Lessons from the first Simplifying Annual Reporting Sandbox cohort
2 minute read
We welcomed four AIM companies and one FTSE-listed company to participate in the first round of the sandbox from late 2025 to early 2026. All participants had a common interest in identifying where they could cut down unnecessary volume from their annual report and to make it more accessible to investors. They also faced some common challenges driving an increase in pages year on year, which were not solely due to addressing regulatory requirements.
Participants generally found that the sandbox was a valuable opportunity to dedicate the time necessary to critically analyse their most recent annual report content for any duplication and opportunities for streamlining, outside of the time limitations of an audit. FRC experts provided their observations and prompted companies to consider whether certain disclosures were necessary or could be edited, subject to discussion with the company’s board and auditors.
Nick Clark, CEO, Built Cybernetics plc“We were really impressed at the FRC’s approach and their support for us as a small issuer grappling with the challenge of an overly long annual report. Having open discussions was a helpful way to change our approach and start to streamline our disclosures. We were able to identify some near-term changes and further improvements for our annual report in future."
Richard Spilsbury, CFO, Digitalbox plc“I really appreciated being able to talk to technical experts with a common interest in making annual reports more comprehensible. Joining the sandbox has given us greater confidence that we can make our annual report clearer and more effective for its users in future.”
In the first phase of the sandbox we identified three key areas companies can address to simplify their annual reports:
- Duplication of information
- Provision of voluntary information
- Relevance and materiality
Duplication of information was one of the most commonly observed opportunities for simplification. Identical or very similar information appeared in multiple sections of the annual report, such as the CEO’s, Chair’s and CFO’s report. There was also duplication between the strategic report, the sustainability report and the notes to the financial statements. Such duplication could be eliminated or significantly decreased through greater use of cross-referencing. For example, discussion of going concern in the front half of the annual report could be cross-referenced to the detail within the financial statements notes.
Some annual reports included information which was not required. For example, extensive directors’ remuneration and sustainability disclosures may be required for FTSE-listed companies (“quoted” as per Companies Act)[1] but are not necessarily applicable to most AIM companies. Such information may of course still be useful to investors and helpful to disclose, but companies could consider what level of detail is necessary. Annual reports also often include information which could be considered marketing and is aimed at stakeholders other than investors and is not legally required. The company website may be a more appropriate repository for this type of information, and the annual report could signpost to it.
Some disclosures in the financial statements, such as accounting policies, may relate to immaterial transactions or balances. Relevance of disclosures may also change over time due to new policies or requirements, or change in circumstances, so a policy or judgment that was relevant a few years ago may not necessarily be relevant now. This can be addressed by reviewing any rolled-forward disclosures on a yearly basis, and by tailoring illustrative accounts used as templates, to avoid any boilerplate information. Companies can also consider aggregation of information where appropriate.
In summary, the key suggestions for companies to simplify their annual report are to consider:
- information needs of the primary users of the accounts, i.e. investors and debt providers/creditors;
- the objective of the disclosure requirement and the level of detail primary users need;
- avoiding boilerplate disclosures and being company-specific, including in the areas of governance and sustainability reporting;
- cross-referencing when information is addressing requirements applicable to more than one section of the report; and
- signposting to the website when targeting other users or for more detailed information.
Find out more about the next phase of the Simplifying Annual Reporting Sandbox and further opportunities for companies to engage.