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FRC release results of thematic reviews for 2017

FRC release results of thematic reviews for 2017

The results show that improvements were made in three focus areas but the FRC will continue to challenge poor disclosure.


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Steve stormonth audit executive director kpmg in the channel islands


KPMG Channel Islands Limited


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In a previous ACI release we highlighted that The Financial Reporting Council (‘FRC’) had announced the thematic reviews they will undertake in 2017. The FRC subsequently wrote to 60 companies before their year-end to inform them that their upcoming annual report would be reviewed in one of the three following areas:

  • Significant accounting judgements and sources of estimation uncertainty;
  • Pension disclosures; and
  • Alternative Performance Measures. 

Having completed their review the FRC have now shared some examples of what they consider best practice. The summary findings and links to the full reports are recorded below.

Judgements and estimates 

Improvements that were observed:

  • Many companies made a better effort to distinguish judgements from estimates;
  • More focused on genuinely critical judgements where management decisions had had a significant impact on results; and
  • Most improved the granularity of disclosure while keeping it clear and concise.

The FRC will continue to challenge and expect change by those who do not:

  • Identify the assets and liabilities at significant risk of material change in the next 12 months;
  • Quantify the specific amounts; and
  • Provide sensitivity analysis of the possible range of outcomes.

Pension disclosures 

Improvements that were observed:

  • Many companies provided more information about the risks and uncertainties arising from their pension schemes; and
  • Better explanation of why there was a marked increase in companies’ pension deficits and the actions to address the issue.

The FRC will continue to challenge and expect change by those who do not:

  • Disclose the  information needed to support an understanding of how pension-related risk may affect the amount, timing or uncertainty of future cash flows; or
  • Clearly explain the basis on which different plan assets have been valued.

Alternative Performance Measures (APMs)

Improvements that were observed:

  • All companies provided definitions of their APMs, with fair and accurate descriptions;
  • All reconciled some, if not all, their APMs to IFRS numbers; 
  • Most explained why their particular APMs were useful without resorting to cursory or boilerplate text; and
  • Most gave equal prominence to APMs and IFRS numbers.

The FRC will continue to challenge and expect change by those who:

  • Display APMs with greater prominence than IFRS measures; or
  • Default to identifying matters as ‘non-recurring’ or similar in connection with items such as restructuring or impairment charges.

© 2019 KPMG Channel Islands Limited, a Jersey company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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