The UK Financial Reporting Council (FRC) has this week released a bold discussion paper proposing a future for corporate reporting based on a principles-based framework. It outlines a blueprint for a more agile approach to corporate reporting which challenges existing thinking about how companies can more effectively meet the information needs of investors and other stakeholders.
The proposals are designed to be tested with stakeholders and stimulate the conversation about what the future of corporate reporting should look like. Comments are invited by 5 February 2021.
The paper considers a common criticism that annual reports are too long, and information difficult to access. With companies and society at large facing significant challenges, which have only been heightened by the Covid-19 pandemic, stakeholders are ever more interested in companies’ wider actions and the reporting that supports these.
- unbundling the existing purpose, content, and intended audiences of the current annual report by moving to a network of interconnected reports;
- a new common set of principles that applies to all types of corporate reporting;
- objective-driven reports that accommodate the interests of a wider group of stakeholders, rather than the perceived needs of a single set of users;
- embracing the opportunities available through technology to improve the accessibility of corporate reporting; and
- a model that enables reporting that is flexible and responsive to changing demands and circumstances.
These proposals are consistent with the themes in the independent Kingman and Brydon reviews. To build trust in the system for corporate reporting, it needs to be supported by a framework for audit and assurance and regulation.
FRC Executive Director of Regulatory Standards, Mark Babington said: “As the UK’s corporate reporting framework has evolved, annual reports have become a vehicle of convenience for ever-more information, however, this has undermined their purpose and usability. The future of corporate reporting discussion paper proposes a more agile approach that is responsive to the needs of users of accounts. To build trust in business we need a modern corporate reporting system that is transparent, flexible and puts users of corporate reporting at its heart. We look forward to hearing views from our stakeholders”
The discussion paper is available here. Comments are invited by 5 February 2021.
To respond to the survey click here.
The supporting literature review is here.
The results of the FRC’s initial survey can be found here.