The strategic report is a key part of the annual report in the UK. We explain how strategic reports can be developed to address the demand for better narrative reporting, and provide shareholders with a concise report focused on the key drivers of business prospects.
Narrative reporting is undergoing a period of increased regulatory focus. There is widespread recognition that it has an essential role to play in providing a broader perspective on business performance alongside the financial statements. The FRC’s Guidance on the strategic report is the latest in a series of regulatory initiatives aimed at improving the relevance of narrative reports for shareholders.
Approached positively, the guidance could help companies look beyond current year earnings to provide a broader picture of shareholder value creation in their annual reports. The business-centric focus of the guidance is an opportunity for companies to focus their reports on those factors that are most important to the long term prospects of their business. This will require a different approach from report preparers, placing the emphasis on explaining the business story and understanding shareholder needs, rather than meeting a checklist of disclosures.
Key areas of change that we expect the guidance to drive include:
KPMG offers a strategic report health check service that can help to highlight the key areas to develop in your report.