The Financial Reporting Council (FRC), the UK’s independent regulator responsible for promoting confidence in corporate reporting and governance, has today published its updated Regulatory Strategy and finalised Plan for 2009/10, which are available on the FRC website at: http://www.frc.org.uk/about.

Chief Executive, Paul Boyle, said:

“We are grateful for the positive and constructive feedback we have received from our stakeholders on our updated Strategic Framework and on our draft Plan for 2009/10. This has helped us to refine our analysis of the major risks to confidence and to firm-up our priorities for 2009/10. We recognise that our work in relation to corporate reporting and governance in 2009/10 will interact with the follow-up to the G20 reports and the Turner Review.

The Plan includes actions to support market participants in implementing high standards of reporting and governance during a period when they are under particular pressure. We will raise awareness of the risks arising from current economic conditions, monitor market practices, and take enforcement action where appropriate.

We believe that our budget demonstrates that we remain cost-effective and provides a necessary degree of flexibility to enable us to respond to the risks which may arise. In line with our usual practice, we will confirm our levy rates for 2009/10 in May.”

Updated Regulatory Strategy

The Regulatory Strategy is the definitive published statement on the FRC’s role and approach as an independent regulator, including its governance, funding and accountability. It sets out the FRC’s regulatory principles and its Strategic Framework and is the basis on which it prepares its annual Plan. The Strategic Framework sets out the desired outcomes which the FRC believes that it and its stakeholders should be working towards to contribute to confidence in corporate reporting and governance in the UK. 

Plan 2009/10

A number of the major activities and projects in the Plan are directly related to impact of current tougher economic conditions. Others relate to risks which do not arise directly from those conditions, but have been heightened by them. Major activities and projects include:

• Continue to raise awareness of the risks to confidence in corporate reporting and governance arising from current economic conditions.
• Complete the review of the effectiveness of the Combined Code on Corporate Governance which the FRC announced in March 2009.
• Continue to influence the development of IFRS during a period when a number of key standards are likely to be scheduled for agreement.
• Promote continued support in the EU for maintaining the IASB and other standard setters’ ability to exercise independent judgement in setting accounting standards.
• Review a risk-based selection of accounts and directors’ reports, focusing on the banking, retail, leisure and travel, commercial property and house-building sectors and others which derive significant revenue from the provision of business services.
• Review narrative reporting in the light of the business review requirements of the Companies Act 2006 and review the need for additional disclosure requirements relating to business models.
• Continue the FRC’s work on choice in the UK audit market, including monitoring the implementation of the recommendations of the Market Participants’ Group; and consider the need for further action aimed at enhancing the efficiency of the audit market.
• Undertake risk based monitoring and report on the quality of audits, having particular regard to audit issues relating to going concern, fair value accounting estimates and disclosures and the impairment of assets.
• Continue the transition from existing actuarial technical standards to a new suite of standards, including final standards on data, modelling and reporting; and review the implications of the introduction of Solvency II.
• Investigate, and take enforcement action where appropriate, in public interest cases involving members of the accountancy and actuarial professional bodies.
• Review the effectiveness of the regulatory framework for professional discipline and enforcement of standards, including the FRC’s role within the framework.

The FRC will remain alert to the need to respond to emerging developments.

Expenditure and funding

The FRC proposes to operate across the period covered by the Plan at approximately the same staffing levels as in 2008/09. In relation to accounting, auditing and corporate governance, the FRC expects core operating costs to increase by 5% in 2009/10 to £12.5m (including an increase in its contingency reserve to £0.5m to provide some flexibility to deal with additional investigations and cases). This is a reduction of £0.2m compared to the draft budget published in December 2008. In relation to actuarial standards and regulation, it expects core operating costs to increase by 4% to £2.3m. The FRC plans a modest increase in its reserves in 2009/10.

Feedback Statement

The FRC’s Feedback Statement summarising the responses to the draft updated Regulatory Strategy and Plan for 2009/10, which were published in December 2008, together with the individual responses, are available on the FRC website at: http://www.frc.org.uk/about/feedback.cfm
 

1. The Financial Reporting Council (FRC) is the UK’s independent regulator responsible for promoting confidence in corporate reporting and governance.
2. The FRC promotes high standards of corporate governance through the Combined Code, but does not monitor or enforce its implementation by individual boards. It sets standards for corporate reporting and actuarial practice and monitors and enforces accounting and auditing standards. It also oversees the regulatory activities of the professional accountancy and actuarial bodies and operates independent disciplinary arrangements for public interest cases involving accountants and actuaries.
3. The FRC’s 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.
4. The FRC has updated its Strategic Framework to:
   • differentiate more clearly between the regulatory outcomes for which the FRC is directly responsible and the legislative outcomes for which the Government or EU have primary responsibility;
   • bring “related services” - reports relating to financial information such as investment circulars and “compilation” or “review” reports - within the scope of the outcome relating to auditing rather than (as previously) the outcome relating to the professionalism of accountants; and
   • more closely reflect the principles of better regulation.
5. All media enquiries should be addressed to David Andrews, Policy and Planning Manager, +44 (0)20 7492 2382 or email at: d.andrews@frc.org.uk.