FCA consults on changes to streamline its transparency rules on structured digital reporting of financial statements

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17 Jan, 2023

The Financial Conduct Authority (FCA) are consulting on changes to streamline its transparency rules for certain companies with securities admitted to UK regulated markets to prepare, publish and file with the FCA their annual financial report in a specific web browser format (XHTML), and to present the financial statements in it in the structured digital format.

Structured digital reporting can improve transparency of market disclosures by applying 'tags' to information.  This makes it easier for market participants to extract, compare and analyse it.  This supports efficient price formation and investors' decision making. 

The FCA are proposing to simplify the structure of its current rules by:

  • simplifying the content and arrangements of its existing requirements by revoking the Technical Standard where they are currently set out, and including the key provisions directly into its Disclosure, Guidance and Transparency Rules sourcebook (DTRs);
  • making a new rule in DTRs requiring issuers to tag their annual financial statements (where they are prepared in accordance with IFRS Accounting Standards) using a ‘generally accepted taxonomy’ for annual corporate reporting in UK regulated markets;
  • issuing guidance on ‘generally accepted taxonomies’ in a new Technical Note on its website.  This will indicate what the FCA consider to be 'generally accepted taxonomies' - i.e. the detailed templates used by companies to label or 'tag' specific information in their annual financial reports, which are based on International Financial Reporting Standards (IFRSs).  In setting out the new Technical Note guidance, the FCA will also update the list of taxonomies currently contained within the Technical Standards to reflect new taxonomy updates published during 2022 such as the ESEF 2022 taxonomy published by the European Securities and Markets Authority (ESMA) in December 2022.

The FCA indicates that its proposals are intended to support companies subject to its rules by:

  • Making its existing requirements easier to locate and navigate.
  • Improving certainty for companies and supporting service providers by creating a new framework that enables the FCA to stay aligned with the taxonomies that are generally accepted for disclosing financial statements in UK regulated markets, in accordance with established practice in the UK.  This new guidance is intended to signal to the market at an earlier stage which taxonomies the FCA considers to be generally accepted for a given financial year and remove the time lag in formally updating FCA rules or Technical Standards on 'permitted taxonomies'.  
  • Making its requirements easier to understand, promoting compliance and reducing the likelihood of making simple formatting errors.

The proposals are directly relevant to all companies that are required to prepare and publish an annual financial report under DTR 4.1 in the format specified in the Technical Standards cross-referenced in DTR 4.1.14R.

Comments are requested until 24 February 2023.

The related publication and online response form can be accessed from the FCA's website.

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