News December 2017 Strategic report guidance to follow government legislation

Strategic report guidance to follow government legislation

04 December 2017
The Non-Financial Reporting Regulations (PDF) which implemented the EU Directive as regards disclosure of non-financial and diversity information by certain large undertakings and groups became effective for financial years starting on or after 1 January 2017.

In August 2017, the Financial Reporting Council (FRC) published a consultation proposing amendments to the Guidance on the Strategic Report. It was the FRC’s intention for the amendments to incorporate the requirements of the Non-Financial Reporting Regulations into an updated version of the Guidance and enhance the link between the strategic report and the directors’ section 172 duty to promote the success of the company.

Since the publication of the consultation, the Government has announced that it will be introducing legislative changes in respect of reporting on section 172. It is likely that these changes, expected in March 2018, will result in an amendment to the existing strategic report requirements and further amendments to the Guidance will be required. Consequently, the FRC intends to finalise the Guidance after the Government publishes its legislative changes in 2018.

Respondents to the consultation have also suggested we delay the introduction of encouraged content on section 172 until the Government has made legislative changes.  Nevertheless, the FRC remains committed to promoting better reporting in respect of section 172 and it encourages boards to continue to develop their thinking in this critical area.  Anticipated amendments to the Corporate Governance Code will require directors to consider the interests of wider stakeholders on a comply or explain basis. 

The FRC has also received feedback that some preparers would welcome further clarification on the changes resulting from the introduction of the Non-Financial Reporting Regulations which will apply to companies with December 2017 year-ends onwards. As a result, the FRC is publishing some frequently asked questions to assist companies with implementation. These should be read in conjunction with the 2014 Guidance on the Strategic Report (PDF).

Here are some Frequently Asked Questions about non-financial reporting (PDF)