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Annual report of the UK FRRP

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26 Sep 2012

The Financial Reporting Review Panel (FRRP) of the UK Financial Reporting Council (FRC) has published its annual report 2012. The FRRP is responsible for ensuring that the annual accounts of public companies and large private companies comply with the requirements of the Companies Act and applicable accounting standards.

An excerpt from the FRRP findings:

Conclusions

The Panel found the general quality of reporting by companies whose accounts it reviewed to be good.

There was further improvement in all aspects of reporting of principal risks and uncertainties. The reporting of mitigating actions, in particular, was considered to be done well.

In recent years, to support its objective of improving the quality of corporate reporting, the Panel has highlighted features which it associates with a good annual report. It is pleased to see some evidence this year of boards focussing on key messages by eliminating unnecessary and obscuring detail. Others have reconsidered the presentation of their financial statements by giving greater prominence to material disclosures or by changing the order of content to assist shareholders’ understanding of their company’s business, policies, performance and position.

We do, however, remain concerned about the quality of reporting by some smaller listed and AIM quoted companies that lack the accounting expertise of their larger listed counterparts. The Panel raised more potentially substantive issues with a number of such companies and these frequently took more time to resolve satisfactorily. Directors should not under-estimate the importance of their legal responsibility to prepare accounts that comply with the law and accounting standards.

The Panel was pleased that boards of directors continued to co-operate well with it during the year, often voluntarily giving undertakings to improve the quality of their future reporting. In the one instance where a company did not respond constructively to the Panel’s request for additional information and explanations, the Panel wrote to the chairman invoking its statutory power to require such information as it believed necessary. Such information was then provided.

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