UK 'lab' publishes report on net debt reconciliations

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26 Sep 2012

The United Kingdom Financial Reporting Council (FRC) has published a project report from its Financial Reporting Lab’s dealing with ‘net debt reconciliations'. The report shows how some companies are defining net debt and disclosing various cash and non-cash movements in net debt that might not otherwise be apparent from financial reports.

The Financial Reporting Lab was launched in October 2011 and is designed to focus on helping listed UK companies communicate more effectively with investors and analysts through participation of listed companies, professional investors and the retail shareholder community.

The overall objective of the lab project was to explore various voluntary practices around the disclosure of net debt, and to identify those that investors found to be useful, indicating why this is the case and how information is used.

A strong majority of investors indicate they use a net debt reconciliation or reconciliation of net cash flows to net debt in their analysis when one is presented, and given the importance, attempt to construct them when they are not.

The report also includes a listing of the characteristics of the reconciliations that investors feel are most helpful.

Any feedback received on the report is expected to be taken into account in producing two further lab reports on debt and cash flow disclosure.

Click for press release (link to UK FRC website).

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