Long-awaited narrative reporting regulations laid before UK parliament

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13 Jun, 2013

The long-awaited narrative reporting regulations issued by the United Kingdom Department for Business, Innovation and Skills (BIS) have now been finalised and laid before the UK parliament for approval. The regulations are the UK government’s response to a project that began in 2010 and are intended to make narrative reporting simpler, clearer and more focussed.

The Institute of Chartered Accountants in England and Wales (ICAEW) have welcomed the new regulations (link to draft regulations) but have also raised concerns that some companies may struggle to meet the adoption deadline.  Dr Nigel Sleigh-Johnson, Head of ICAEW’s Financial Reporting Faculty, said: 

Companies need time to implement changes of this magnitude; the timetable is likely to prove challenging for many businesses. This is not ideal; boards certainly need to turn their attention to this change sooner rather than later. 

The regulations: 

  • require all companies (except small companies) to prepare a strategic report which will be presented separately to the directors' report and will replace the current business review.  The aim of the strategic report is to pull together the company’s strategy, business model and risks facing the company and link this through to the financial statements and remuneration of company directors.  The regulations regarding directors’ remuneration, which include the requirement for quoted companies to disclose a single remuneration figure for each director, are expected to be laid before parliament shortly. Quoted companies will need to ensure they include specific information on the company’s strategy, business model, human rights and gender diversity; 
  • require quoted companies to include information on greenhouse gas emissions in their directors’ report.  This report will be required to contain an annual quantity of emissions, in tonnes of carbon dioxide equivalent, in respect of emissions produced by “activities for which that company is responsible”, including fuel usage and resulting from the purchase of “electricity, heat, steam or cooling” by the company.  Companies will be required to disclose the methodology used to calculate these figures including prior year comparative information for the second and subsequent year of reporting;
  • remove a handful of other currently required disclosures in the director’s report such as the principal activities of the company during the course of the year; and 
  • replace the option to prepare summary financial statements with an option to provide a ‘strategic report with supplementary material’.  The supplementary material consists of some administrative details, details of any qualifications made by the company’s auditor in its report on the full annual accounts and, for quoted companies, the “single total figure table” for directors’ remuneration.

The UK Department for Environment, Food & Rural Affairs (DEFRA) has published regulations governing how companies should report their greenhouse gas (GHG) emissions in their publication 'Environmental Reporting Guidelines: Including mandatory greenhouse gas emissions reporting guidance' (link to DEFRA guidance).  This publication provides guidance for companies on how to measure and report greenhouse gas emissions and discusses the requirements for carbon reporting in more detail.  Further DEFRA guidance is on greenhouse gas emission factors is provided in their publication '2013 Government GHG Conversion Factors for Company Reporting: Methodology Paper for Emission Factors' (link to DEFRA guidance) and 'UK Greenhouse Gas conversion factors' (link to DEFRA website).  Should they be approved, the regulations will come into force for periods ending on or after 30 September 2013.  

Click for: 

BIS press release (link to BIS website)

Regulations laid before parliament (link to draft regulations)

DEFRA guidance on how to measure and report greenhouse gas emissions and '2013 Government GHG Conversion Factors for Company Reporting: Methodology Paper for Emission Factors' (link to DEFRA guidance)

Our previous story on the future of narrative reporting

Deloitte ‘Need to know’ on the New UK narrative reporting regulations

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