The Financial Reporting Council (FRC) has published its Annual Review of Corporate Reporting, which outlines where the FRC expects to see improvements in the 2021/2022 reporting season. The FRC’s expectations in what they expect to see are as follows:
- Clear explanation of the significant judgements made by management, including those used in their assessment of going concern, with sufficient detail to understand the specific judgements made and their financial reporting effects.
- Clear description of key assumptions underlying major sources of estimation uncertainty, including information about the sensitivity of amounts recognised in the financial statements to changes in assumptions.
- Material climate change policies, risks and uncertainties to be discussed in narrative reporting and appropriately considered and disclosed in the financial statements, particularly where investors may reasonably expect a significant effect on the expected life or fair value of an asset or liability.
- The nature and extent of material risks arising from financial instruments and related risk management are adequately addressed, including: the use of factoring and reverse factoring in working capital financing; the approach to and significant assumptions made in the measurement of expected credit losses; concentrations of risks and information about covenants (where material).
- APMs not to be given greater prominence or authority than amounts stemming from the financial statements and the basis for classifying amounts as adjusting, ‘non-underlying’ or ‘non-core’ explained.
- The nature and extent of material risks arising from financial instruments and related risk management should be adequately disclosed, including: the use of factoring or reverse factoring in working capital financing, if relevant; the approach and significant assumptions applied in the measurement of expected credit losses; and concentrations of risks and information about covenants, where material.
- Information that meets the disclosure objectives of the relevant accounting standards, as well as the specific disclosure requirements.
- Material information that is not obscured by immaterial items.
The FRC has published the findings of its review into IAS 37 'Provisions, Contingent Liabilities and Contingent Assets'
FRC Review of Provisions, Contingent Liabilities and Contingent Assets