The new Code applies to accounting periods beginning on or after 1 October 2014 for all companies with a premium listing of equity shares, regardless of where they are incorporated
The 'comply-or-explain' approach is the trademark of corporate governance in the UK and the code continues to follow this approach, with the clear statement that 'the Code is not a rigid set of rules. It consists of principles (main and supporting) and provisions.
The Listing Rules require companies to apply the Main Principles and report to shareholders on how they have done so.
The principles are the core of the Code and the way in which they are applied should be the central question for a board as it determines how it is to operate according to the Code.'
The key changes to the code, highlighted by the Financial Reporting Council, are in the following areas:
The code also highlights the importance of the 'board’s role in establishing the "tone from the top" of the company in terms of its culture and values', and that 'the directors should lead by example in order to encourage good behaviours throughout the organisation.' This includes diversity within the make-up of the board.
The FRC has issued a single document on the ISA changes, entitled Extracts from International Standards on Auditing (UK and Ireland) 260, 570 and 700 (Revised September 2014), which presents the revised paragraphs from ISAs 260, 570 and 700.
The revisions are effective for audits of financial statements for periods commencing on or after 1 October 2014.
The FRC has also issued revised individual standards and new guidance that 'revises, integrates and replaces the current editions of the Financial Reporting Council’s "Internal Control: Revised Guidance for Directors on the Combined Code" and 'Going Concern and Liquidity Risk: Guidance for Directors of UK Companies:, and reflects changes made to the UK Corporate Governance Code.'
These changes impact primarily on businesses that are required to apply, or voluntarily apply, the code.
The revised standards and guidance are:
Details can be found on the FRC website
The FRC has also indicated that it is considering a review of board succession planning as part of the next update to the Code in 2016.