Deloitte comment letter on the FRC's consultation on its corporate reporting research activities

Published on: 31 Mar, 2017

We have published our comment letter on the Financial Reporting Council's (FRC's) Corporate Reporting Research Activities consultation

We support the FRC’s work to identify and assess opportunities that aim to improve the quality of corporate reporting. It is imperative that the UK has a strong voice and seeks to influence the direction of standard setting and corporate reporting globally. The FRC has a long history of both independent standard-setting and contributions to standard-setting at an international level and has as a result significant knowledge and experience that should be leveraged on if the FRC’s stated aim that the UK should continue to be influential in the development of IFRSs following its exit from the European Union is to be achieved.

The output of the FRC’s work will be more effective in stimulating debate and influencing the IASB if its research is carried out through a global lens. Much of the practical experience drawn upon during research will, understandably, be from the UK environment, but a global focus should be the aim for findings to address the full scope of issues arising and, as result, to gain traction internationally.

The four projects identified in the Consultation Document concern areas which can present conceptual challenge in applying the principles of IFRS in practice. In fact, Deloitte Touche Tohmatsu Limited’s response to the IASB’s Request for Views: 2015 Agenda Consultation, highlighted non-reciprocal transactions (referred to as ‘non-exchange transactions’ in the Consultation Document) and variable consideration as two priority areas that should be added to the IASB’s Research Agenda even though they were not identified in the IASB’s Request for Views. 

Regarding research in the area of reporting to other stakeholders, whilst we understand that stakeholders other than investors may have legitimate case to ask for further information from organisations, the purpose of the annual report, as set out in the FRC’s Guidance on the Strategic Report, is ‘to provide shareholders with relevant information that is useful for making resource allocation decisions and assessing the directors’ stewardship’. As highlighted in the Consultation Document, there are many initiatives currently on-going looking at multi-stakeholder engagement and as such believe the FRC should not prioritise a project in this area, but instead, monitor and contribute to the work of the Corporate Reporting Dialogue.

Further we note the FRC’s response to the BEIS Green Paper on Corporate governance reform and its plans to revisit the Guidance on the Strategic Report to cover how matters referred to in s172 of the 2006 Companies Act have been taken into account by directors in promoting the success of the company by covering “how these factors were taken into account, describing the boards’ consultation mechanisms, the issues considered and trade-offs”. We welcome this initiative but view this as part of the FRC’s current standard setting rather than as research activities.

Further comments and a full response to all questions raised in the invitation to comment are contained within the full comment letter which can be downloaded below.


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