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UK 'Financial Reporting Lab' publishes report on clear and concise reporting

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13 Aug 2014

The United Kingdom Financial Reporting Council (FRC) has published a report of its 'Financial Reporting Lab' highlighting the progress that UK companies made during the 2013 year-end reporting cycle towards clearer and more concise reporting. Although focused on UK financial reporting requirements the observations and recommendations in the report are broadly applicable.

The observations in the report are based on a review of 41 annual reports of FTSE 350 companies and provides an overview of what companies have been doing in the past year to improve the clarity and conciseness of their annual reports. The report is providing many illustrating examples.

Based on the results of the review and the observations, the report encourages companies to think about the following in relation to their annual reports:

  • Communication channels and users' information needs. By taking steps to match communication channels to audiences, companies can improve the clarity and conciseness of what is presented.
  • Content. The report encourages companies to report on actions rather than processes, to focus the level of reporting, to remove standing information, to remove information not required, and to reduce the actual detail presented in the financial review.
  • Materiality. Examples of how clarity and conciseness of information can be improved include removing prior year disclosures that are no longer required in the current year, removing elements in the annual report that are no longer required, improving the quality of accounting policy disclosures, and removing immaterial notes to the financial statements.
  • Layout. A logical layout and a minimum of duplication will contribute to the clarity of an annual report. Cross referencing and signposting of information within the annual report will also improve clarity.

The report contains a section to provide practical steps that companies can adopt when seeking to implement processes to improve their annual reports to make them clearer and more concise. It also includes examples of best practice with detailed case studies of two listed companies.

The full report is available from the FRC website.

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