publication builds upon its publication Corporate Reporting: Seven questions and a debate for 2016 published in December 2015 which offered seven questions for users, preparers and auditors to ask in order to provide better information during the reporting season.

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