Annual Review of Corporate Reporting
High quality and transparent reporting are fundamental to building trust and to the long-term success of UK companies and the wider economy.
In October 2018 we published our Annual Review of Corporate Governance and Reporting (2017/18) (PDF)
The Annual Review of Corporate Governance and Reporting sets out the FRC’s findings in the year in respect of corporate reporting in the UK, based on evidence gathered through the FRC’s monitoring of annual reports and accounts, broad outreach with stakeholders and evidence gathered by external parties.
The report highlights aspects of good practice and common areas for improvement. The FRC reviewed 220 annual and interim report and accounts in the year to April 2018, predominantly December 2016 year ends. Of these, 121 were full scope reviews, and the remainder were looked at as part of our thematic reviews.
This year’s report highlights that:
There are points of strength in corporate reporting but there is clearly room for improvement in some areas.
The reporting of the significant judgements and estimates made in the preparation of accounts was, again, a major area for improvement.
We continued to see instances of poor disclosure of the sensitivity of assets and liabilities to the assumptions and estimates on which they were based.
We were disappointed to see a rise in basic errors and non-compliance in a few areas of reporting, including misclassification of cash flows in the primary statement. This raises doubts about the robustness of the procedures which companies put in place to review the report and accounts prior to publication.
The number of required references increased this year to 15, from 3 in 2016/17, reflecting in part these more basic errors.
The required references were mainly attributable to companies outside the FTSE 350.
Companies generally react will to our conclusions and recommendations, even when these go beyond what is strictly required by reporting standards, demonstrating their desire to meet user needs.
Pre-informing companies that we are to review specific aspects of the accounts has had a positive impact on quality, as many companies took the opportunity of reviewing the relevant disclosures and improving the quality of information provided.
Our thematic reviews identify what ‘good’ looks like and provide a benchmark against which we review subsequent disclosures and are intended to be a useful source of guidance.
Our challenges to companies on their strategic reports this year were principally on the description and disclosures relating to APMs and whether the strategic report was sufficiently balanced and comprehensive.
The FRC will shortly be publishing two thematic reports on IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers. The publications will report on the FRC ‘s findings of how the two new standards were reflected in a sample of June interim reports, as trailed in the Annual Review.
Annual Review of Corporate Governance and Reporting (2017/18) (PDF)
Corporate Reporting Review Technical Findings 2017/18 (PDF)
Annual Review of Corporate Reporting 2016/17 (PDF)
Corporate Reporting Review Technical Findings 2016/17 (PDF)
Annual Review of Corporate Reporting 2015/16 (PDF)
Technical Findings of the Conduct Committee's Financial Reporting Review Panel 2015/16 (PDF)