27 October 2021
The Financial Reporting Council (FRC) has today published its Annual Review of Corporate Reporting, which outlines the FRC’s ‘top ten’ areas where improvements to reporting are required. These include reporting on judgements and estimates, revenue and cash flow statements.
The FRC reviewed 246 reports and accounts (a 14% increase on 2020) and wrote to 97 companies with substantive questions about their reports. Overall, the review found the quality of reporting remained unchanged, despite the impact of the Covid-19 pandemic. However, significant non-compliance was found at 15 companies that were required to restate their accounts.
In line with FRC guidance, most companies with December year ends reported the effects of the Covid-19 pandemic on their results and prospects and included additional information on key forward-looking judgements of interest to investors, such as going concern.
In addition, the FRC has also published its year-end bulletin of key corporate reporting matters for companies which sets out the FRC’s areas of focus for the coming year. From next year, premium listed companies will be required to disclose their compliance with the Taskforce for Climate-related Financial Disclosures (TCFD) recommendations on a comply-or-explain basis. The FRC also expects material climate change policies, risks and uncertainties to be included in narrative reporting and appropriately considered and reflected in the financial statements.
The FRC’s Executive Director of Supervision, Sarah Rapson said:
“High quality reporting on important issues such as climate change and the Covid-19 pandemic are vital for investors and users of accounts so that they can make timely and informed decisions.
Through our routine monitoring activity, we continued to identify basic errors in cash flow statements that should have been identified by companies’ own internal review processes. We expect to see improvements in this area in the future.
Given the growing importance of climate risks and the need for high quality reporting in this area, the FRC will be closely reviewing how companies report against the new TCFD requirements.”
A link to the full report can be found here.
A summary report can be found here.
A link to the end of year bulletin of key matters for preparers can be found here.