Key findings from the report, which is based upon a number of reports and surveys, are as follows:

Governance and reporting

• 94 per-cent of FTSE 350 companies comply with all, or all but one or two, of the UK Corporate Governance Code’s 54 provisions
• 61 per-cent of FTSE 350 companies fully comply with all 54 provisions
• Progress has been made in the area of diversity.  The target of 25% female directorships by 2015 set by Lord Davies “is well within reach” with 22.8% of FTSE 100 directorships now held by women.  Improvements have also been seen in the level of female executive directors in FTSE 100 companies, although there has been a “marginal decrease” in the FTSE 250.  The level of female non-executive directors across the FTSE 100, FTSE 250 and small cap companies.    
• The 2012 edition of the UK Corporate Governance Code brought in an expectation that companies should set out their policies on boardroom diversity and report on the progress against any measureable objectives they had set themselves.  The report highlights that 98 per-cent of FTSE 100 companies “make some reference to diversity” with 85 per-cent having a “clear policy”.  The figures were 56% for FTSE 250 companies and is an “area where more improvement is required”.
• There has been an improvement in audit committee reporting with approximately two-thirds of audit committees now providing a “good or detailed discussion of significant accounting issues”.
• Disclosure in relation to appointing the auditor, safeguarding objectivity and independence relative to the use of non-audit services has “generally been of a good standard”, although the report identifies the need for improved disclosure in the expected timing of an audit tender.
• For a sample of FTSE 350 annual reports, the FRC found that the standard of explanations for departures from the UK Corporate Governance Code provisions “continues to be variable”.
• Improvements are still required in the board’s assessment that the company’s annual report and accounts taken as a whole is fair, balanced and understandable.  There is a variation in the nature of the board’s assessment in FTSE 350 annual reports – 10 per-cent of FTSE 350 companies currently provide no explanation at all. 

Stewardship and engagement

• The report highlights “encouraging signs” that “more engagement on a wider range of issues is taking place between large companies and their major shareholders” but this is not the case across the listed sector or across all signatories.
• Companies and investors are calling for “more proactive and better quality engagement”, especially in the area of the binding vote on remuneration.
• The FRC are concerned about the quality of reporting against the seven principles of the Stewardship Code (link to FRC website).  For its annual sample of signatories’ statements against the Stewardship Code in 2014, the FRC found that “not all are reporting against all seven principles of the Code”.  For those that did report against all of the principles, the FRC comments that “the depth of statements continues to vary considerably”.  The report highlights that “the FRC will look to signatories to make better efforts to report sufficiently across the seven principles and the instances where explanations are required”.

Based on these findings and others highlighted in the report, the FRC considers the following to be the key issues for investors and companies in 2015:

The importance of good corporate culture and embedding sound governance behaviours throughout companies;

Board composition and ensuring suitable succession planning is in place;

Effective board evaluation and reporting;

Active engagement between boards and investors and improved reporting in this area;

Early consideration of the new viability statement;

Maintaining effective risk management and internal controls;

Focussing on the quality of explanations under both Codes; and committing to clear and concise reporting.

The FRC will also continue to focus on the issue of company culture and behaviour and in 2015 and, among other things, will:

• assess how effective boards are at establishing company culture and practices and embedding good corporate behaviour, and will consider whether there is a need for promoting best practice.
• re-emphasise the value of ‘comply or explain’ in achieving good governance
• begin an project to study how best it can promote a culture of stewardship and its benefits; and how it can increase scrutiny of adherence to the Stewardship Code in order to improve the quality of practice and reporting.
• focus on the role of proxy advisors

Click for:

• Press release (link to FRC website).
• Full report (link to FRC website).
• Our Governance in brief publication

The proposals set out a new standard on interim reporting for entities that apply FRS 102 in their annual financial statements. The proposed standard is based on IAS 34, the international standard on interim reporting and will replace the existing ASB Statement 'Half-yearly financial reports'

Our key comments are as follows:  

• we agree that the ASB Statement on Preliminary Announcements is now of little practical use and can be withdrawn without replacement;
• we agree with the proposal to replace the ASB Statement: Half-yearly Financial Reports with a pronouncement based on IAS 34 but with necessary amendments to enable it to work within the context of UK accounting standards.  However, we believe that the proposed draft FRS 104 deviates more than necessary from the text of IAS 34 and that greater consistency would be preferable; and
• we question whether it is appropriate to badge the document as a Financial Reporting Standard given the complications that will arise because it will not be an ‘accounting standard’ for legal purposes. 

Further comments and a full response to all questions raised in the invitation to comment are contained within the full comment letter.

The full agenda for the meeting, dated 10 January 2015, can be found here.  We will post any updates to the agenda, and our Deloitte observer notes from the meeting, on this page as they are available.

As the IASB concluded that diversity in practice around the recognition of a deferred tax asset that is related to a debt instrument measured at fair value is mainly attributable to uncertainty about the application of some of the principles in IAS 12, the proposed amendments (in Exposure Draft (ED) 2014/3) consist of some clarifying paragraphs and an illustrating example.

EFRAG is supportive of the core proposals contained within the ED.  However it has “some concerns and wording suggestions” which it suggests the IASB takes into account when finalising the amendments “to ensure that the welcomed clarifications are fully effective”. 

The full comment letter is available on the EFRAG website.

In light of experience over the 2014 AGM season and recent developments, the Group felt that there were a number of issues included within the 2013 Guidance that required further supplementary guidance and a number of areas that could be further clarified to promote best practice reporting.

Further supplementary guidance is provided in the following areas:

• Assurances regarding remuneration policies.  The Group highlights that some remuneration committees have published assurances about the way aspects of their proposed policies would be implemented.  The 2014 Statement indicates that such assurances should be provided on the accounts and reports section of a company’s website and in the remuneration reports in the following years of the policy’s term as a disclosure regarding policy implementation in those years,
• 2014 UK Corporate Governance Code – impact on remuneration policies previously approved – malus and clawback.  The Group suggests that companies which plan to extend withholding and recovery provisions in response to the 2014 UK Corporate Governance Code “may wish to consider (in consultation with investors) deferring this to the next scheduled policy renewal, presenting for approval a new policy amended accordingly or devising some other solution, for which they may wish to seek appropriate advice (e as regards any risk of making awards or payments ‘inconsistent’ with approved policy”.
• Information about the approved policy in subsequent remuneration reports.  The Group does not consider that the full policy needs to be included in every report but that “sufficient information should be included to help shareholders easily assess the reported remuneration in the context of relevant aspects of the policy, and that at least the policy table should be included”.  The Group also highlight that the full policy should be available and signposted on the company’s website.

In addition, the 2014 Statement seeks to clarify the following areas:

• Linking remuneration to company strategy
• Applying the GC 100 and Investor Group guidance on discretion
• Performance targets – protecting genuine commercial sensitivity yet achieving transparency
• Remuneration component maxima
• Shareholding requirements – compliance, time to comply and enforcement by remuneration committees
• Remuneration committees should aim to improve clarity

Click for:

• The 2014 Statement (link to the GC 100 pages on the Practical Law website).
• Our previous story on the GC 100 and Investor Group guidance.

Geoffrey will take up the position on 1 April 2015, replacing the current chair, Richard Fleck.

The press release can be found on the FRC website, here.

SORPS are intended to supplement accounting standards and other legal and regulatory requirements to reflect transactions or circumstances that are unique to particular sectors such as housing and pensions.

The revised SORP, published by the NHF, sets out revised guidance for accounting for registered social housing providers in the UK.  It has been published following an original consultation in December 2013 and a second consultation on impairment of social assets in April 2014.

The revised SORP, published by the PRAG, which will replace the current 2007 SORP, sets out revised guidance for financial reporting by pension schemes.  It has been published following a consultation in April 2014.

The revised SORPs are effective for accounting periods beginning on or after 1 January 2015, consistent with the effective date for FRS 100 ‘Application of Financial Reporting Requirements’, FRS 101 ‘Reduced Disclosure Framework’ and FRS 102.

Copies of the SORPs are available from the NHF and PRAG websites.  A Deloitte guide to the pension SORP is available here.

*Update June 2015 - the PRAG and the Investment Association have published a practical guide to help pension schemes, their accounts preparers and investment professionals in implementing the investment disclosure requirements in the revised pensions SORP.  The guidance is available to PRAG members and members of the Investment Association on the PRAG website.  Deloitte has published a briefing on this practical guide which is available here.* 

*Update February 2016 -the PRAG has issued additional guidance (link to PRAG website) that should be read alongside the pensions SORP.  This provides additional amendments that are required to the pensions SORP due to amendments to FRS 102.  Most of the amendments to FRS 102 relate to areas that are not relevant to pension schemes or where they are relevant they are already consistent with the content of the SORP.  However two amendments regarding disclosures required where the financial statements depart from FRS 102 and the definition and disclosure for related parties are relevant and are covered in the guidance. The PRAG does not expect these amendments to be significant for pension schemes.  The changes are effective from 1 January 2016 with early adoption permitted from 1 January 2015.*