FRC’s expectations for the 2020 reporting season

FRC’s expectations for the 2020 reporting season

The FRC’s Corporate Reporting Review (CRR) has issued its annual review of corporate reporting along with four area specific thematic reviews.


Also on


The FRC in its annual and thematic reviews has called for further improvements and candid disclosure in corporate reporting to address matters of increasing concern to investors as well as enhancing public trust in business. Lack of disclosures on key and emerging issues, the FRC suggests, implies that management is unaware of their potential impact, is not managing the issues effectively or is being opaque. They have called for clearer disclosure of the risks companies face, particularly:

  • forward looking information, 
  • impact of emerging risks on future business strategy, such as climate change; and 
  • the carrying value of assets and recognition of liabilities.

The FRC’s Annual Review of Corporate Reporting along with an open letter to Audit Committee Chairs and Finance Directors has been further supplemented by four thematic reviews on IFRS 9, 15, 16 and impairment of non-financial assets all issued in 2019.

Narrative reporting

Overall expectations

The FRC notes that in times of uncertainty investors look for greater transparency in corporate reporting to inform decision making and so expect careful disclosures in areas exposed to heightened levels of risk for example going concern considerations, Brexit and all areas of material estimation uncertainty.

There are extra expectations for companies to report on climate risk, including potential climate regulation for the period beyond that considered in the viability statement. This is particularly the case for those companies who have business models with significant climate change risk.

Revisions to requirements

Section 172 reporting is new for the 2020 reporting season and the FRC expects it to describe how the company has regard to wide ranging factors when promoting the success of the business and the consequences which they have on all stakeholders including the impact on the environment.


Brexit disclosures should reflect a company specific assessment of the current uncertainties. It was noted that companies have begun to highlight a range of specific risks which varied by industry and that mitigating actions taken should be identified as well.

Alternative performance measures (APMs) flaws to be addressed

FRC still finds deficiencies in:

  • Identifying and reconciling APMs to the audited IFRS numbers from which they are derived;
  • Absent or unclear definitions of APMs; and
  • Explanations of why certain amounts were excluded from adjusted measures when they appeared to be part of normal business.

IFRS reporting

Significant judgements and estimates disclosure improvements

Detailed specific disclosures are expected where a particular judgment had a significant impact on reporting. This is particularly required in cases relating to consolidation judgements and the question of control over another entity.

Disclosure of significant estimates requires transparent reporting of the estimation uncertainties including sensitivity of changing assumptions/range of possible outcomes to give clearer insight into possible future changes in balance sheet values over the twelve months ahead.

Additional estimation uncertainty disclosures, including where the uncertainty is beyond 12 months, may be useful although this needs to be clearly distinguished from the required disclosures.

Addressing errors in the reporting of cash

The FRC believes investors are entitled to rely on the cash flow statement as a compliant core statement however the FRC continue to see basic errors involving misclassification of cash flows between operating, investing and financing activities. There is concern that companies and their auditors are not picking up these errors as part of their quality procedures.

The FRC still believe many companies are not providing relevant information for Supplier financing arrangements. Where such arrangements are being used, they expect disclosure of why they are being used and the extent of the company's dependence on them.

Impairment disclosures gaps to be filled

The thematic review emphasises the need to:

  • Ensure the full detailed disclosure requirements of IAS 36 are followed. For example, the period of cash flow projections, discount rates, growth rates, key assumptions other than discount and growth rates, and necessary sensitivity analysis;
  • Give additional estimation uncertainty disclosures under IAS 1.125 where required; and
  • Improve disclosures of impairment reviews in parent company accounts.

Current issues to consider include:

  • The effect of Brexit and other political/macro-economic risks;
  • Impact of climate change and other environmental effects; and
  • Any changes in calculations arising from IFRS 16 implementation,

IFRS 15 second year improvements

The FRC expects companies to improve accounting policies which describe the specific nature of performance obligations, and whether they are satisfied at a point in time or over time. Also the disclosure of significant judgements should be company-specific and clearly explained.

IFRS 9 credit risk disclosures

Continued areas of focus for corporates include:

  • Application of expected credit loss requirements to contract balances, lease receivables and intercompany loan assets; and
  • Appropriate credit risk disclosures of the credit quality of the gross carrying amount by credit risk rating grade or details such as days past due;

IFRS 16 first year expectations

The FRC is looking for the impact of transition explanations to be comprehensive including how the variety of practical expedients have been applied. Where the modified retrospective basis is chosen a reconciliation between the previously disclosed IAS 17 commitment and the IFRS 16 opening lease liability is required along with explanations of the reconciling items (apart from discounting). APMs will need to address the inconsistencies arising as a result of comparative information not being restated, whilst ensuring the revised APMs are properly labelled, reconciled and explained.

If you would like to discuss any of the topics in more detail then please contact us.

© 2021 KPMG LLP a UK limited liability partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

For more detail about the structure of the KPMG global organisation please visit

Connect with us


Want to do business with KPMG?


loading image Request for proposal

Save, Curate and Share

Save what resonates, curate a library of information, and share content with your network of contacts.

Sign up today