With effect from 30 September 2013 year ends onwards, under provision C.1.1 of the UK Corporate Governance Code (the Code), boards of premium listed companies are required to make the following statement in the annual report:

“The board confirms that the annual report and accounts, take as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the performance, strategy and business model of the company.”

This new provision supports the main Code principle previously in force that “The board should present a fair, balanced and understandable assessment of the company’s position and prospects”.  The supporting principle in section C.1 of the Code states:

“The board should establish arrangements that will enable it to ensure that the information presented is fair, balanced and understandable.”

Code Provision C.3.4 says that, where the board asks, the audit committee should provide advice to the board on this statement.  Since the audit committee already has the task of reviewing the annual report on behalf of the board, we believe that in most cases this task will land on the audit committee’s agenda. 

As well as discussing the new statement, this publication discusses what the Financial Reporting Council (FRC) is trying to achieve with this statement and key areas that should be considered in preparing to make the statement.

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