UK 'lab' publishes report on the presentation of market risk disclosures

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21 Feb 2013

The United Kingdom Financial Reporting Council (FRC) has published another project report from its Financial Reporting Lab. The report on 'Presentation of market risk disclosures’ focuses on a large bank's changed risk disclosures and investors' reactions to those changes.

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 bank whose financial reports were used as a basis for discussion (HSBC1)) volunteered a project to look at changes made to its risk disclosure during 2011 when static policy information was separated from current measures of key risk figures and changes to assumptions. The updated presentation moves a significant amount of recurring information into an appendix immediately following the primary risk disclosure. The result of this change is a primary risk disclosure that is focused on current period results and dynamic risk trends facing the bank and the industry.

Investors were evenly split as to whether the amended presentation improved the clarity and usability of the risk section of the annual report or neither enhanced nor hindered the quality or clarity of the risk disclosures.

Please click for the FRC press release and access to the report (all links to FRC website).

1) In October 2012, the Enhanced Disclosures Task Force (EDTF), published a report Enhancing the Risk Disclosures of Banks, reflecting industry and investor views on risk reporting. The EDTF was co-chaired by HSBC’s Chief Accounting Officer. About half of the investor participants in the Lab project were also members of the EDTF.

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