Reporting: clear and concise

The Financial Reporting Council has published a report on developments in corporate reporting

The Financial Reporting Council's report, Clear and Concise: Developments in Corporate Reporting, sets out the clear objectives of the FRC project to improve reporting.

The report highlights that the objectives are to encourage: 

  • communication that is focused on the needs of the audience 
  • greater emphasis on the application of materiality 
  • improvement in the relevance and readability of annual reports 
  • consideration of other channels for reporting information.

One of the areas that causes difficulty is the application of disclosure requirements, with the FRC highlighting that preparers are cautious and less likely to remove what the FRC refers to as immaterial items.

The report asks and answers questions such as:

  • Do companies need to provide every disclosure set out in standards or other regulation?

The FRC states:

'Not in all cases. Company law and accounting standards both include concepts of materiality although the language used may be different.

Strategic report

The Companies Act 2006 (the act) uses terms such as "to the extent necessary", "key" (eg key performance indicators), "principal" (eg principal risks and uncertainties").

This means that only information that is material to shareholders should be included in the strategic report.

Corporate governance

There are certain mandatory disclosures in the Disclosure and Transparency Rules and the UK Corporate Governance Code.

However, there are others in the Listing Rules and the UK Corporate Governance Code that apply on a "comply or explain" basis.

Financial statements 

Accounting standards do not require disclosure when the information is not material.'

  • Does the Corporate Reporting Review take the same approach to materiality as set out in accounting standards or other regulation?

The FRC states:

'Yes. Corporate Reporting Review letters of enquiry discourage boards from including immaterial matters in their reports and explain that only disclosures that are material or relevant should be included.'

The report is a useful reminder to all preparers of the importance of not cluttering reports.