Financial Reporting Lab publishes first case study on ‘Clear and Concise’ reporting

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05 Feb, 2015

The Financial Reporting Council (“the FRC”) has today published the first of a number of case studies, undertaken by its Financial Reporting Lab (“the Lab”) on the steps individual companies have taken, or are taking, in relation to ‘Clear and Concise’ reporting and the views of their investors and analysts in response. The first case study focuses on William Hill and their approach to ‘Clear and Concise’ reporting with regards to accounting policy disclosure. Investors were supportive of the approaches adopted by William Hill.

William Hill, from 2011 onwards, has only defined and disclosed what it considers are its significant accounting policies being revenue recognition, intangible assets – licences, going concern and exceptional items.  A complete list of accounting policies is then provided outside of the financial statements.  This contrasts to other companies that may present a longer list within their annual report.

Views were sought from eight of the company’s institutional investors and analysts, together with three retail investors in the company.

The case study highlights that institutional investors view William Hill as “the leader in good reporting in its sector in Europe, with high quality and clear disclosure”.  Investors supported the disclosure of only significant accounting policies which were supported by sufficiently detailed entity-specific related notes that “adequately explain how the company accounts for its significant transactions”.  Investors confirmed that “they would like companies to follow the lead of William Hill, and identify which of their accounting policies are significant and give these more prominence than other policies”.

Investors also supported effective disclosure of policy information in order to understand the business and its performance.  The case study indicates that investors “predominantly prefer” the significant accounting policies to be presented in the ‘Statement of Group Accounting policies’ section with the complete list provided as an appendix to the annual report.  Some would like to see each of the significant accounting policies placed in the related note(s) to the financial statements “as this presents the context and numbers together”. 

The case study is part of the FRC’s ‘Clear and Concise’ reporting initiative, launched in June 2014 and builds on the Lab’s recent report ‘Accounting Policies and integration of related financial information’ published in July 2014.

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