Financial Reporting Council sets out to challenge corporate reporting status quo

The FRC will review current financial and non-financial reporting practices, consider what information investors and other stakeholders require and the purpose of corporate reporting and the annual report. The different types of corporate communications produced by companies will also be examined.

The auditors’ regulator said there was pressure to streamline annual reports, and the project will aim to find the balance between the needs of users, the cost and practical burden on companies, and increasing reporting requirements.

Corporate governance expert Martin Webster of Pinsent Masons, the law firm behind Out-Law.com, said a fresh approach to corporate reporting was welcome.

“The FRC has recently said ‘The landscape for corporate governance and reporting is changing’. It certainly is, with a tsunami of new regulation and guidance and an increasingly critical focus on auditing,” Webster said.

“New thinking is needed if companies and investors are not to drown in an excess of information. More disclosure does not necessarily mean better disclosure,” Webster said.

The FRC said it expected the project to result in a series of calls for action for changes to regulation and practice, and it will publish a thought leadership paper consolidating the outcomes of the project during the second half of 2019.

The project will be supported by an advisory group and the FRC is calling for up to 15 participants to join.

“It is good the FRC is looking at a wide constituency to join its advisory group. We need people at the sharp end, those preparing and using company reports every day, and for their experience to complement and influence the agenda from regulators and government,” Webster said.

FRC executive director of corporate governance and reporting, Paul George, said the project would consider the way technology might help deliver information to stakeholders.

“New models for corporate reporting will inevitably lead to considerations of how audit and assurance models will need to evolve to respond to the changes,” George said.

The FRC corporate reporting project follows the recent announcement of a review into the audit profession in the wake of criticism of auditors and several large company failures.

The review includes an examination of the work auditors do on the front half of companies’ annual reports to assess whether they are undertaking enough work to conclude these are not materially misstated.