FRC consults on non-financial reporting guidance

News types: Consultation Announcement, Guidance

Published: 15 August 2017

PN 42/17

The Financial Reporting Council’s (FRC) consultation on amendments to its Guidance on the Strategic Report (PDF), published today, encourages businesses to consider the interests of stakeholders. 
These proposals reflect the FRC’s desire to improve the effectiveness of section 172 of the Companies Act 2006. This section requires a director to have regard to a number of matters including the long term impact of any decisions, the interests of stakeholders; and non-financial matters in pursuing their duty to promote the long term success of the company. The FRC is therefore encouraging companies, to provide better information on how companies have fulfilled this duty to improve accountability to shareholders and other stakeholders.
The proposals reflect the enhanced disclosures that certain large companies are required to make in respect of the environment, employees, social matters, respect for human rights and anti-corruption and anti-bribery matters. The guidance also encourages all companies to disclose information on how boards have considered broader stakeholders when taking decisions to promote the long term success of the company. 
The Guidance on the Strategic Report was first issued in 2014, following the introduction of the requirement for companies to produce a strategic report. It is being amended now to take account of the new regulations for non-financial reporting that are effective for financial periods beginning on or after 1 January 2017. In line with the FRC’s Clear & Concise initiative, the guidance continues to encourage companies to produce a cohesive annual report that provides information that is relevant for an understanding of the development, performance position and impact of the company’s activity.
Paul George, FRC’s Executive Director of Corporate Governance and Reporting, said:

“High quality reporting enhances transparency and trust in business. The proposed amendments to the Guidance on the Strategic Report encourage business to consider the impact of their activities on stakeholders and the factors that contribute to the success of the company over the longer term. We encourage all companies to make non-financial reporting an integral part of the annual report and to provide information which helps shareholders and the wider community to understand how directors have had regard to their obligations under Section 172 of the Companies Act 2006. The FRC is committed to improving reporting in this area since it believes that it provides an important insight into the culture of a company.”

Comments and feedback on the FRC’s exposure draft are invited by 24 October 2017.

Notes to editors:

1. The Financial Reporting Council (FRC) is the UK’s independent regulator responsible for promoting high quality corporate governance and reporting to foster investment. The FRC sets the UK Corporate Governance and Stewardship Codes and UK standards for accounting and actuarial work; monitors and takes action to promote the quality of corporate reporting; and operates independent enforcement arrangements for accountants and actuaries. As the Competent Authority for audit in the UK the FRC sets auditing and ethical standards and monitors and enforces audit quality.