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News September 2012 FRC publishes Lab report on 'Net debt reconciliations'

FRC publishes Lab report on 'Net debt reconciliations'

17 September 2012

PN 008

The Financial Reporting Council (FRC) has today released the Financial Reporting Lab’s (Lab) project report on Net debt reconciliations (NDR) (PDF).
 
The Lab worked closely with five leading companies and a range of investors in preparing the observations contained in the project report. Comments on existing company disclosure were gathered by the Lab in a series of face-to-face discussions with over thirty individuals from sixteen investment organisations.
 
The five companies who participated in this project include: BT Group, National Grid, Royal Dutch Shell, Vodafone and Xchanging.
 
The Lab’s 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 Lab’s work has shown that this gives investors confidence that they have understood issues related to the development of financial obligations that must be met, and issues relating to the capital structure and the enterprise value attributable to net debt versus shares.
 
Commenting on this publication Stephen Haddrill Chief Executive of the FRC said,
 

‘Through its work with companies and investors, the Lab has demonstrated on this project the need for clear information on net debt, and explained how such information is used by investors. We are pleased to see the Lab helping to bring a focus on information that is relevant and important to investors, and ways in which it can be presented.’

 
Director of the Financial Reporting Lab, Sue Harding, said:
           

‘The overall objective of this project was to explore existing voluntary practices and to identify those that investors found to be useful. I believe that we have successfully achieved this aim, and hope this encourages other companies to consider adding or improving an existing NDR, as appropriate.'

 
The Lab encourages readers of this report to comment on its content and presentation. Any feedback will be taken into account in producing two further reports on debt and cash flow disclosure shortly. Please send any feedback to financialreportinglab@frc.org.uk.


Notes to editors

  1. The FRC is responsible for promoting high quality corporate governance and reporting to foster investment.  We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work.  We represent UK interests in international standard-setting.  We also monitor and take action to promote the quality of corporate reporting and auditing.  We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.
  2. The Financial Reporting Lab provides a unique environment where investors and companies can come together to develop pragmatic solutions to today’s reporting needs:
  3. As a learning space, companies can use the Lab to test new and advanced reporting formats with investors, and investors can indicate areas where management can add greater value through the information they provide;
  4. As a hub to support innovation in reporting, the Lab’s focus on gathering and sharing evidence from the market provides the broader corporate community with feedback from investors on the value that new reporting formats bring. More information about the Lab’s work can be found here.
  5.  The PDF of the report, “Net debt reconciliations,” can be found here.

 

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