Narrative Reporting

Collection of narrative reporting news and publications


Most UK companies are required to provide narrative information in their annual reports, with the level of information varying according to the size and type of legal entity. Since the reporting requirements are governed by different pieces of legislation, different types of legal entity have different requirements as to the types of narrative report that they are required to prepare.

The Companies Act 2006 (“the Act”) requires all UK com­pan­ies (except those that qualify as mi­cro-en­tit­ies) to prepare a directors’ report. The Act also requires all com­pan­ies (other than those entitled to prepare accounts for the year in accordance with the small companies regime or would be so entitled but for being or having been a member of an ineligible group) to prepare a stra­tegic report which contains the majority of the narrative disclosure. Quoted companies as defined in s385 of the Act are also required to prepare a directors’ remuneration report.

The Dis­clos­ure Guidance and Trans­par­ency Rules (DTR) of the Fin­an­cial Conduct Au­thor­ity (FCA) require most listed com­pan­ies to prepare an annual 'man­age­ment report' to ac­com­pany their fin­an­cial state­ments. Section 9.8 and Section 14.3.27 of the FCA Listing Rules also set out further dis­clos­ures re­quired by listed com­pan­ies.

Premium listed companies are also required under the FCA Listing Rules either to comply with the provisions of the UK Corporate Governance Code or explain to investors the reasons for not doing so.

This page provides a brief overview of the narrative reporting requirements for the strategic report and directors’ report, required under the Act.  Note also that all companies, except those that are small, are required to make certain disclosures about the aggregate remuneration of the directors with considerably more onerous requirements for quoted companies.  These are discussed on our dedicated Directors' remuneration page

Strategic report

All com­pan­ies, other than those entitled to prepare accounts for the year in accordance with the small companies regime (including micro-entities), or would be so entitled but for being or having been a member of an ineligible group, must prepare a stra­tegic report for each financial year. The strategic report commonly con­tains the ma­jor­ity of the nar­rat­ive in­form­a­tion prepared by a company. 

The overall purpose of the stra­tegic report is to inform members of the company and help them assess how the dir­ect­ors have per­formed in their duty under s172 (the duty to promote the success of the company for the benefit of its members whilst having regard to the matters set out in section 172(1) (a)-(f)).

When pre­par­ing a stra­tegic report, dir­ect­ors are en­cour­aged (but not re­quired) to follow the best prac­tice re­com­mend­a­tions set out in the FRC’s Guid­ance on the Stra­tegic Report ('FRC Guid­ance'). 

Overview of information requirements

All companies preparing a strategic report are required to provide a fair review of the business, including details of principal risks and uncertainties, and key performance indicators. In addition, all companies, except those qualifying as small or medium-sized, are required to produce a s172 statement. This statement should describe how the dir­ect­ors have com­plied with their duty to promote the success of the company having regard to the matters set out in s172(1)(a) to (f) of the Act.

Further detailed information on the scope and disclosure requirements for the s172 statement can be found in Deloitte’s Need to Know publication.

Additional disclosure requirements apply to quoted companies, such as information on the company’s strategy, business model, market trends, information and policies relating to various social matters, environmental matters (including impact on the environment) and on the company’s employees. Details are also required on the company’s gender split.

UK public interest entities with more than 500 employees are required to provide a non-financial and sustainability information (NFSI) statement. This statement includes information such as the company’s business model and non-financial KPIs, information and policies relating to environmental matters (including the impact on the environment), various social matters, and on the company’s employees. The NFSI statement also includes statutory climate-related financial disclosures (see below).

AIM-listed companies and traded and banking LLPs with more than 500 employees, and other companies and LLPs with more than £500m turnover and more than 500 employees, are also required to provide statutory climate-related financial disclosures within a NFSI statement.

Premium-listed commercial companies and companies with a standard listing of shares or Global Depositary Receipts (GDRs) representing equity shares are also required to provide climate-related financial disclosures consistent with the recommendations and recommended disclosures of the Task Force on Climate-related Financial Disclosures (TCFD) on a ‘comply or explain’ basis.

Further information on climate-related financial disclosure requirements, can be found here.  An overview of broader sustainability reporting developments and reporting requirements, including in relation to the International Sustainability Reporting Standards Board (ISSB) and EU Corporate Sustainability Reporting Directive (CSRD) can be found here.

Directors’ report

The re­quire­ment to produce a dir­ect­ors’ report is con­tained in s415 of the Act. The in­form­a­tion re­quired to be dis­closed is de­tailed in s416 to s419 of the Act and Sched­ules 7 and 7A to The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 SI 2008/410 and in Schedule 5 to The Small Companies and Groups (Accounts and Directors’ Report) Regulations 2008 SI 2008/409 for small companies (the “Accounting Regulations”).

All UK com­pan­ies (except those that qualify as mi­cro-en­tit­ies) are cur­rently re­quired by the Act to prepare a dir­ect­ors’ report. Com­pan­ies which qualify as small or medium-sized, or would do so other than because they are members of an in­eligible group, are eli­gible for certain ex­emp­tions from dis­clos­ures in the dir­ect­ors’ report.

Overview of information requirements:

The information required by the Act and Accounting Regulations in the directors’ report will vary according to the size and type of legal entity, and may include details on:

  • Energy and carbon reporting (see below)
  • Statements on engagement with employees and with suppliers and customers and others (see below)
  • Statement of corporate governance arrangements (see below)
  • Employment of disabled persons
  • Future developments of the business
  • Dividends
  • Post balance sheet events
  • Research and development
  • Acquisition of own shares
  • Directors’ details
  • Political donations and expenditure
  • Existence of branches
  • The use of financial instruments
  • Disclosure of relevant information to auditors
  • Qualifying third party indemnity provisions
  • Capital structure

Com­pan­ies may wish to include in­form­a­tion the dir­ect­ors con­sider is of stra­tegic im­port­ance to the company or group in the stra­tegic report rather than the dir­ect­ors’ report. This is permitted provided that the directors’ report includes a cross-reference to where in the strategic report the information can be found.

Further detailed information on the scope and disclosure requirements for energy and carbon reporting, can be found in Deloitte’s A Closer Look publication  

Further detailed information on the scope and disclosure requirements for the statements on engagement with employees, and with suppliers and customer and others, and in relation to corporate governance arrangements can be found in Deloitte’s Need to Know publication.  Our dedicated Corporate Governance page also includes further information on disclosures of corporate governance arrangements for large private companies.

Interaction with DTR and FCA Listing Rules

The FCA's DTR require most listed companies to prepare an annual 'management report' to accompany their financial statements. However, with one exception, these requirements duplicate existing requirements within the law concerning the content of the directors’ report and strategic report. The exception relates to the disclosure of branches. The DTR require information about the existence of branches which goes further than the equivalent requirement in the Accounting Regulations, which is restricted to branches outside the UK.

Section 9.8 of the Listing Rules sets out further disclosures required by listed companies, most of which are normally included in the directors’ report. There is a requirement to clearly signpost where these disclosures are made as a company’s report must either contain all of the information required by LR 9.8.4R in a single identifiable section or it must include a cross-reference table indicating where that information is set out.

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