The FRC (“Financial Reporting Council”) has published its Annual Review of Corporate Reporting for the 2019/2020 reporting cycle which reveals the FRC’s ‘top ten’ areas where improvements to reporting quality are needed so users of accounts have a clearer understanding of company performance and position. In particular the FRC has observed: -
— Fewer companies with inconsistencies between the judgements and estimates disclosed in the accounts and related disclosures in other sections of companies’ reports.
— Fewer pervasive shortcomings in alternative performance measure disclosures, indicating that the FRC’s focus on this area in recent years has had some effect.
— Issues raised relating to strategic reports relate to a lack of detail, rather than outright non-compliance (e.g. entirely overlooking the non-financial reporting statement).
Looking forward to the 2020/2021 reporting cycle the FRC will be expecting to see: -
— Going concern disclosures that explain the basis of any significant judgements, including whether there are any associated material uncertainties, and the matters considered when confirming the preparation of the financial statements on a going concern basis.
— Disclosures about significant judgements applied in the preparation of the financial statements, sources of estimation uncertainty and other assumptions made, that enable users to understand management’s exercise of judgement and views about the future.
— “Adjusted for Covid-19” alternative performance measures only being used in exceptional circumstances.