Seeking your views on the UK government’s non-financial reporting review
The UK government’s Department for Business and Trade (DBT), working with the Financial Reporting Council (FRC), is conducting a ‘Smarter regulation’ non-financial reporting review of the requirements placed on UK companies.
In launching the review, DBT stated that:
“This builds on the ‘Smarter regulation to grow the economy policy paper’ which set out how the government would improve regulation across the board to reduce burdens and drive economic growth now that the UK has left the European Union. Our departure from the EU allows us to shape rules and processes so that they work for the UK’s specific circumstances, including for non-financial reporting.”
Call for evidence
As part of this review, DBT has launched a call for evidence on:
- The UK Companies Act 2006 annual report requirements, as set out in part 15 of the Act.
- Company and LLP size thresholds which determine both the financial, non-financial reporting and filling requirements companies and LLPs must comply with.
- Other non-financial reporting requirements which sit outside the annual report requirements, including gender pay gap and modern slavery reporting.
Primarily, DBT is interested in stakeholder views on the costs and benefits of current non-financial reporting requirements and opportunities to streamline the existing reporting requirements. In addition, by considering size thresholds which determine financial reporting requirements, the review’s outcome could also impact on an entity’s accounts preparation requirements and the audit threshold.
It is worth noting that the Economic Crime and Corporate Transparency Bill is at the report stage in the House of Lords. This Bill proposes the removal of the ability of small companies, including micro-entities, to prepare abridged accounts for members and to file filleted accounts with Companies House.
The call for evidence closes on 16 August and ICAS is going to be responding to the call. We would very much like to receive views from our members on the topics covered.
We anticipate that DBT will consult on detailed proposals for reform following consideration of the evidence gathered.
More about the review
In undertaking the review, DBT recognises that company reporting requirements have grown over the years due to regulation, as well as stakeholder and investor demand, “to support more sophisticated decision making that is not just narrowly focussed on financial return.”
However, it also recognises that “The UK’s framework for non-financial information needs to be able to respond to this demand but this needs to be balanced with companies being able to produce information that is focused, comparable and concise.”
Another catalyst for the review is a major international development. The recently established International Sustainability Standards Board (ISSB) is developing global standards focused on sustainability disclosures. The UK government is to establish a formal mechanism for assessing and endorsing those standards for use in the UK. Therefore, an objective of the review is to ensure that future requirements to report against UK-endorsed IFRS sustainability reporting standards fit within the wider body of UK law.
To support respondents to the call for evidence, DBT has gathered together information on the relevant Companies Act 2006 requirements, supporting regulations, and other regulations that set out reporting requirements outside of the Companies Act 2006. It is worth noting that DBT is emphasising that the information gathered may not be complete. This information can be found in the Annex: Individual reporting requirements.
The call for evidence is being conducted via a survey, designed to gather the views of two main stakeholder groups(preparers and investors) and there are specific questions directed to these groups.
The following general questions are asked of both stakeholder groups:
- What changes, if any, would you like the UK government to make to the current legal requirements for companies to prepare non-financial information, and why?
- Thinking about the future of your organisation and the UK’s transition to a net zero economy, what changes, if any, do you think may be required to the type of non-financial information produced to guide decision making, and why?
- How should the standards being prepared by the ISSB be incorporated into the UK’s non-financial reporting framework?
- To what extent do you agree or disagree that current size and company type thresholds for non-financial reporting information could benefit from simplification?
- The Companies Act 2006 sets out size categories for UK companies that determine the type of accounts that need to be prepared and filed with Companies House. Do the size thresholds remain appropriate?
- Do you have any other comments that might aid the consultation process as a whole?
If you would like to contribute to the ICAS response to DBT’s call for evidence please contact Christine Scott at email@example.com with your written comments by 5pm on Wednesday 19 July.