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FRC record of the Annual Open Meeting on 12 September 2013

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18 Sep 2013

The Financial Reporting Council (FRC) has published the transcript and proceedings of the Annual Open Meeting held on Thursday 12 September 2013. The meeting began with an opening address by Chairman Baroness Hogg, included a report by the Chief Executive Stephen Haddrill on the key activities of the FRC and also included an opportunity to ask questions.

In her opening speech Baroness Hogg noted that the “primary task of the FRC is to help capital markets operate effectively by ensuring that investors in the capital markets have what they need to place their money”.  This would include: 

  • Effective boards who communicate well;
  • Useful annual reports and accounts, robust and easily comparable accounting standards; and
  • Effective audit and actuarial standards. 

She described that the FRC has been working hard to produce guidelines and codes to help preparers meet new regulatory requirements and also emphasised the “better coordination” that has been secured with key players such as the Bank of England, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). 

Stephen Haddrill then discussed the work of the FRC during the past year. 

Key highlights include: 

  • The revision of the UK Corporate Governance Code in 2012 which, among other things includes the requirement that companies should state their policies in relation to diversity, including gender diversity and to also ensure that the board present a fair, balanced and understandable assessment of the company’s position and prospects in their annual report. 
  • Revised guidance for Audit Committees.
  • Guidance on conducting effective audit tenders.
  • The introduction of the Stewardship Code to ensure that investors are paying attention to the explanations provided by companies in meeting the requirements of the UK Corporate Governance Code.
  • The introduction of “new” UK GAAP.
  • Progress made during consultations to implement Lord Sharman’s proposals on going concern. 
  • The success of the Financial Reporting Lab which has created a number of reports to “help companies to identify better ways of reporting”.
  • The opening of an office in Brussels which will allow the FRC to operate more efficiently on an international stage. 

He also expressed a view on the current status of corporate reporting in the UK.  He noted that “much of the quality of corporate reporting is good” but “poorer accounting” was being carried out by smaller companies.  Stephen Haddrill identified these “poorer accounting” areas as: 

  • Accounting in relation to revenue recognition.
  • The impairment of financial instruments.
  • Cash flow statements.
  • Too much “clutter” in annual reports. 

To address these issues, the FRC would like smaller listed companies to “focus on this with their auditors”.  It is hoped that through this dialogue it will prevent such “mistakes in the accounts”. 

The current strategic priorities of the FRC were also highlighted and include: 

  • Monitoring and enforcing our codes and standards;
  • A focus on stewardship and the importance of trying to encourage investor engagement with companies;
  • Continuing to monitor corporate reporting to ensure that it is fair, balanced and not overburdened with clutter;
  • Building confidence in the value of audit (on which we have a specific project from which we will be publishing some views later in the autumn);
  • Implementing the new role of actuarial regulation; and
  • Getting a better understanding of the economic and market context of our work. 

It was noted that a draft of the next plan, as part of the FRC three year strategy, will be published in mid-December. 

Please click here for a link to the FRC website and the full transcript.

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