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The Bruce Column - A time of change, and of opportunities

  • Robert Bruce Image

10 Sep 2013

The draft guidance on the strategic report suggests that companies will be encouraged to experiment and be innovative in their corporate reporting. Our regular resident columnist, Robert Bruce, reports on how communication of the corporate story is now centre stage. And how the launch of UK Accounting Plus will help this process.

At the end of this month a whole range of changes in UK corporate reporting comes into force. The part of the directors’ report that used to be known as the business review will become the strategic report. The Financial Reporting Council describes the changes in law as ‘relatively modest’ but they herald a new era of corporate communication.

There is a long history of efforts to encourage greater narrative explanation of what a company has done, is doing, and where it is going. Operating and financial reviews and similar initiatives have come and gone. They have tended to arrive with fanfares and then expire through a lack of commitment and regulatory interest.

But now we have a different approach. It is collaborative and gentler. But the aim is, if anything, more ambitious. This time the aim is to spark change rather than impose it. And also to pass the means of doing so to companies themselves.

The hope is that this will result in much clearer corporate reporting with a greater emphasis on narrative and non-financial measures. And the current tranche of changes deal with everything from directors’ remuneration to carbon footprints and diversity. But the FRC wants the ‘modest’ changes to bring about far-reaching change. ‘They should’, it says, ‘act as a catalyst for entities to prepare more concise and relevant narrative reports’. Hence its recently-released exposure draft on ‘Guidance on the Strategic Report’. The accent is on encouraging innovation and experimentation. It is about companies taking more responsibility themselves over what they put into their narrative, where they put it, and how they go about explaining what they are doing. It is intended to improve their communications.

And the guidance has been produced alongside the current momentum towards integrated reporting. The FRC has ‘met and shared ideas with the International Integrated Reporting Council, (IIRC), throughout the development of this guidance’, it says. For his part the CEO of the IIRC, Paul Druckman, points out that the new draft guidance supports ‘a shift in the mind-set of a business away from rigid compliance, and towards the better communication of its individual value creation story for its providers of financial capital’.

That is where the difference lies. What we are talking about now is not slotting pedantic detail into pre-ordained places. This is about broad frameworks and the onus moving to companies to choose the best ways to get their story across.

And this is also what this new website is about. It is about providing a huge range of information and comment in an easy form to help directors and companies refine their strategic and decision-making processes.

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