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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 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.

New company reporting requirements for private and public companies approved by Parliament

26 Jul 2018

The Companies (Miscellaneous reporting) Regulations 2018 have been approved by Parliament.

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.

FRC issues new UK Corporate Governance Code

16 Jul 2018

The Financial Reporting Council (FRC) has published the new UK Corporate Governance Code together with revised Guidance on Board Effectiveness. The new Code applies for periods commencing on or after 1 January 2019.

Governance in brief — FRC issues new UK Corporate Governance Code

16 Jul 2018

The FRC has published the new UK Corporate Governance Code together with revised Guidance on Board Effectiveness. The changes are far-reaching in some areas and reflect the Prime Minister’s broad social reform agenda and desire to restore trust in UK business. The new Code applies for periods commencing on or after 1 January 2019.

Governance in brief — BEIS issues legislation to deliver key corporate governance reforms

20 Jun 2018

The Companies (Miscellaneous Reporting) Regulations 2018 have been laid before Parliament. These represent the legislative strand of the Government’s package of corporate governance reforms announced by BEIS in August 2017.

BEIS issues legislation to deliver key corporate governance reforms on pay and stakeholder engagement

11 Jun 2018

The Companies (Miscellaneous Reporting) Regulations 2018 have been laid before Parliament. These represent the legislative strand of the Government’s package of corporate governance reforms announced by BEIS in August 2017.

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 consults on a new-style UK Corporate Governance Code

05 Dec 2017

The Financial Reporting Council (FRC) has today published a new-style UK Corporate Governance Code for consultation together with revised Guidance on Board Effectiveness and some questions on the future of the Stewardship Code.

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.

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