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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

Governance in brief — FRC issues advice on annual reports for 2019/20 reporting season

14 Nov 2019

The FRC has issued its Annual Review of Corporate Reporting and annual open letter to finance directors and audit committee chairs covering its perspectives on key developments and areas of focus for 2019/20 annual reports. The report sets out the FRC’s “expectations for corporate reporting to improve trust in business”, emphasising the annual report is a vehicle of trust and stewardship.

Need to Know - New reporting requirements for large private companies

31 Oct 2019

This Need to Know addresses the new reporting requirements for large private companies in annual reports for periods commencing on or after 1 January 2019 under the Companies (Miscellaneous Reporting) Regulations 2018 (SI 2018/860).

FRC publishes findings on the quality of corporate reporting in 2018/2019

30 Oct 2019

The Financial Reporting Council (FRC) has published its Annual Review of Corporate Reporting 2018/2019, 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.

Accountancy Europe recommends revising the EU Non-Financial Reporting Directive

23 Oct 2019

Accountancy Europe has released a call to action recommending five steps to revise the Non-Financial Reporting Directive and strengthen non-financial reporting requirements in Europe.

Annual report insights 2019 — Surveying FTSE reporting

21 Oct 2019

Our latest annual reporting survey, Annual report insights 2019, provides insights into practices in annual reporting, focusing on areas where requirements have changed, where regulators are focusing or where innovative practices are emerging.

Governance in brief — New 2019 reporting requirements for large private companies - a reminder

17 Oct 2019

This publication covers the new governance-related reporting requirements for large private companies in annual reports for periods commencing on or after 1 January 2019.

Governance in focus — Board briefing on the new Section 172(1) statement

24 Sep 2019

Deloitte produces board briefing on the new Section 172(1) statement

FRC issues consultation on Streamlined Energy and Carbon Reporting Taxonomy

02 Aug 2019

The Financial Reporting Council (FRC) has published a consultation on the draft Streamlined Energy and Carbon Reporting (SECR) Taxonomy.

FRC publishes a statement on the Government's Green Finance Strategy

03 Jul 2019

The Government has announced its Green Finance Strategy which recognises the role of the financial sector in delivering global and domestic climate and environmental objectives. In response, the Financial Reporting Council (FRC) has issued a joint statement with other financial regulators, including the Prudential Regulation Authority (PRA), Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) welcoming the strategy.

Need to Know — FRC Guidance on the Strategic Report

07 Mar 2019

This publication examines the revisions made in the Financial Reporting Council’s (FRC's) revised Guidance on the Strategic Report, published on 31 July 2018.

Environmental reporting guidelines published

04 Feb 2019

Guidance to help companies comply with the Streamlined Energy and Carbon Reporting regulations, including greenhouse gas (GHG) reporting have been published.

Stay Tuned Online - IFRS and UK GAAP Update December 2018

18 Dec 2018

Stay Tuned Online is an online financial reporting update, aimed at helping finance teams keep up to speed with IFRS and UK financial reporting issues. Each update lasts about an hour, and sessions are normally held three times a year –the next one will come out in Spring 2019.

New Code launched for corporate governance of large private companies

14 Dec 2018

A new code for the corporate governance of large private companies has been launched.

Accounting Roundup - Closing Out 2018

13 Dec 2018

Closing out 2018 discusses the significant corporate reporting issues relevant to 31 December 2018 annual reports, covering areas of regulatory focus identified in the FRC’s Annual Review of Corporate Reporting 2017/2018, the 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 — 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.

Governance in focus — On the board agenda 2019

27 Nov 2018

As 2018 draws to a close, we thought this briefing would stimulate your thinking. The Deloitte Academy’s review of hot topics for boards and committees for the 2019 reporting season covers both areas of regulatory focus as well as emerging themes.

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.

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