The Financial Reporting Review Panel (‘the Panel’) has had under review the report and accounts of Supercart Plc (‘the company’) for the year ended 31 December 2007. The auditors’ opinion on the accounts was qualified for disagreement in relation to non-compliance with IFRS 8, ‘Operating segments’.

The Panel concluded that the company’s failure to disclose certain information required by IFRS 8, on the grounds of commercial sensitivity, was not in accordance with that standard.

The directors have accepted the Panel’s conclusions and, in the recently published accounts for the year to 31 December 2008, have complied with the requirements of IFRS 8, including disclosure of the relevant information for 2007 by way of comparatives.

Supercart Plc’s non-disclosure of certain items of segmental information

IFRS 8 is mandatory for the annual accounts of companies using IFRS for periods beginning on or after 1 January 2009. It requires segment information to be disclosed based on the information reported internally to the entity’s chief operating decision maker and used to allocate resources and assess performance. The company applied IFRS 8 early as part of its first year of accounting under IFRS.

The company disclosed in its 2007 accounts that it had omitted the disclosure of the following information on the grounds of commercial sensitivity:

• the segmental analysis of revenues from external customers;
• the operating segments responsible for revenues from major customers; and
• the measure of profit reported to the chief executive officer for the purpose of making decisions about allocating resources to the segment and assessing its performance.

1. The Financial Reporting Council (FRC) is the UK’s independent regulator responsible for promoting confidence in corporate reporting and governance. Its functions are exercised principally by its operating bodies (the Accounting Standards Board, the Auditing Practices Board, the Board for Actuarial Standards, the Financial Reporting Review Panel, the Professional Oversight Board and the Accountancy and Actuarial Discipline Board and by the FRC Board. The Committee on Corporate Governance assists the Board in its work on Corporate Governance.
2. The Role of the Panel is to examine the annual accounts of public and large private companies to see whether they comply with the requirements of the Companies Act 2006 (“the Act”) including applicable accounting standards. Following implementation of the Accounting Regulation (EC) No 1606/2002, this may mean compliance with UK or International Financial Reporting Standards.
3. Where breaches of the Act are discovered the Panel seeks to take corrective action that is proportionate to the nature and effect of the defects, taking account of market and user needs. Where a company’s accounts are defective in a material respect the Panel will, wherever possible, try to secure their revision by voluntary means, but if this approach fails the Panel is empowered to make an application to the court under section 456 of the Act for an order for revision. To date no court applications have been made.
4. IFRS 8 replaces IAS 14: ‘Segment Reporting’ and is expected to give rise to an increase in the number of reported segments and disclosure of amounts used internally which may be prepared on a basis different to the IFRS amounts reported in the primary statements.
5. Disclosure of IFRS 8 information will be mandatory for companies preparing IAS 34 compliant half-yearly accounts to 30 June 2009.
6. The Chairman of the Panel is Bill Knight and the Deputy Chairmen, Ian Wright and David Lindsell. There are currently 26 other Panel members drawn from a broad spectrum of commerce and the professions. Individual cases are normally dealt with by specially constituted Groups of 5 or more members.
7. All Press enquiries and consultation responses should be directed to Carol Page tel: 020 7492 2460 or at c.page@frc-frrp.org.uk.