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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 Parker Review Committee publishes its final report on the ethnic diversity of UK boards

24 Oct 2017

The Parker Review Committee has published its final report on the ethnic diversity of UK boards

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.

Deloitte Comment Letter 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.

FRC publishes findings on the quality of corporate reporting in 2016/2017

23 Oct 2017

The Financial Reporting Council (FRC) has published its Annual Review of Corporate Reporting 2016/2017, 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.

UK government consults on a streamlined approach to energy and carbon reporting

16 Oct 2017

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

November 2017 meeting of the ICAEW FRDG

11 Oct 2017

The next meeting of the Institute of Chartered Accountants in England and Wales (ICAEW) Financial Reporting Discussion Group (FRDG) will be held on 8 November 2017 in London.

FRC publishes year-end advice to preparers in advance of the 2017/18 reporting season

11 Oct 2017

The Financial Reporting Council (FRC) has published a letter to Audit Committee Chairs and Finance Directors, in advance of the 2017/18 reporting season, highlighting changes to reporting requirements and aspects of annual reports where the FRC feels that companies can improve.

The Bruce Column — making s172 more accessible

05 Oct 2017

There has been growing pressure to make S172 of the Companies Act more effective in encouraging directors to explain how they have carried out their responsibilities and how the long-term sustainability of companies is achieved. Robert Bruce, our resident regular columnist takes a look at the latest developments.

Annual report insights 2017 — Surveying FTSE reporting

03 Oct 2017

Our latest annual reporting survey, 'Annual report insights 2017' provides insights into narrative and financial reporting trends for UK listed companies, together with ideas to help them improve their annual reports. Hot topics including Brexit disclosures, governance reform and integrated reporting are all addressed.

Governance in brief — FRC encourages broader reporting of company purpose and impact in proposed revisions to the Guidance on the Strategic Report

11 Sep 2017

The FRC has published proposed revisions to its Guidance on the Strategic Report. These revisions encourage companies to report on broader matters that may impact the value and sustainability of business over the longer term and reflect new corporate reporting requirements arising from changes to the Companies Act 2006 which implement the EU Non-Financial Reporting Directive.

Need to know — FRC publishes consultation on amendments to its Guidance on the Strategic Report

30 Aug 2017

This edition of Need to Know outlines the FRC's consultation on amendments to its Guidance on the Strategic Report.

Government to set new legislation to take forward its corporate governance reforms

30 Aug 2017

The Government has set out its plans to move forward with its corporate governance reforms following its Green Paper issued last November and also the BEIS Select Committee inquiry into corporate governance which reported in April 2017.

FRC proposes amendments to its Guidance on the Strategic Report

15 Aug 2017

The Financial Reporting Council (FRC) has today published, for consultation, amendments to its ‘Guidance on the Strategic Report’ ("the Guidance").The Guidance remains non-mandatory with a view to encouraging best practice.

FRC publishes a factsheet on the EU Non-Financial Reporting Directive

26 Jul 2017

The Financial Reporting Council (FRC) has today published a factsheet on non-financial reporting that provides an overview of the new regulations implementing the EU Directive on non-financial and diversity information (“EU NFR Directive”).

Need to know — EC adopts guidelines on the EU Non-Financial Reporting Directive

14 Jul 2017

This edition of 'Need to Know' outlines the new European Commission guidelines on the European Union Non-Financial Reporting Directive.

Governance in brief — BEIS Select Committee inquiry report calls for reforms to the UK Corporate Governance Code and greater enforcement

25 May 2017

A next step in the corporate governance reform agenda has been the publication in April 2017 of the BEIS Select Committee inquiry report.

Government Equalities Office launches gender pay gap website as two new transparency requirements come into force

07 Apr 2017

Two new transparency initiatives with reporting requirements outside the annual report are now in force.

BEIS Select Committee publishes its report on corporate governance

06 Apr 2017

The Business, Energy and Industrial Strategy (BEIS) Select Committee has published its report following its inquiry and consultation on corporate governance launched in September 2016, recommending that action must be taken to address a lack of trust in business. Whilst the findings of the Select Committee are not binding on the Government, the proposals laid out in this report may be taken into consideration in any subsequent White Paper on Corporate Governance Reform.

Deloitte comment letter on the FRC's consultation on its corporate reporting research activities

31 Mar 2017

We have published our comment letter on the Financial Reporting Council's (FRC's) Corporate Reporting Research Activities consultation.

The Bruce Column — Recognising the global nature of corporate governance

09 Mar 2017

Corporate governance has grown steadily in influence. But, reports our regular resident commentator, Robert Bruce, pressure is growing for that expanding influence and global importance to be recognised and reinforced more effectively.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.