A number of the provisions of the Companies Act 2006 have implications for financial reporting and the ASB’s work.

Regulations under the Act setting out the accounting and reporting requirements for companies are still in draft form and will be finalised in time for implementation from 6 April 2008. These can be accessed from the website of the Department for Business Enterprise and Regulatory Reform (BERR) via the following link: http://www.berr.gov.uk/bbf/co-act-2006/index.html.

More immediately, a number of additional Business Review requirements for companies have come into force for financial years beginning on or after 1 October 2007. The Business Review now has a statutory purpose, which is to inform the members of the company and help them assess how the directors have performed their duties under the Act to promote the success of the company.

The Act also requires quoted companies to provide additional disclosures in their Business Reviews “to the extent necessary for an understanding of the development, performance and position of the business”, in particular:

1. the main trends and factors likely to affect the future development, performance and position of the company’s business;
2. information about –
   1. environmental matters (including the impact of the company’s business on the environment),
   2. the company’s employees, and
   3. social and community issues, including information about any policy of the company in relation to those matters and the effectiveness of those policies (and where a company does not discuss any of the above in its Business Review it has to state that it has not done so) , and
3. information about persons with whom the company has contractual or other arrangements which are essential to the business of the company. This provision is subject to a specific exemption concerning disclosure about a person if, in the opinion of the directors, disclosure would be seriously prejudicial to that person and contrary to the public interest.

All the above provisions were originally included in the former statutory Operating and Financial Review (OFR). While there are no reporting standards underpinning the legal requirements for the Business Review, companies will find useful guidance on how they might meet those requirements in the ASB’s best-practice Reporting Statement on the OFR. The Statement can be accessed via the following link: http://www.frc.org.uk/asb/press/pub1029.html.